Yes We Can! Long Island 2012Until 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.
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Jemcopper totally misses the point of the Cantwell-Collins legislation. The goal is to discourage the use of fossil fuels by all Americans, rich or poor. The premise of the legislation is that no one should be able to use our air as an open sewer; all must pay the cost of dumping carbon and other pollutants into our atmosphere. This is not socialism; it’s more a capitalistic approach than any other legislative proposal. The rich will only pay their fair share for their carbon emissions. Energy hogs (rich, poor or middle class) who continue to operate gas guzzling SUV are or keep their homes at 68 degrees in summer even when they are not home will pay more. In fact the rich are the ones who have the means to install solar or geothermal in their homes and purchase hybrids auto thus reducing the amount they will pay under this legislation.
Jemcopper also forgets that individuals account for more than 50% of carbon emissions in America and that corporations only produce products for use by consumers. It’s time to look in the mirror and face the fact that we as individuals are just as responsible as the manufactures that provide the products we purchase. It’s time we all due our fair share and stop blaming everyone else.
I’m not sure I’m the one who misses the point. All the schemes being discussed here (cap and trade, cap and dividend, carbon tax and my proposal) are identical in that they add to the cost of burning fossil fuel in proportion to the carbon content. I mentioned that in my comment (“This will drive energy saving, renewables etc. in exactly the same way as Cantwell’s proposal”) but did not labour the point because I assumed it was obvious to all.
The difference between the schemes is in what they do with the revenue from the charge on burning carbon.
With carbon tax it goes to the national government to allow taxes to be reduced or expenditure increased.
With cap and trade revenue from permit auctions again goes to the government, but of course the value of free allowances given to polluters goes to their shareholders, if free allowances are included in the scheme as they are in both the EU and the US plan. Basic microeconomics tells us that the market price of a good is the marginal cost of its production. In this case since a generator will either have to buy an extra permit or not sell one that he could have sold in order to increase his output, the marginal cost includes the permit value. So in a free market his prices go up across the board even though his total actual costs are hardly changed.
With cap and dividend the revenue is divided equally between the nation’s inhabitants although I notice illegal immigrants are for some reason excluded from this bounty. In total of course the bounty is identically equal to the extra cost of fossil fuel so on average it pays for none of the cost of using more expensive lower carbon energy sources or making energy savings.
My proposal uses the revenue to pay for capture and sequestration of carbon dioxide by whoever can provide this service at the lowest cost. Safeguards are included to ensure that those selling this service sequester carbon dioxide securely and in the agreed quantity.
We are accustomed to paying for services from suppliers in other nations so paying for sequestration around the globe is likely to be acceptable. We are accustomed to income redistribution within a country so a national dividend scheme may also be acceptable, although I see no logic in tying it to a carbon tax other than as an attempt to bribe the electorate with their own money. But we are not accustomed to giving money to foreigners or their governments with nothing to show for it. The international extension of the dividend to provide handouts to all citizens of the world (or in many cases their corrupt rulers) will not therefore be acceptable. And none of these schemes will stop global warming unless they are extended internationally; they will simply result in the export of energy intensive industries and jobs to unregulated countries.
A conglomeration of national cap and dividend, cap and trade or carbon tax schemes will also be unworkable because the sovereign nations of the world will never be able to agree how to share the massive emission reductions required. My proposal requires no such share out, only a global target and that is already tightly constrained by the agreement at Copenhagen to limit warming to 2C.
I’d like to better understand your concern about a loss of US jobs, which I certainly do not want to encourage, I believe a strong middle class is the key to our nation’s success. As I understand it, Cap and Dividend, proposed by Cantwell-Collins, places a carbon tax on the raw materials that contain carbon. The major share, 75% goes back to all legal residents on an equal share basis and 25% is used by the government for R&D and other efforts, such as those to help establish renewable energy or carbon sequestration, if it ever proves to be feasible.__Thus I’m trying to understand your concern about the loss of jobs. For example, coal mining firms will add the carbon tax to the coal that is burned by utilities and other firms. Utilities will have the choice of implementing carbon sequestration or shifting to renewables or perhaps nuclear or perhaps a mix of all three to achieve 80% reduction. I don’t see how that hurts US jobs? Are you instead speaking about other specific industries? __Ditto for gasoline. I don’t think that higher gasoline prices should cause a loss of USA jobs? By now Ford and the bankrupt GM have gotten the message that they can’t continue to manufacture gas guzzlers. __
My other concern is that your proposal is too prescriptive and seems to rely on some type of government run subsidy program for carbon sequestration. I believe that subsidies are very inefficient and often distort the market, typified by booms and busts; similar to the Spanish experience with solar energy. Even if carbon sequestration is feasible it may only be cost effective for a portion of the reduction needed. Typically for most processes you reach a point of diminishing returns. It’s probable that this will be the case for sequestration and a range of options will be necessary.
An international agreement eventually needs to be resolved but meanwhile the USA continues to be the laggards. Europe and even China are ahead of us in developing renewable energy. We use more than 6 times per person in China and have for over 100 years. It’s time for the USA to lead by example.
I am not expecting any government to collect the charge on the carbon in fuel or to dish it out as a subsidy. To quote from my website "Fossil fuel producers and importers would contract for the capture and sequestration of a quantity of carbon dioxide equal to a proportion of that produced from the fuel they supply……The contracts would be traded and recorded centrally, mostly placed and paid for by the international energy companies." seehttp://jemsavestheplanet.blogspot.com/2009/11/cli…
Energy companies have shown themselves to be efficient and effective at collecting both production and sales taxes with little fraud or smuggling.
My proposal will also drive energy saving, renewables and nuclear because it raises the price of fossil fuel exactly like the Cantwell plan but however many windmills we build if we are still burning fossil fuel we need to capture the CO2 produced to stop atmospheric concentration rising.
My point about industry and jobs being exported to unregulated countries would apply to energy intensive manufacturing industries such as metals and chemicals which could relocate overseas. Many of these industries already choose to locate where low cost gas or electricity are available.
It's CLEAR to me!
The cost of switching from fossil fuel or capturing carbon are real and substantial, so on average the dividend Cantwell proposes would not cover the cost to consumers of cutting emissions even if 100% were paid back. The problem is that money only goes into the kitty when people carry on burning fossil fuel. If people switch to expensive renewables or nuclear or adopt costly energy saving measures, which is the intention, the money has to be found elsewhere.
The income redistribution part of the plan will nonetheless appeal to all socialists, but why dress it up as a dividend related to global warming? Why not just tax the rich and divide the take equally between everyone.
If we want to stop global warming we need an international arrangement. When the Cantwell plan is extended internationally, will the whole population of the globe will be entitled to equal handouts? How popular would that be in the US or Europe?
My plan to stop global warming has none of this socialist claptrap. The people who should pay to stop carbon emissions are the ones who make them by burning fossil fuel. My plan puts a price on carbon in a similar way as Cantwell, by obliging fossil fuel producers to pay for the capture and sequestration of an increasing proportion of the carbon dioxide produced when their product is burned. This will drive energy saving, renewables etc. in exactly the same way as Cantwell’s proposal but there are no extra charges to provide handouts for everyone to try and grab.
For details see my article at http://www.ngoilgas.com/article/sorting-climate-c…
and my website at http://jemsavestheplanet.blogspot.com/2009/11/cli…