Cap&Dividend CLEAR-ed for Consideration

Remember when health insurance reform was pronounced a lost cause? That’s where Cap&Trade and the effort to get the U.S. into the fight against global change are now. If they are to go forward, lawmakers must find a way to stop U.S. greenhouse gas emissions by putting a price on the generation of them without stopping U.S. economic growth or overburdening U.S. energy consumers.

In place of Cap&Trade, some would substitute Cap&Dividend. CLEAR Economics: State-Level Impacts of the ‘Carbon Limits and Energy for America’s Renewal Act’ on Family Incomes and Jobs is one of the first neutral and academic evaluations of the Cap&Dividend concept, which would cap U.S. greenhouse gas emissions (GhGs), charge the major emitters for what they spew via an auction of allowance permits and redistribute the revenues from the auction as dividends to all citizens as compensation for the burdens they would bear in the form of higher energy costs.

The study finds that Cap&Dividend could drive a transition to New Energy (NE) and Energy Efficiency (EE) that would create 360,000 jobs from public spending and many more as private spending shifts from Old Energy to the New Energy economy. The public spending could also be designed to support more job growth in states with high unemployment and high dependence on Old Energy. ::continue::

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Despite the relatively minimal costs that would be imposed by the Cap&Trade system proposed in legislation passed by the House of Representatives in June 2009 and stalled in the Senate ever since, the market-based plan to fight global climate change has been branded “cap-and-tax” by opponents on the left and the right.

Most Congress-watchers believe neither Cap&Trade nor any other comprehensive energy and climate bill will get through the Senate this year. Some hold out hope for a bipartisan energy and climate proposal being worked out by Senators Kerry (D-MA), Lieberman (I-CN) and Graham (R-SC). It is unclear exactly what the details of the Kerry-Lieberman-Graham (KLG) emissions-cutting plan will ultimately be. The Senators have acknowledged the potential of the Cap&Dividend concept contained in the Carbon Limits and Energy for America’s Renewal (CLEAR) Act proposed by Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) but appear to be developing a “reduction and refund” compromise concept.

Though Senator Graham has worked hard on the compromise legislation, he has – since the passage of the health insurance reform legislation – repeatedly told the media he foresees difficulty with any other business being done in the Senate until after the November elections.

Therefore, even as the new report elucidates the significant economic benefits of Cap&Dividend, its fate is anything but CLEAR.

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This post is based on CLEAR Economics: State-Level Impacts of the ‘Carbon Limits and Energy for America’s Renewal Act’ on Family Incomes and Jobs by James K. Boyce & Matthew E. Riddle (March 2010, Department of Economics and Political Economy Research Institute/University of Massachusetts, Amherst)

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