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

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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.  

The House leadership left specific prescription for auctions and allocations out of the ACES bill, instead preferring to work out an appropriate formula through the legislative process. The Van Hollen bill is the first to break the silence. The bill could not have been introduced without the blessing of Speaker Nancy Pelosi, with whom Van Hollen works closely both as chair of the Democratic Congressional Campaign Committee and co-chair of the House Renewable Energy Caucus.

Since the introduction of the ACES bill, Republican opponents around the country have launched a massive and disciplined opposition campaign, labeling the measure as a giant new tax. Most commonly, they’re labeling it "Cap and Tax", and in another formulation calling it the "light switch tax" – trying to convince consumers that they will have to start paying for doing the things everyone now takes for granted. 

The Van Hollen bill has the potential to help flip the messaging war on its head by reaching consumers with the idea of a Cap and Rebate – the precise opposite of the way climate law is being attacked.

Under Van Hollen’s formulation, polluters will be paying consumers for the privilege of using the atmosphere as a dumping ground for global warming pollution. It provides the blueprint for a potential messaging jujitsu that, with the help of the president’s oratorical skills, could turn the tables on opponents of climate law. 

Van Hollen’s bill also seeks to simplify the imposition of a carbon cap. In less than eight pages, it calls for the imposition of an "upstream cap" placed on the first sellers of oil, natural gas and coal – about 2,000 companies that would be required to buy the carbon permits. It seeks to regulate carbon at the point where it enters the economy, rather than where it emerges from smokestacks. The ACES bill needs more than 100 pages to explain a variety of cost containment mechanisms and the complex rules for capping carbon from tens of thousands of companies that emit carbon dioxide. 

Original co-sponsors of the Cap and Dividend Act of 2009 include Reps. Mike Thompson (D-Calif.), Earl Blumenauer (D-Ore.) and Lloyd Doggett (D-Texas). Observers say a cap and dividend bill is also in the works on the Senate side, being worked on by Sens. Diane Feinstein (D-Calif.) and Maria Cantwell (D-Wash.).


See also:

Video: Is Cap and Dividend the Right Solution?

Video: Cartoon for a Better Planet: Cap’n Dividend

Memo to Obama: Make Carbon Cap Simple and Unsinkable