Carbon Rebates: Better than Carbon Regulations?

The New York Times is
running today an op/ed, “The
Carbon Dividend,” by University of Massachusetts economist
James Boyce touting a new bill by Rep. Chris Van Hollen (D-Md.)
that would set up a cap-and-dividend program that aims to limit
U.S. emissions of globe-warming carbon dioxide. Boyce explains that
the plan…

…would require coal, oil and natural gas companies to buy a
permit for each ton of carbon in the fuels they sell. Permits would
be auctioned, and 100 percent of the proceeds would be returned
straight to the American people as equal dividends for every woman,
man and child…

The number of permits initially would be capped at the level of
our 2005 carbon dioxide emissions. This cap would gradually ratchet
down to 80 percent below that level by 2050. Prices of fossil fuels
would rise as the cap tightened, spurring private investment in
energy efficiency and clean energy. Energy companies would pass the
cost of permits to consumers in the form of higher fuel prices. But
for most families, the gain in carbon dividends would be greater
than the pain. In fact, my calculations show that more than 80
percent of American households would come out ahead financially —
and that doesn’t even count the benefits of cleaner air and a
cooler planet.

As the cap tightened, prices of fossil fuels would rise faster
than quantity would fall, so total revenues would rise. The tighter
the cap, the bigger the dividend. Voters not only would want to
keep the policy in place for the duration of the clean energy
transition, they would want to strengthen it.

The net effect on any household would depend on its carbon
footprint — how much it spent, directly and indirectly, on fossil
fuels. The less carbon it consumed, the bigger its net benefit. But
why would a vast majority emerge as winners?

There are two reasons. First, among final consumers, households
account for about two-thirds of fossil fuel use in the United
States. Most of the remainder is consumed by government. In Mr. Van
Hollen’s bill, households would receive these other carbon dollars,
too.

Republicans should welcome this feature, since over the years it
would return billions of dollars from the government to the people.
Unlike a carbon tax, which brings in more revenue for the
government, Mr. Van Hollen’s bill is, in effect, a tax cut.

Boyce likens the proposal to the popular Alaska permanent fund
that divvies up oil and gas royalties to each Alaskan citizen.

Given that the bastards in Washington and various statehouses
are going to “do something” about climate, this proposal could be
thought of as a least bad policy alternative policy. After all, our
policymakers have already screwed up the economy with ethanol
mandates, EPA coal regulations, CAFE standards, feed-in tariffs,
renewable portfolio standards, tax credits for solar, wind, and
electric cars, and on and on and on. So what about a deal? Get rid
of all of those regulations, mandates and requirements in exchange
for this straigtforward carbon dividend plan.