On February 1, 2010, I invested a very useful hour of my time in a national telephone conference call learning the Torah of a new bill to prevent climate disaster that has been nicknamed “cap-and-dividend” — a bill introduced by Senators Maria Cantwell (Dem, WA) and Susan Collins (Rep, Maine).

It differs in major ways from the existing “cap-and-trade” bills that have been before the House and Senate: the Waxman-Markey cap-and-trade bill that passed the House of Representatives and the Kerry-Boxer cap-and-trade bill that passed the Senate Environment and Public Works Committee but has been stuck, probably irretrievably, in the Senate.

The Cantwell-Collins bill, formally known as the Carbon Limits and Energy for America’s Renewal (CLEAR) act, would restrict trading in a new carbon market to carbon producers, about 500 companies in the US – not the myriad of carbon-user companies like electric utilities that would have been covered by cap-and-trade bills and under them would have had to keep emissions records, would trade in emissions permits, etc.

Since only the limited number of carbon-producing companies could take part in the auction and trade in the resulting “carbon shares,” banks like Goldman Sachs would not be able to seek new profits in the giant secondary trading market in “derivatives” that would be created under economy-wide cap-and-trade.

Producers would bid in monthly auctions for “carbon shares.” The seller would be the government of the United States. The resulting revenue generated by the auctions would be used for two vital functions:

• 75 percent would be refunded in equal amounts to every individual residing legally in the United States.

This dividend (about $1100 per person per year) would more than compensate most households for the increase in carbon-based fuel prices that producers would pass on to consumers.   Read more »