Forget Cap and Trade; Cap and Dividend is the Way Forward
Well how’s this for getting your ideas out: In the July 10th issue of Rolling Stone, Barrack Obama was questioned on how he plans on achieving an 80% reduction in greenhouse gas emissions by 2050. According to Obama:
Whenever you transition to a new technology or a new way of thinking about structuring our economy, the old is going to resist the new. The key is to make the new profitable, job-generating and appealing enough that more and more people embrace the new and let go of the old. That’s where government can play a role. If we institute a cap-and-trade system for carbon emissions, that’s going to generate billions of dollars. Now, that’s also going to mean higher electricity prices for consumers, so a huge chunk of that has to go back to consumers in the form of rebates, so they don’t feel the pinch as badly. [author's highlight]
Obama is not the first to suggest a cap and dividend system (basically, a cap and trade system that returns the proceeds to consumers). However, he is the most visible politician to do so, and without a doubt supporting such a system in a Rolling Stone interview demonstrates his willingness to discuss it in a non-technical manner. Other support for a cap and dividend-style system includes Senator Barbara Boxer of California’s proposed amendments to the recent Lieberman-Warner Climate Security Act that would return about $800 billion (14%) of the revenue generated to citizens.
However, it is not just politicians blowing smoke, as academics from the University of Massachusetts have put together a research paper, which aims to demonstrate ”how to curb global warming while protecting the incomes of American families”. The authors conclude that a cap and dividend policy would have a net positive effect and that the majority of American households would be net winners monetarily (i.e. the dividend would help cover the increased costs of fuel with something left over).
This cap and dividend policy is based upon the premise that a cap and trade system is implemented with permits for fossil carbon are auctioned, and that the proceeds of the auction are distributed equally to every man, woman and child in the United States.
While the complexity of such a system will make some observers gulp, creating a “fee and dividend” system will is easier to sell to political leaders, rather supporting what voters will perceive as another tax during these more difficult economic times.
For More on Cap and Trade:
- Is McCain Serious About Cap-and-Trade? Economic Advisor Steve Forbes Doesn’t Think So
- Largest Cleantech Industry is…Carbon Credits at $63 Billion
- Wisconsin Looks to Reduce Greenhouse Gas Emissions
- Laws and Money: Ending the Free Ride for Carbon Emissions
Photo Credit: RedGreenandBlue.org media archives
[...] Scheme has already been criticised for setting unambitious carbon reduction targets, whereas the ‘cap and dividend’ scheme proposed by presidential candidate Barack Obama may return the proceeds to [...]
[...] Maryland to definitively sign onto the intiative. And who knows if capping and trading is even the right way to go. But it’s a step in the right [...]
It seems to be common wisdom these days that adding dividends to the mix will somehow make an effective cap and trade program politically popular. This “wisdom” ignores basically all evidence I’ve seen to the contrary, and generally relies on anecdotal evidence (if anything) for support. I’ve outlined why I think why Cap and Dividend barely moves the needle politically speaking here. I’d welcome your response.
Jesse Jenkins
The Breakthrough Institute