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Ban Carbon Emissions, Don’t Price them: Why Cap and Dividend is the Best Approach

Cliff Stainsby, Dogwood InitiativeB
The current debate over carbon taxes versus “Cap and Trade” is wrongheaded on two counts; (1) it treats global warming as an economic issue, and (2) neither carbon taxes nor “Cap and Trade” will solve the problem.

There is a solution that does work and which is rapidly gaining public support once understood—the ‘Cap and Dividend’ system (which I describe below).

But first we must see what is wrong with the current approach.

… Neither a carbon tax nor “Cap and Trade” meet the five criteria [scale, urgency,certainy, simple & transparent, fairness]. Fortunately, there is one proposal that does; it is called ‘Cap and Dividend’.

The Cap and Dividend “policy has three basic steps:

  • First, … carbon emissions are capped at a level that gradually declines over time.
  • Second, based on the Cap in a given year, permits are auctioned to firms that bring fossil carbon into the economy (whether through domestic extraction or imports). The supply of permits in a given year is fixed by the cap; their price depends on the demand for them.
  • Third, revenue from the sale of permits is deposited into a trust fund and paid out equally to every woman, man, and child in the country. In addition, some fraction of the revenue initially may be earmarked for other uses, such as transitional adjustment assistance.

Cap and Dividend will work because it fulfills all the criteria:

  1. Scale: it caps all CO2 emissions at the point they enter the economy – the oil and gas wells, the coalmines, and the border. Consequently there are very few emissions sites to monitor and enforce, and the emissions are well known.

  2. Urgency: it can respond to the urgency because caps are required at relatively few sites.
  3. Certainty: a legislated enforceable cap can provide emission reduction certainty, and an easy to determine path from today to zero emissions in 2050. (Unlike carbon taxes for which no one can guarantee the emission reductions that will result from any particular specified tax rate.)
  4. Simple and transparent: the plan is straightforward; all the elements – cap, auction, and dividends – can easily be made public and audited.
  5. Fairness: the dividend ensures that low-income people receive protection from increased energy costs.

Cliff Stainsby is a long time activist who was in vanguard of getting BC ENGOs and trade unions to recognize global warming. Cliff is recently retired and when not working on climate policy spends most of free time in his magnificent garden
(20 April 2009)
Suggested by EB contributor Bill Henderson who adds, “The cap and dividend site mentioned has a lot of good info too.”

Why CEOs want carbon laws

David Whitford, CNN Money
Executives of Ford, Duke Energy, and carbon trader EcoSecurities are hoping market mechanisms will help jumpstart green tech investments.
What do CEO Bill Ford of Ford Motor (F, Fortune 500), CEO Jim Rogers of Duke Energy (DUK, Fortune 500) and CEO Bruce Usher of carbon trader EcoSecurities (ECGUF) have in common? A deep aversion to unpredictability.

That’s why Rogers has been begging for carbon legislation for years — so he can make big investments in renewables. It’s why Ford says he wants a gas tax — so he can invest in smaller cars. And it’s why Usher needs a cap and trade bill from Congress — to jumpstart carbon trading in the U.S. and catalyze big investments in green technologies. Before it’s too late.

“Market mechanisms not only work,” Usher said during Tuesday’s carbon finance session Fortune’s Brainstorm: Green conference. “They work incredibly fast.”­­
(22 April 2009)

Panama rainforest growing back?

David Ariosto, CNN
Rainforest clash in Panama signals larger debate

Hunched over a campfire in eastern Panama, Embera tribesman Raul Mezua chanted a song his grandfather taught him when he was a boy.

… It’s not just the song but their language and culture that Mezua and his tribe fear losing as deforestation from logging and cattle ranching threatens the rainforest that is part of their identity.

But recent trends could usher in a welcome reversal for Mezua and his tribe. Rural workers are migrating toward cities in search of jobs, and forests are re-emerging where now abandoned farms and cattle ranches once flourished, according to a 2009 report from the U.N. Food and Agriculture Organization. Video Watch the struggle over Panama’s rainforests »

Such “secondary” forests in the tropics can rapidly grow in areas once cleared for logging and cattle ranching if left alone, said Joseph Wright, senior scientist at the Smithsonian Tropical Research Institute in Panama.
(22 April 2009)