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Congressman
Chris Van Hollen (D-Md), chair of the Democratic Congressional Campaign
Committee and a close ally of House Speaker Nancy Pelosi (D-Calif), has
introduced legislation into Congress that would create a variation on
cap™ many call Cap and Dividend.
Cap™ is the market-based system
used on a limited scale to beat acid rain in the early 1990s and being
developed in the European Union (EU) Emissions Trading Scheme (ETS) as
a method to cap greenhouse gas (GhG) emissions and reverse glcbal
climate change.
Everyone who accepts the proposition of global
climate change (which is everyone but the most uninformed or
recalcitrant of skeptics and far more than 90% of all experts who
thoroughly understand the science) likes the idea of a “cap” on
emissions.
When emissions are capped, big emitters (power
plants and utilities) will be forced to purchase “allowances” to spew,
via a federally administered auction. As the caps are made tighter, the
price of allowances will go up. When big emitters are forced to pay,
they will naturally be forced to pass the costs on to utility
ratepayers but the auction brings in federal revenues which can be used
to reimburse ratepayers and neutralize their costs.
The “trade”
part of the cap™ equation is more controversial. The EU ETS is a
trading market where allowances are sold by big emitters whose shift to
emissions-free New Energy and Energy Efficiency eliminates their GhGs
and their need to apply the allowances they bought at auction.
Allowances are also bought in the EU ETS marketplace by big emitters
whose continued generation of GhGs forces them to obtain more
allowances to continue doing business.
The idea is to make
doing business by generating GhGs too expensive to be practical unless
there is absolutely no better choice. As a brand new kind of market,
the EU ETS has been controversial as experience has revealed kinks,
loopholes, scams and surprises in the trading system.
Congressman
Van Hollen’s idea is to eliminate the controversy by immediately
remitting the revenues from an emissions allowance auction to the
widest spectrum of the public. Besides its simplicity, Cap&Dividend
makes almost every citizen a partner.
click to enlarge
Another
difference between Cap&Dividend and the EU ETS is that the Van
Hollen plan also would auction emissions allowances at the point of
origin (“upstream,” to the oil importers, coal miners, etc.) rather
than at the point of distribution (“downstream,” to oil refiners,
utilities, power companies, etc.)
While the cap™ system is
expected to provide revenues to fund a scale-up of New Energy and
Energy Efficiency, the Van Hollen plan would remit 90% of all auction
revenues to everyone with a social security number via a direct bank
deposit or an anonymous debit card.
Cap&Dividend is based on
the work of Peter Barnes, who stressed fairness by including everybody
in the benefits and simplicity by auctioning upstream instead of
downstream.
click to enlarge
COMMENTARY
The
forces against cap™ are gathering a fascinating set of lies to lay the
idea – the centerpiece of the Obama administration climate change
agenda – as low as Wall Street’s spirits were in January.
The
President's opponents have already begun their campaign with the
half-true claim that cap™ will drive utility prices up, neglecting to
mention that power prices will inevitably rise with or without a
trading system while cap™ is a way of raising federal revenues to
neutralize the utility price increases and build a New Energy and
Energy Efficient infrastructure that will control power prices over the
long term.
Sooner or later, the President's oppopnents will say
cap™ is (1) the biggest government tax ever leveled, (2) the biggest
government give-away the Democrats ever voted for, (3) corporate
welfare, (4) Wall Street welfare, and (5) welfare for freeloaders who
can’t pay their utility bills.
In this especially
market-doubting moment, the U.S. public may find it extremely difficult
to trust a new emissions trading scheme like the EU ETS, even one
backed by the widely-trusted new President. And even if Mr. Obama is
able to sell cap™ to his base, it is entirely likely the recalcitrant
minority of Republican naysayers in the Senate would block any climate
change legislation with a cap™ provision.
click to enlarge
It
is interesting that Senator Bob Corker (R-Tenn), one of the Republican
conservatives who has so far worked against President Obama, has been a
strong supporter of Cap&Dividend. Politically, it is possible – and
this could have something to do with Senator Corker’s enthusiasm – the
Van Hollen idea could split off support from cap™ by those who mainly
support the trading part because its revenues would go to fund New
Energy and Energy Efficiency.
Like the Obama cap™ idea, Van
Hollen would auction 100% of the emissions allowances. The President
has recently indicated he might be willing to compromise on the 100%
auction in the early phases of a cap™ program in order to gain support
from moderate Republicans like Senator John McCain (R-Ariz). Many
Congress-watchers believe that if climate change legislation still has
a hope, it will be the percent of allowances auctioned that will be
pivotal.
The Sierra Club is among those who have proposed
compromise measures. The Sierra Club calls its idea “cap and auction.”
It builds in protections for consumers if cap™ costs get out of hand.
Cap and auction and other such ideas are bridges between the intent of
the Van Hollen plan and the market basis of cap™ – but they don’t
simplify the matter or resolve public distrust of markets and big
government.
click to enlarge
QUOTES
-
Congressman Van Hollen: “[Cap and Dividend will cap emissions in 2012]
and establish a scientifically driven glide path to a minimum 80
percent reduction in carbon emissions by 2050.”
- Congressman Van
Hollen: “At its core, any successful climate change bill must deliver
scientifically based emissions reductions while enjoying broad public
support from the American people—and it must continue to do both for at
least 40 years…In that regard, I believe there is one approach that
offers the best chance to get the job done: cap and dividend.”
-
Carl Pope, Executive Director, Sierra Club: “[Cap and auction]
establishes an escape valve for periods of high permit prices without
weakening the overall signal to capital markets to aggressively invest
in low carbon opportunities; it provides a mechanism for buffering
carbon-dependent communities against high transition costs, and it
recognizes uncertainty.”
- Robert Samuelson, economics columnist,
Washington Post: “If environmentalists still prefer an allowance
system, let’s call it by its proper name: cap-and-tax.”
posted by Herman K. Trabish
Van Hollen Climate Bill To Feature “Cap and Dividend”
Chris Holly, February 26, 2009 (Energy Daily via Cap and Dividend)
and
Debating Cap-and- _____ (Fill in the Blank)
Kate Galbraith, April 6, 2009 (NY Times)
