GUEST OPINION: Cap and trade funds on way
Published: Wednesday, February 13, 2013 at 4:23 p.m.
Last Modified: Wednesday, February 13, 2013 at 4:23 p.m.
In his inauguration speech, President Barack Obama called for a response to climate change. While commendable that he put climate change back on the political agenda, he forgot the two most important words: carbon price. A carbon price will encourage businesses to make low-carbon investments, consumers to make low-carbon purchases and the private sector to decide how best to implement the most cost-effective emissions reductions.
Carbon pricing is still a distant vision in Washington. Congress failed to pass a climate bill in 2010, and no serious effort has been made since. But California's Global Warming Solutions Act (AB 32) which passed in 2006, made carbon pricing real by including cap and trade in the law. The “cap” requires the state to reduce its emissions back to 1990 levels by the year 2020. “Trade” enables regulated companies to swap permits to meet those goals.
Cap and trade launched on Nov. 14 when California administered the first auction of greenhouse gas permits for industrial and electricity sectors. The auction raised $290 million.
How this money is spent will determine the success of the program. One major hazard is that social inequity will worsen. Low-income families spend a higher proportion of their income on necessities such as fuel and electricity and so bear a bigger burden of increasing fossil fuel costs. If the auction revenue is spent exclusively on emission reduction projects, as many advocates espouse, social inequity becomes more pronounced, and arguments that a carbon price is a regressive tax and that cap and trade is a government cash cow would be bolstered.
California should spend the auction revenue so that economic equity improves rather than worsens. One means of accomplishing this is by issuing climate dividends. This concept is based on the idea that the atmosphere performs a service by acting as a “sink” for greenhouse gas pollution. Up to the present, this valuable service has been free to polluters. By marrying cap and trade with a climate dividend, polluters pay and funds collected are returned to all
Californians equally as compensation for the use of the sky, a common asset.
Recently the California Public Utilities Commission adopted a climate dividend policy for the part of the revenue generated in the electricity sector. In announcing its decision, the PUC wrote, “Returning revenues equally to all residential customers is more equitable and comports with the idea of common ownership of the atmosphere given that residential ratepayers will ultimately bear the increased costs as a result of the cap-and-trade program.” Although the dividends are small — between $40 and $80 per household per year — they are nonetheless a start. Californians should begin to see this money reflected on their utility bills this year.
In 2015, California's cap and trade program will add the transportation sector, generating up to $6 billion per year. Depending on how auction revenues are spent, the economic bite on low- and middle-income families may become even more painful. In contrast, if dividends are issued, low- and middle-income people will be protected, the economy stimulated and investment dollars steered toward clean energy.
In the next six months many interests will vie for a piece of the AB 32 revenue pie. We urge decision-makers in Sacramento to follow the state Public Utilities Commission's example in keeping the interests of average Californians in mind and creating a model that might help move the rest of the country toward adopting a carbon price.
Mike Sandler is co-founder of the Climate Protection Campaign and former program manager at the Sonoma County Regional Climate Protection Authority. Barry Vesser is the deputy director of the Climate Protection Campaign.
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