So I read the Clean Act, also known as Cap and Dividend, is gaining momentum in the US thanks to Senators Maria Cantwell (Democratic Washington State) and Susan Collins (Republican Maine).
Through this plan the government will (a) cap the carbon supply, then (b) auction permits to companies, and out of this (c) Pay back dividends to citizens. Every year there is a reduction in permits so supply declines and prices increase. The idea is that once this begins clean technology will become competitive with traditional dirty energy. Consumers will pay more for energy, which in all scenarios will occur (prices are already rising), but monthly dividends from carbon auctions will get sent to every American.
According to CCAN, it is projected that if the Act is implemented for 2012, between $42 billion and $126 billion will be raised and over time that amount will likely grow, as will the rebates. 75% is used for rebates to Americans, and 25% is used for reinvestment in clean energy through a not-for-profit Clean Energy Reinvestment Trust (CERT) Fund. Also, banks and wall-street are explicitly prevented from buying or selling the carbon shares/emissions permits. Trading permits is allowed, but only between the 2-3,000 companies that are required to buy shares at auction.
So, say that in the first year (2012) there is $84 billion raised. That means approximately $210 is returned to every american and $21 billion gets invested into clean energy projects (not including nuclear).
Now, there is also the question of competitive markets internationally and how American companies would be harmed by imports from countries without carbon legislation. There is a fee placed on such imports, comparable if not equal to the cost that US companies would have incurred. How this is established is another aspect far outside of my understanding, but it is definitely important and should not be ignored.
So how does this differ from Cap and Trade?
In Cap and Trade, according to Wikipedia:
Companies or other groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) which represent the right to emit a specific amount. The total amount of allowances and credits cannot exceed the cap, limiting total emissions to that level. Companies that need to increase their emission allowance must buy credits from those who pollute less. The transfer of allowances is referred to as a trade. In effect, the buyer is paying a charge for polluting, while the seller is being rewarded for having reduced emissions by more than was needed. Thus, in theory, those who can reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest cost to society.
According to a 2008 article in Scientific American, the problem with Carbon Cap and Trade is that Capping emissions makes carbon scarcer and lets private companies raise carbon prices – which are then forced on consumers. But who ultimately gets the extra money depends on who has the initial rights to the air. Although we would assume the air belongs to everyone, when capping was first proposed, it was assumed that polluting companies would receive permits for free. When Europe introduced its cap-and-trade system, this is what it did and it led to higher consumer prices and further profits for polluters. So instead, U.S. States proposed auctioning off permits instead of handing them out. This way profits go to the government to invest in clean energy (theoretically). Unfortunately consumers are still burdened with approximately $1,600 on average in higher energy prices every year.
Here is the hope
By introducing a Cap and Dividend system, limits are placed on CO2 output and will annually be tightened. Permits for allowed CO2 output are auctioned to companies and these proceeds are used to invest in clean energy (75%) and to lower burden on consumers (25%) through automatic refunds. Costs will rise, as they will anyways, but consumers who use less “dirty” energy are rewarded by lower prices (promoting conservative use) and everyone will receive a small monthly dividend out of the profits of carbon auctions. The poor should also be protected to some degree because they traditionally use far less energy than most Americans and will receive equal payments from the carbon dividends.
But in the end…is it too good to be true?
Find out more @ http://www.capanddividend.org/
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