Cap & Dividend
Via Dave Roberts, an animation aimed at explaining Peter Barnes’ “cap and dividend” concept. But basically the idea is you have a cap and trade system with auctioned permits and then all the revenue from the permits is rebated to the public on a flat per capita basis. Consequently, everyone whose overall carbon footprint is below average for an American will wind up benefiting financially. And thanks to the magic of income inequality, most people have below average footprints (since the tiny number of people flying around in corporate jets between their three homes are skewing the average) and will benefit:
Dave says: “I’ll admit to remaining wildly ambivalent about C&D, vexingly unable to develop the kind of clear, strident opinion the blogosphere demands.”
I maintain a position of clear stridency in favor of ambiguity on this topic. From my armchair, cap and dividend seems like the most politically viable approach. From other people’s armchairs, other approaches seem more politically viable. But the people who really count here are the members of the United States Senate. I would urge committed greens in said body to be willing to get behind whatever version of a carbon pricing scheme can in fact attract the broadest support from their more short-sighted, small-minded, and/or corrupt colleagues. There’s really no sense in people of good will and good faith beating each other up about the merits of these different ideas — the real issue is the empirical question of which approaches can garner support and which cannot
26 Responses to “Cap & Dividend”
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December 18th, 2008 at 1:27 pm
And thanks to the magic of income inequality, most people have below average footprints (since the tiny number of people flying around in corporate jets between their three homes are skewing the average) and will benefit…
Off topic, but this reminds me of one of the more intriguing policy ideas I’ve heard of late: getting rid of the penny via a government decree making them worth five cents. Everybody who owns pennies would get free money, of course, but the poor disproportionately so.
December 18th, 2008 at 1:31 pm
Uh, did the people who make the video turn the levels up a little too high, maybe?
December 18th, 2008 at 1:32 pm
Matt, you’re getting funnier.
December 18th, 2008 at 1:40 pm
Sounds like a plan even Sarah Palin could support. I’m assuming Snow Machines are excluded from the carbon footprint calculation, right?
In seriousness, I suspect that’s how it would work in real life. Lot’s of little addendums excluding special interest areas. Thus making middle class home owners the biggest polluters in the country, at least on paper.
December 18th, 2008 at 1:43 pm
Framing guru George Lakoff supports Cap and Dividend:
December 18th, 2008 at 2:02 pm
The most politically viable proposal in the senate is likely to use the revenues from cap-and-trade for regressive income tax changes, or a cap gains tax cut, or “compensation” to the coal and oil industries, or something else similarly odious. Getting to 60 votes is going to require some serious palm-greasing that is likely to require us to trade off climate change versus other progressive goals.
December 18th, 2008 at 2:03 pm
Christ, not Lakoff again. Dude’s the apotheosis of Berkeley liberals telling the rest of us how to appeal to real America. I like Berkeley liberals (I’m related to several of them!) but it’s a ridiculous proposition on its face. Lakoff’s perspective is internally consistent, but I’ve never seen any evidence that it’s actually useful for anything.
December 18th, 2008 at 2:04 pm
…none of which is to malign cap & dividend, incidentally.
December 18th, 2008 at 2:17 pm
Interesting idea. Using the price system in some manner to discourage carbon fuel consumption (or as in this case to reward conservation) is far superior than rules, regulations, bureaucracy and nonsense. I’d also like to see a gas tax designed to put a floor on gas prices, with the floor steadily rising over the years.
December 18th, 2008 at 2:18 pm
Another advantage of Cap and Dividend is that its the soundest in terms of broader economic impacts. Its the Cap and Trade approach that does not have a built in deflationary drag … if anything the opposite, given that those with the largest carbon footprints are also those with the greatest freedom to devote income to wealth accumulation instead of spending on newly produced goods and services, so the net transfer will, if anything, be a mild economic stimulus.
And during a transition to a more ecologically sustainable economy, we very much need to be encouraging the uptake of new technology.
If they push the permits as far upstream as optimal, that would make the permit payment less visible (and also harder to nibble to death with myriad small exemptions). If the Cap and Dividend includes a right to use a portion of the Dividend stream for up front costs of energy and carbon saving residential spending, that would increase its stimulus, and increase the popularity of the dividend stream.
December 18th, 2008 at 2:37 pm
“I would urge committed greens in said body to be willing to get behind whatever version of a carbon pricing scheme can in fact attract the broadest support from their more short-sighted, small-minded, and/or corrupt colleagues.”
I’m sure that both farsighted, broad-minded, non-corrupt committed greens in the US Senate will take your suggestion very seriously and work hard to attract the support of their other 98 colleagues.
December 18th, 2008 at 3:23 pm
I don’t like cap & dividend, to the extent I understand it. It doesn’t impose disincentives on polluters, but on the sellers of the fuels that pollute. Aside from the fact that it makes those fuels more expensive, it doesn’t do much to encourage the users of polluting fuels to change their consumption or production habits. If I have a factory, and my fuel source has just become more expensive because of new taxes and supply caps imposed on my fuel suppliers, and if I have an option between installing one new system that burns that fuel in a way that is more cost efficient, but dirty, and another new system that is cleaner, but less cost efficient, my incentive is going to be to buy the cheaper dirtier system. To incentivize cleaner but more costly systems, I have to be facing a pollution penalty on the other side.
Cap and dividend is also gimmicky. It doesn’t do much to encourage participation of the citizenry in efforts to transform our energy system, but treats them as passive, consuming bystanders, and tries to buy their participation into a program they don’t understand by tricking them into believing they are getting free money in the form of some kind of “dividend”. The web sites that have been set up to support cap and dividend are filled with a lot of embarrassing and disrespectful “framing” that dumbs down and talks down. I feel like trying to encourage my fellow citizen’s to support the program puts me in the position of doing a slick sales job on them, rather than appealing to their faculty of reason.
My preference would be he revenues raised from carbon penalties should be plowed back into new technologies, rather than handed out to people to be consumed – maybe on an extra polluting car trip to Disney World or grandma’s house!
December 18th, 2008 at 3:54 pm
Dan – your use of “clean” and “dirty” doesn’t apply well to atmospheric CO2. The only tech that counts as “clean” here is capture and sequestration, and I think that will be expensive and unusual enough to special-case. The polluter’s incentive to use less fuel really is the same as the incentive to not emit CO2.
December 18th, 2008 at 4:41 pm
Capture and sequestration is expensive, Nathan Williams. But isn’t it less expensive in opportunity terms if the alternative is that you have to pay for more permits or pay more taxes to emit CO2?
I’m willing to believe that upstream caps and fees are more efficient, and easier to administer, than downstream caps and fees. Maybe cap and dividend is sensible policy. But what I really dislike about this whole cap and dividend promotional dog and pony show is that it is dishonest. It’s organizers have incorporated a lot of dumbed down, overly slick sales smack into the policy promotion, talk designed to trick people into thinking that no costs will be imposed on them personally, but only on the polluters. Gee, we are even going to make money!
But of course most of the costs imposed in the form of upstream permits are going to be passed on downstream, all the way to the consumer. And capping and taxing the sales of carbon fuels is supposed to encourage shifts to other fuels. These fuels are obviously going to be expensive during the earlier development stages, and many of the costs of this shift are also going to be born by fuel consumers, and the consumers of those consumers, etc. So why not just tell people that, instead of trying to trick them into thinking that they are going to see no impact at all on their incomes or living costs, and are just going to get free money from the pocketbooks of the polluters. Can’t we get people to understand that they are going to be asked to pay something, whether through direct taxes or higher costs on most products, but that in return for that they get a better environment?
And finally, I don’t like the promotional angle of pushing a rebate of all the permit fees to the general public as some wonderful progressive measure. The cap and dividend website even sports quotes about the “demand for a 100% rebate” as though it’s some great public cause. The notion that we collectively own the commons is a good one to promote, as is the idea that we should collectively charge people penalties for degrading the commons. But it seems to me that the next step is to encourage people to use the penalty funds they collect to repair, restore and protect the commons. Cap and dividend seems to say, “Nah, let’s charge people for degrading the commons and then just take the money and buy stuff!”
December 18th, 2008 at 6:10 pm
Could this get more complicated? Two words: gas tax. Three more: cut payroll taxes.
December 20th, 2008 at 7:32 pm
Echoing what DTM said, it’s a huge misconception that “gas tax” = “climate change policy”.
Emissions from all forms of transport (driving, flying, etc) are only a fraction of total emissions – in the US I think it’s about 25%. The other 75% of greenhouse emissions come from coal, gas and oil fired generation for electricity, industrial processs, agriculture, and a diverse range of other sources. People tend to assume that emissions from cars are the whole story just because cars are so visible, while electricity generation plants and factories are located a bit away from population centres and you don’t see them all the time.
The advantage of a broad based carbon price is that all of those different pollution sources would face the same price and you don’t create distortions between them. In practice, coal fired power plants are actually hardest hit by a carbon price because direct fuel costs are a bigger % of their total costs, while the retail price of petrol includes refining, distribution, and many more middle men. The same carbon price might make coal fired generation costs go up 50% and petrol prices go up 10% for example (fake numbers).
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