Friday, April 23, 2010

Cap and Refund



Senators Maria Cantwell (D-Wa) and Susan Collins (R-Me) have a brilliant way to capture imaginations and reclaim the public debate about cap-and-trade. Their bill on the floor of the House is called the CLEAR Act — Carbon Limits and Energy for America’s Renewal — just the kind of moniker to lift the fog of climate change deniers like Marsha Blackburn and James Inhofe. The bill makes an end-run around the pitfalls of cap-and-trade, summarized so well by Annie Leonard (Story of Stuff)’s short animation by the same name.

Cap and refund stands on the shoulders of deep thinking by David Fleming, Richard Douthwaite and the rest of the skunk works at FEASTA, the (Irish) Foundation for the Economics of Sustainability. Fleming correctly foresaw the boondoggle Ponzi scheme that cap-and-trade, the darling of the Kerry/Graham/Lieberman approach, would prove to be when it was actually implemented in Europe. His alternative was cap-and-share (called cap-and-dividend in the US), the idea that every citizen would go to the bank or post office and collect a monthly check from the international trading exchange in carbon credits. While gradually reducing atmospheric CO2 (the cap), the refund would ensure that the poorest people in the world are not priced out of the market for energy and everything made with energy as its price rises due to the tightening cap. Leiberman’s bill, and the dismal experiment with the European carbon market, would, if enacted, enrich the oil companies and big energy consumers, and mint a new generation of Wall Street billionaires while starving and freezing the poor.

We need a carbon credit exchange, despite rallying cries to the contrary coming from the climate summit in Cochibamba, because without it, there is no way to put a price on carbon. Without a price on carbon, big polluters like the US, Canada and China can keep building more coal plants and ignoring alternatives like wind, solar and biochar. Leiberman’s bill would give fat subsidies to nuclear reactor builders by ignoring uranium’s huge carbon footprint, in the same stroke starving wind energy (with a fraction of the carbon footprint) of needed investment.

As Elizabeth Kolbert reports in the April 21 issue of  Yale 360
“Under the [CLEAR] bill, the president would, beginning in 2012, set an overall cap on fossil-fuel emissions. That cap would remain in place until 2015, after which it would start declining by a quarter of a percent a year. So-called “upstream” emitters — mainly sellers or importers of coal, oil, and natural gas — would then have to buy permits from the federal government at a monthly auction. Three-quarters of the proceeds would be returned to U.S. citizens in the form of a monthly check. (Cantwell’s office has estimated that, for a family of four, the “refund” would be about $1,000 a year.) The other quarter would go into a Clean Energy Reinvestment Trust Fund to research and develop renewable sources of energy.”
Admittedly, reducing carbon emissions by half a percent per year will not pull the world’s fat out of the fire. At that rate, it would take until 2115 to bring US emissions down by half, which is not nearly quick enough. If the rate were raised to 1 percent, the US could bring emissions to half by mid-century, which is more in line with what is needed (although 80% reductions would be better, and some nations have pledged to be carbon neutral much sooner than that). By Cantwell’s calculus, raising the annual cap increase to 1% would line $2,000 in every USAnian’s pocket. Raising it to 2% would mean $4,000, and so forth. What is not to like about that? It is Lafferesque in its voodoo economics.

What are the chances that CLEAR will supplant the Leiberman porkmonster? In the latest issue of The New Republic, Bill McKibben asks, 
“why is Bill One, the porky kludge, viewed as ‘serious’ and ‘realistic’ and the center of the action, while Bill Two barely gets a mention? One answer I heard from half a dozen people on both sides of the issue was surprising: ‘They’re women.’ One would hope, in Nancy Pelosi’s Washington, that this isn’t actually the cause. But what do I know? The even scarier, and probably even truer, answer is that Bill One, Kerry-Graham-Lieberman, is seen as serious precisely because it’s weighed down with a thousand compromises.”
Another question is, which bill will the White House support? From what we have seen of Obama on this and other issues in recent months, the answer seems apparent: Leiberman. But c’mon Barry, surprise us. 
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