Posted by Thomas Nephew on July 18th, 2009
A couple of weeks ago, I got an email from Chesapeake Climate Action Network (CCAN) that read, in part:
Thanks to your hard work, the American Clean Energy and Security Act passed 219-212 in last Friday’s historic vote. Although, as we’ve said, key features of the bill fall short of what scientists say is urgently needed, there were several members of Congress who emerged as true climate leaders — including Congressman Van Hollen. Congressman Van Hollen is on a well-deserved recess until July 6th but I want to make sure he hears from his constituents when he gets back. That’s why on Tuesday, July 7th, I plan to hand-deliver a giant thank you card to his office. (Care to join me? Just email me)…
I decided against joining in on the giant thank you card. But I think the story of just how Congressman Van Hollen got the “climate leader” accolades and “climate hero” gala festivities CCAN has been bestowing on him is worth telling.
Gordon Clark, the 2008 election, and “cap and dividend”
In last fall’s election, Representative Van Hollen was opposed by (among others) Green Party candidate Gordon Clark — whom I supported. Van Hollen is a personally popular liberal Democrat elected in something of an uprising against local moderate Republican Connie Morella in 2002; he’s not hurting for campaign funds, and many in the area are proud he’s chair of the Democratic Congressional Campaign Committee — despite Van Hollen’s association with the disappointing Democratic “opposition” to Bush between 2002 and 2008.
Clark, a long time activist in and director of peace and environmental movements, campaigned hard and turned in a strong debate performance — which Van Hollen couldn’t attend due to the emergency bailout vote the same evening. On Election Day Van Hollen easily outdistanced both Clark and his Republican challenger.
But the Clark/Green Party campaign was influential nonetheless; as often happens with third parties, they peel off some activists, they serve as an important source of ideas, and they can win some important skirmishes even if they wind up losing the contest. In this case, the skirmish Clark won was one for the endorsement of an influential local political group, Progressive Neighbors. In a very surprising development (covered on this site), Clark tied with Van Hollen after a kind of “mail-in debate” — the only debate of any kind between the two candidates in the campaign. Clark had parried Van Hollen’s less coolly composed letter with point after point detailing Van Hollen’s lack of leadership, especially on the financial crisis, peace, and environmental issues.
And Van Hollen apparently read Clark’s letter carefully, at least this part (link added):
While [Mr. Van Hollen] can claim the endorsement of more centrist national environmental groups like Sierra Club, which endorses most Democrats, what should be of greater interest to Progressive Neighbors are the advocacy positions of local and much more progressive environmental organizations like the Chesapeake Climate Action Network (CCAN). If you look at these organizations, you will find the positions they advocate are the positions I take, not the positions Mr. Van Hollen takes… [...]
Cap and trade vs. cap and dividend – Cap and trade is a “market-based” system for gradually reducing carbon emissions that largely failed in Europe. Cap and dividend is the more aggressive system advocated by the majority of those in the global warming activist community, including CCAN. I also support a cap and dividend system. Mr. Van Hollen supports cap and trade.
Cap and trade vs. cap and dividend
In “cap and trade,” the government sets some upper limit (the “cap”) on the amount of permissible bad stuff — carbon dioxide, pollutants, what have you — and either issues or sells permits to polluters equal to that amount of stuff. The “trade” part comes as polluters find they don’t have enough permits; they go looking for permits from low-polluting companies who can sell their spare permits.
Assuming the caps are set to truly restrictive and declining carbon dioxide emissions levels, this is a direct way of setting goals for and achieving man-made carbon dioxide emissions reductions within a specific timeframe. But a big practical political and economic problem with caps on carbon emissions is that if the cap has any “bite” — if it actually means less stuff burned — it will necessarily drive up the cost of energy. That, in a sense, is the whole point: putting a price on pollution we used to pretend was free of charge.
And that burden will hit precisely those people the hardest who are least able to afford it — the poor and near-poor. In a 2007, University of Massachusetts researchers James Boyce and Matthew Riddle estimated that a $200 charge per ton of carbon would reduce emissions by 7 percent, while raising the cost of living of the top fifth of Americans by 5.3 percent — and that of the bottom fifth by 10.2 percent.
Even assuming the government sold permits rather than merely issuing them, it might well not use that revenue to help citizens disproportionately affected by rising energy prices, instead of spending it on something else (war, tax breaks, paying interest to China, what have you). Meanwhile, some companies or individuals may reap windfalls by gaming whatever permit allocation system is devised. “Cap and trade” is politically unstable, when carbon emissions reductions need to be highly predictable.
As CCAN’s Mike Tidwell explains in the video on the right, “cap and dividend” is an elegant improvement on cap and trade.
First, it’s a so-called “upstream cap” — permits are not for carbon dioxide emissions but for carbon import (e.g. oil, gas), or production (e.g., coal, oil, gas). This vastly simplifies the permit process.
Second — at least in the version CCAN favors — no permits are given away: every permit is sold. Just as with cap and trade, the annual quantity of permits drops every so often, so that carbon is gradually ‘squeezed out’ of the economy and higher energy prices encourage alternative energy sources and more efficient energy use. Likewise, the bill envisions no “offsets”*, which are often hard to verify, might have happened anyway, and threaten to be too easy a way out for carbon emitters.
Third, and most distinctively, the money is not held by the government for long — it’s used to pay monthly dividends to all U.S. citizens. Tidwell:
And what this does is once you get a dividend check once a month it’s going to protect most Americans from rising energy prices. At least 60% or more of Americans will either break even or actually have more money in their pocket. Why? Because that dividend check will be equal to or more than what you’re actually spending in increased energy costs.
Boyce and Riddle calculate that the net impact of “cap and dividend” would “range from a 14.8% income gain for the poorest 20% of families (and a 24% gain for the poorest 10%) to a 2.4% loss for richest 20%.”
The effect of the CCAN “cap and dividend” proposal would be to return basic fairness to the climate bill — emissions permits would not be a windfall for polluters or for the Treasury, but represent the atmosphere as the jointly held commons it truly is. Or ought to be.
It did everything you’d want a “cap and dividend” bill to do: reductions to 85% of 2005 emissions levels by 2050; auction of all carbon permits with proceeds deposited in a “Healthy Climate Trust Fund“; trading of permits between permit holders; and equal consumer dividend payments out of the trust fund to anyone with a social security number; no offsets to administer. Even with other provisions (carbon sequestration, tariffs on imports from non cap and trade or cap and dividend countries), the whole bill is simple enough to be just 20 pages long — compared to the Waxman-Markey ACES cap and trade behemoth whose very 962 page length became part of the criticism against it.
Reviews were glowing: long time cap and trade proponent Peter Barnes called the bill “beautiful,” Eric DePlace of Sightline Daily wrote,“Van Hollen’s bill is an excellent piece of climate policy. Here’s hoping it sparks more conversation.”
Indeed it should have. But it didn’t — the bill remains mired in committee, with only four co-sponsors. The legislation tracking site “govtrack.us” notes that while there’s always a chance the bill’s language may appear in another resolution, “the original bill or resolution, as it would appear here, would seem to be abandoned.” In my view, there’s a real question who is using whom in the Van Hollen/CCAN alliance; more on that later.
* Offsets can be defined as “certified cuts in emissions that are outside the cap, either legally or geographically, but that are counted towards meeting emissions goals.” The definition, as well as a discussion of objections to the policy, can be found in the “Cap and Trade 101″ reference provided below.
EDIT, 7/20: “Even assuming” sentence edited to sentence form.
FURTHER READING ON “CAP AND DIVIDEND” AND “CAP AND TRADE”:
- The Economics of Responding to Climate Change (Douthwaite, FEASTA; .PDF, 16 p.)
- Cap and Dividend, Not Trade: Making Polluters Pay (Barnes, Scientific American)
- Cap and Dividend: How to Curb Global Warming While Protecting the Incomes of American Families (Boyce, Riddle, UMass; .PDF, 28 p.)
- Cap and Trade 101: A Federal Climate Policy Primer (Durning et al, Sightline Institute, .PDF, 39 p.)