Posted by: Bruce Robinson on Feb 03, 2009
Caps on carbon use are not the end of the world for California businesses, says a key advisor to the governor, but a potential springboard to new economic growth.
David Crane (left), Special Advisor to the Governor for Jobs and Economic Growth, explains how the state successfully adopted energy policies that met their goals and stimulated growth back in the 1970s.
Crane explains he is also a firm believer in economic competition as a driver toward new solutions in the climate change arena.
Although it has not yet gained a great deal of public attention, some climate protection advocates are actively promoting the "cap and dividend" method of curtailing carbon use by industry. You can see a promotional video for the concept here.
You can read a basic explanation of the cap and dividend concept here. For those who want to investigate the concept in greater depth, there is a 22 page (pdf) handbook that goes into conisderable detail that can be read or downloaded here.
Meanwhile, we have answers to some basic questions right here:
Who will receive climate dividends?
Every U.S. resident who’s eligible for Social Security.
How will the dividends be paid?
Through monthly transfers to people’s bank accounts or debit cards.
How big will the dividends be?
An MIT study estimates that carbon permit sales could raise $100 billion to $500 billion per year, depending on the scenario. If all of that is returned in dividends, a family of four could receive between $1,200 and $6,000 a year.
The important thing is that dividends will automatically rise along with carbon prices. This protects American families no matter how high carbon prices go.
How will climate dividends affect me?
That depends on what you do. The more carbon-based energy you use, the more you’ll pay in higher prices. Since everyone gets the same amount back, you’ll gain if you conserve and lose if you guzzle. The ‘winners’ will thus be everyone who conserves fossil fuel — plus our children who inherit a stable climate.
What are the economic consequences of cap and dividend?
The descending carbon cap will spur private investment in clean energy and create millions of new jobs. What’s more, the dividends will sustain consumer buying power and make sure our economy doesn’t falter as carbon prices rise.
Will the public support climate dividends?
Given the popularity of Social Security and Alaska’s dividends, there’s little doubt the American public will support climate dividends.
The converse is also true: in the absence of dividends, the public will be outraged by higher energy prices, and a political backlash will arise.
Will politicians support climate dividends?
A carbon cap with dividends is easier for politicians to support than a climate policy that soaks the middle class. Dividends take politicians off the hook for rising energy prices. When voters complain (as they surely will), politicians can honestly say, “The market sets prices, and you determine by your own behavior whether you gain or lose. If you conserve, you come out ahead. How you fare is up to you.”
Why shouldn’t government spend the money from selling carbon permits, rather than give it back to the people?
Carbon permit revenue isn’t manna from heaven — it comes from the higher energy prices everyone will pay when carbon emissions are capped. It’s thus a highly regressive revenue source, and the point of returning it to the people is to keep climate change from making most Americans poorer.
A second reason for returning permit revenue to the people is that the money isn’t likely to be well spent.
For political reasons, the technologies that are likely to get the most subsidies are nuclear energy and coal burning with carbon captured and stored. If these subsidies come from higher prices that everyone pays, that’s like nurses and teachers writing checks to coal and nuclear companies.
Federal investment in public transportation, scientific research, job training and energy conservation is clearly needed to combat climate change. However, that money should come from general revenues, from the $50 billion in yearly subsidies that currently go to fossil fuels, from windfall profits taxes on fuel companies, and from borrowing long-term.
Why should rich people get climate dividends?
Rich people receive Social Security and Medicare benefits because these programs are universal. Eligibility is based on equal rights rather than individual need.
Climate dividends are based on the notion that everyone has an equal right to clean air. Polluters are charged for infringing this right, and the revenue is returned to everyone equally.
History has shown that programs based on universal rights endure longer than means-tested programs that target the poor. Since carbon capping has to last for 40 years or more, it makes sense to make dividends a universal right.
Are other federal policies needed?
Cap and dividend will drive the clean energy transition in all sectors of our economy. However, it should be supplemented by sector-specific policies such as:
- Steadily rising efficiency standards for motor vehicles, airplanes, buildings and appliances;
- Steadily rising renewable energy requirements for electric utilities;
- Large investments in mass transit;
- Transition assistance to workers, communities and businesses badly hurt by rising carbon prices;
- Green collar job training.