Until recently Cap and Trade was considered the favorite economic framework for climate legislation. However there is now an alternative, which seems to have bipartisan support, “Cap and Dividend” as proposed by Senators Maria Cantwell (D-WA) and Susan Collins(R-ME).
The two concepts, as expressed in varying Senate legislation, have very similar goals. Both proposals strive to achieve a reduction in carbon dioxide emissions roughly 80% by 2050. Both proposals raise billions of dollars by charging a fee for carbon dioxide sources. However there is a dramatic difference as to the how this new source of revenue is used.
In Cap and Trade, 100% of the new revenue is used by the Federal government to promote clean energy programs and other potential initiatives such as protecting consumers or industries that are hurt by rising energy prices.
With Cap and Dividend legislation, 75% of the collected fees are returned directly to every legal citizen in the form of annual dividends. Government clean energy programs are limited to 25% of fees collected. The Cantwell – Collins legislation is estimated to benefit the middle class and poor, as rising energy costs due to these fees are more than offset by dividends. Those families that chose to reduce their carbon footprint can benefit by up to several hundred dollars per year. Energy hogs will pay more in increased prices than they will receive in annual dividends.
Another negative of Cap and Trade is that it creates financial markets that have great potential for manipulation by Wall Street. And if there is the potential……… well you now the rest of the Wall Street story. On the other hand Cap and Dividend puts the money directly into the pockets of individual citizens. No bankers or Wall Street brokers will reap windfall benefits from Cap and Dividend.
By Peter Barnes, The Grist – As U.S. climate legislation creeps forward, Senators now have two frameworks to choose from. One is from Sens. John Kerry (D-Mass.), Joseph Lieberman (I-Conn.) and Lindsey Graham (R-S.C.); the other is from Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine). Both begin with descending carbon caps that, along with supplementary policies, promise to reduce carbon dioxide emissions at roughly the same rate, and both protect domestic industries by imposing fees on carbon-intensive imports from countries that don’t limit emissions. But from there the two approaches diverge markedly.
Read full article at the Grist.