>>What trumps cap-and-trade?
June 10, 2008, 3:04 pm
Filed under: Policy

The failure of the Warner-Lieberman cap-and-trade bill set Democratic lawmakers talking about an even stronger bill next year, when they’ll have presidential support and, presumably, the 60 votes needed for cloture.

Very smart people have pointed out that cap-and-trade is full of holes. It rewards “grandfathered” polluters with a huge new revenue source. It opens up a whole new field for fraudulent accounting practice, centered on measurement of emissions. It creates a new market that will, inevitably, bubble and burst. It passes all costs on to the consumer.

Denis HayesDenis Hayes of the Bullitt Foundation offers a more sensible proposal: auction carbon permits at the source of the carbon — where it comes out of the ground. There are only about 2000 such places so monitoring the source is relatively easy and might even be done honestly. Split the revenue between subsidies for carbon-neutral energy sources, smart-grid infrastructure and reimbursement to consumers for increased energy costs.

Cap-and-dividend is the brainchild of Peter Barnes, author of Climate Solutions. According to AndrewPeter Barnes Revkin, writing in The New York Times, it has been endorsed by James Hansen. Briefly, it bills emitters for excess greenhouse gas discharge, and returns the cash directly to citizens as a fixed monthly energy check. The dividend is meant to compensate us for the increased cost of the energy we use. Because the amount is fixed it’s a larger proportion of the household budget for poor people.

What are the amounts involved? The United States produces about 7500 million metric tons of CO2 equivalent annually. If we aim for an 80% reduction and charge $30 per ton for gas in excess of 1500 million tons, the revenue is $180 billion — roughly $600 per citizen. That’s $50 per person to offset the increased cost of fuel. The cap charge would add about 27 cents to the price of a gallon of petroleum-based fuel (about 7% of today’s gas price). The increase wouldn’t apply to demonstrably carbon-neutral biofuels. So $50 a month would offset the increased price of 185 gallons of gas, which is four or five times the fuel I put into my Subaru each month.

Over time, as major polluters reduce their carbon emissions, any cap fund would decline and payments to those of us who breathe the air or build clean energy sources would taper off. In a carbon-neutral economy, the dividend would evaporate.


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