Wednesday, June 4, 2008

How About a Cap-and-Trade Dividend?

WSJ Opinion piece by Robert Reich:
The Lieberman-Warner cap-and-trade bill is going nowhere. Even in the unlikely event Congress passes it, President Bush has said he will veto the measure, and there aren't nearly enough votes to override....

...Over the life of the bill, half of the permits would be handed out for free, half by auction.

But carbon auctions raise another problem when it comes to Washington. Revenues from the auctions are likely to be fish bait to industries that might qualify for some of them. Sen. Joe Lieberman estimates that the market value of all permits under his bill would be about $7 trillion by 2050. That sum would go into what he calls a Climate Change Credit Corporation, which, operating outside the budget process, would invest in various plans for developing alternative energy. You can bet that lobbyists for ethanol, nuclear and "clean" coal are already salivating at the prospect of a similar fund emerging from a bill championed by a President McCain or President Obama.

That's why it's important that all revenues from carbon auctions be cycled back to citizens. And rather than launch another endless debate over how and to whom – a payroll tax cut for people earning under the median wage, or a cut in capital gains? – it would be well to agree to the simplest possible formula: Every adult citizen should receive an equal share. If the carbon auction yields $150 billion in the first year, for example, each of America's 150 million adult citizens should receive a Treasury check that year of $1,000.

Such direct and simple repayments deal with another problem. Although the balance of economic studies suggest that the cost of a cap-and-trade system will be modest, inevitably some costs will be involved and be passed along to consumers who are already walloped by high fuel and food costs and who will be in no mood to accept even modest additional price increases. Hence, the yearly dividend checks will be a welcome offset.

Our atmosphere belongs to all of us. It seems only reasonable that corporations should have to pay to use it. The citizens of Alaska and Alberta, Canada, get yearly dividends from the oil companies that take away their natural resources. Why shouldn't the same principle apply when industries use the biggest common resource of all?

Mr. Reich, professor of public policy at the University of California at Berkeley and former U.S. Secretary of Labor under President Clinton, is author of "Supercapitalism: The Transformation of Business, Democracy, and Everyday Life" (Alfred A. Knopf, 2007).