New Climate Bill to Send Polluter-Pay Rebates to American Families

Rep. Chris Van Hollen of Maryland introduced a climate bill this week that received little notice, but the formula it provides for capping carbon offers a useful strategy for winning broad public support: Make polluters pay fees for carbon emissions and rebate the revenue to American families.

It is called the The Cap and Dividend Act of 2009, and it is an astonishingly simple piece of legislation – a mere 20 pages long.

The reason this little bill might end up punching above its weight is because it speaks loudly where the 648-page climate bill introduced the day before by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) remains silent: on the question of carbon credit auctions and allocations.

Van Hollen wants to auction 100% of the permits that companies will need in order to release carbon into the atmosphere – in other words, no free giveaways to polluters, despite their demands.

He also wants to return 100% of the auction revenues equally to every American resident with a social security number. That's the "dividend" in the bill's title – also sometimes referred to as "cash back" or "rebate."

His bill echoes President Obama's thoughts on cap and trade as well. The president wants a program that controls emissions, auctions 100% of the permits and returns most of the revenues to working families. Peter Orszag, the president's budget director, explained succinctly why a 100% auction is necessary:

To give away the permits instead would be "the largest corporate welfare program that has ever been enacted in the history of the United States."

As for rebates, the president has called for distributing the revenue by extending the Making Work Pay tax credit, which applies to 95% of working Americans.

Van Hollen's bill will be taken up by the House Ways and Means Committee, chaired by Rep. Charles Rangel (D-N.Y.), who spoke to SolveClimate briefly last month about the need to cushion consumers from rising energy prices (see video). The question of revenues from a cap is a matter that falls squarely within the jurisdiction of his committee, and outside the jurisdiction of the House Energy and Commerce Committee, where the Waxman-Markey bill originated.

The Van Hollen bill in some form could be integrated into the final comprehensive climate package now being constructed through the intricate process of lawmaking in the House.

Insiders do not expect it to emerge from Rangel's committee unchanged. The expectation is that Van Hollen's legislation will end up proposing less than a 100% rebate. Some of the proceeds from the sale of revenues could be put to other purposes – such as investments in clean energy, energy efficiency measures and international climate assistance – while still protecting  consumers from rising prices.

The bill was backed by 10 regional environmental organizations which issued a statement of support, saying, in part:

No other carbon cap proposal does as much to help American families, our economy, and our planet.

The largest and best known environmental groups remain largely skeptical of the Cap and Dividend approach and are most deeply engaged with the Waxman-Markey bill, known as the American Clean Energy and Security Act of 2009, or ACES. However, supporters of Van Hollen's bill say it is not intended to be competing climate legislation.