Can cap and dividend fight global warming?

March 5, 2009 7:08:27 PM PST
By 2011, California is expected to begin trading carbon credits on an open market. It is a potentially valuable commodity that even Congress wants a slice of. But what if they gave you cash instead?

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Scientists increasingly say our planet is heating up largely because of carbon dioxide emissions.

Now, many governments around the world including the U.S. are seeing a different kind of "green" and want to cash in on the sources of global warming.

But one North Bay entrepreneur wants to keep that cash out of the hands of politicians and put it directly in your pocket.

"I am proposing a way to reduce carbon dioxide emissions in the United States. It's market based, it's fair, durable and simple," said entrepreneur Peter Barnes.

Barnes was co-founder of Working Assets, a company that has raised over $60 million for progressive causes.

He wants the federal government to adopt a "cap and dividend" policy instead of a "cap and trade" market to stop greenhouse gas production.

Here's how a cap and trade market works:

The government issues permits to industries that pollute. "Capping" them at a certain level based on environmental regulations.

Each of those permits allows those industries to emit a certain amount of carbon dioxide into the air.

Companies that emit less than their allowance can sell their leftover permits to brokers, who then sell to companies who exceed their pollution "cap."

Investment banks, hedge funds and investors then speculate on the value of those leftover permits and trade them on an open market, much like trading gold or oil.

President Barack Obama's current budget proposal is counting on at least $75 billion from a "cap and trade" program starting in 2012.

However, a cap and trade market will raise prices for consumers.

"There is another side to this. If we cap the carbon supply, we sell permits, that's the way the cap works and we take the money from selling these permits to the fuel companies and we return it to the American people," said Barnes.

Barnes proposes using a "cap and dividend" plan -- putting cash in your pocket to cover the rising costs.

If you conserve energy, the money you're getting back from these dividends would actually be greater than the higher prices that you're paying. So you could actually come out ahead, that's the nice thing," said Barnes.

So who wouldn't want to put more money in your pocket? Well the government for one, many lawmakers see those "dividends" as a valuable source of revenue, particularly during these tough economic times. money that could be used for roads, schools, and social services.

And there are other ideas as well. Kit Batten is with the Center for American Progress, one of the groups that opposes a "cap and dividend" plan.

"We have the same central tenants that is cap and reduce emissions, make sure the polluters pay for their greenhouse gas emissions and to then to protect and invest in the American public," said Batten.

Batten's group wants to make sure that some money goes back to consumers to offset rising costs, but would like to see federal programs that encourage people to adopt new technology as it becomes available.

"We're recommending that about half of the cap and trade auction revenues gets rebated to Americans. bur that the other half goes to adopting new low carbon energy technologies and efficiency technology, so that American energy bills can remain low," said Batten.

Both plans have support in Congress, but no matter what type of plan is adopted, lawmakers would have to pass legislation relatively quickly; this year or next for any system to be operating by 2012.

Regardless of what type of national policy is adopted, California will likely be a template in that final legislation. The state has been vetting proposals and framing it's cap and trade market for the last two years.

Written and produced by Ken Miguel.

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