Cash for Carbon: New Climate-Crisis Bill

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) that is very different from the present “cap-and0-trade” bills. .

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.

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. This is why I call it “Cash for Carbon.”

Only those whose multiple big houses, SUV’s, etc, eat up large amounts of carbon, would pay more in higher energy prices than the $1100 dividend. All dividend recipients would have a strong incentive to reduce their fossil-fuel use in order to increase their benefit from the dividend. They would make up a new strong market for energy efficiency and renewable energy.

• The remaining 25 percent of the auction income would not go onto the general Federal budget but would be devoted to clean energy research and development, regionally-specific assistance for communities and workers transitioning to a clean energy economy, energy efficiency programs, and reductions in non-CO2 greenhouse gases.

The Cantwell-Collins bill also differs from existing cap-and-trade bills in other key ways:

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.

All credits would be sold at an auction. (The cap-and-trade bills Congress has considered would distribute emissions allowances for free during the initial phase of the program.)

The Cantwell-Collins bill also does not allow companies it would regulate to reduce their carbon footprint by investing in programs that allegedly would reduce carbon elsewhere or remove it from the atmosphere, efforts that are known as offsets. (Most of the environmentalist community has been extremely skeptical about the “offsets” that could be claimed by big corporations against their [over]use of fossil fuels, on grounds that the worth of offsets, how real they are, etc, is extremely sloppy.)

Instead, offsets would be encouraged by the 25% government fund on top of, rather than instead of, carbon reductions achieved by the cap system.

The goal of the Cantwell-Collins measure is to cut U.S. emissions by 20 percent by 2020 and 83 percent by 2050, relative to 2005 levels.

Evaluations of the CLEAR Act:

On the conference call of environmental activists to discuss the bill, one of the three panelists was Mike Tidwell of Chesapeake Climate Action, a strongly progressive group that has been deeply concerned by the cap-and-trade bills benefits to Wall Street derivative marketers like Goldman Sachs that could make the cap-and-trade derivatives into the same kind of destructive market they created from home mortgages, and the benefits to Big Coal that won major loopholes from cap-and-trade.

Tidwell urged strong support for CLEAR. He acknowledged that the target emissions ceilings of CLEAR are (like those in the cap-and-trade bills) way too low to meet the scientific call to swiftly return to a ceiling of 350 parts per million of CO2 in the atmosphere, but he argued that more stringent caps were not politically possible at this point. Once a mass public constituency is created through the monthly cash “dividends,” he argued, pressure to limit CO2 more strongly would increase. Cap-and-trade does not build such a constituency.

Charles Komanoff, director of the Carbon Tax Center, who has argued that cap-and-trade is far too opaque and too likely to benefit chiefly big corporations, took part in the call and said that while he still preferred a straight-out carbon tax, he saw the “cap-and-dividend” model as a great step forward from cap-and-trade.

A staffer from Oxfam noted concern that the bill did not mandate grants to poverty-stricken nations to pursue a non-fossil development path. One of the panelists pointed out that part of the “25% fund” could be used this way, probably depending on foreign-policy decisions by a President about how to advance the global climate-healing effort. (Thus it could have been used at Copenhagen to bring into a global agreement many nations that could not afford to pursue a non-fossil path.) But achieving the reduction of CO2 emissions targeted by the CLEAR bill depends a great deal on using the “25% fund” to bring renewable technologies on line, and devoting part of that fund to other uses will weaken the emissions targets.

For many religious groups, therefore, including The Shalom Center, the unmandated possibility is weak, and it would be important to press for a mandated set-aside not only to aid poor countries sidestep the fossil-fuel path in development, but also to meet the emergency needs of some nations already caught in climate-caused droughts, ocean rises, etc.

For me, the Cantwell-Collins bill is indeed a major advance over the cap-and-trade bills that, as I have said over and over, would be a big step up from zero Federal action, but bore very serious problems. I urged support for them on the theory that once passed, they would break the frozen barrier — just as early and very weak civil-rights bill had done while I was working on Capitol Hill, setting the stage for much stronger laws.

But those cap-and-trade bills have already become paralyzed, and most Washington observers think the Senate cannot pass the bill that came out of committee, even with very lukewarm support from Sens. Lindsey Graham and Joseph Lieberman.

Whether the CLEAR Act can do better is an open question. It has less appeal to Wall Street and more to ordinary folks than cap-and-trade. It is much easier to explain – I stumbled every time I tried to describe cap-and-trade, but have felt I could make sense of this, to myself and others.

It is not yet clear whether ANY climate bill can pass the present Congress. Some have urged shifting our attention to cities where change seems more likely. — But CLEAR makes sense, and it could start a virtuous circle — building its own support by providing touchable and faithful rewards at every step.

With blessings of healing for the earth & ourselves –

Arthur