A Climate Change Proposal With Cash

"Cap-and-dividend" advocates say to tackle global warming, Uncle Sam will need to hand out money.

U.S. Sens. Joseph Lieberman (I-CT) (R) and John Warner (R-VA) hold a news conference August 2, 2007 in Washington, DC. The two unveiled legislation that aims to slow global warming by, among other things, establishing emission allowances and auctioning them off, with the proceeds going to promoting new technologies.

U.S. Sens. Joseph Lieberman (I-CT) (R) and John Warner (R-VA) unveiled legislation that aims to slow global warming.

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What if every American got paid for being part of the climate change solution? There would be a lot more political support for doing something big, say advocates of "cap-and-dividend," an idea garnering increasing attention as Washington begins to grapple with global warming. The potential cost to consumers and the concept's downright complexity have been big sticking points in the ideas that have been floated so far—including the big Climate Security Act that the Senate is set to begin debating this week. That plan, authored by independent Joseph Lieberman of Connecticut and Republican John Warner of Virginia, would be the same kind of cap-and-trade scheme that Europeans already are using to attempt to control carbon dioxide. Emissions are limited, or capped, but the thousands of companies that produce carbon dioxide have the flexibility to trade emissions rights among themselves. The Warner-Lieberman bill's prospects are not strong, given the difficulty of capturing all the emitters of carbon dioxide in an economy that runs on fossil fuel, the dispute over loopholes, and the specter of even more steeply rising energy prices. But Democratic Sen. Barbara Boxer of California has gained Warner's and Lieberman's support for amendments to the bill that would return 14 percent of the revenue generated to citizens—a step in the direction of cap-and-dividend.

Cap-and-dividend advocates, who believe the Boxer proposal does not go far enough, argue that a well-designed system could become as popular a federal program, and as sacrosanct, as Social Security. The idea, spelled out in a working paper last fall by economists at the University of Massachusetts Political Economy Research Institute, is to force the oil companies, coal companies, and other "first sellers" of fossil fuel to buy federal permits for the right to sell carbon-emitting fuel each year. The revenue from those permit sales would go into a fund that would be distributed as dividends to every U.S. citizen—perhaps in monthly payments directly into their bank accounts. It would be similar to the dividend that Alaska residents receive to share in the revenue of oil exploration in that state.

Under cap-and-dividend, gasoline and coal-fired-electricity prices nationwide would go up, but consumers would be getting cash to help them cope with those rising costs. Former Labor Secretary Robert Reich calls it a "win win" idea that voters will buy. Republican Sen. Bob Corker of Tennessee, a member of the Senate Energy Committee, has said he might support climate legislation if it returns money directly to citizens. No one, though, has been pushing cap-and-dividend harder than socially responsible investment pioneer Peter Barnes, who was cofounder and former president of Working Assets Long Distance, a telephone service that donates to nonprofit organizations. In recent years, he has been writing on climate and trying to come up with ideas to help a free market system deal with protecting the nation's "common wealth," like the atmosphere. Barnes spoke to U.S. News on why giving citizens a dividend—which, based on the Massachusetts research, would be somewhere between $1,200 and $6,000 a year for a family of four—is the best answer so far. Excerpts:

Why don't you like the Warner-Lieberman "cap" on carbon emissions?


Carbon is everywhere. To administer an emissions cap on carbon would be an administrative nightmare, not just for government but businesses and everyone who had to comply with it. If you require the companies that are the first sellers of fossil fuels—there are only a few hundred of those, like Exxon—to buy permits equal to the carbon content of their fuel, that is relatively easy to calculate. You don't have to monitor any smokestacks or have tens of thousands of businesses filing reports. You simplify the whole thing, and you capture 100 percent of the carbon, and you just crank that valve down, year after year, until you get down to wherever we need to go. Which ultimately may be zero, I believe.