Cap-and-Trade and Cap-and-Dividend Can Be Friends!

Bill Scher

One thing I learned watching the climate debate last year is: don’t pick a fight with Joe Romm.

For example, the Freakonomics boys had their reputation permanently sullied by the brilliant policy analysis and Climate Progress blogger after daring to play loose with the facts about climate science, leading to a devastating takedown in the Boston Globe.

That is why I very gingerly suggest that Romm’s harsh political analysis of the Cantwell-Collins “cap-and-dividend” climate bill — dismissing it as “cap-and-divide” — is off-target.

Romm’s argues the bill — which would cap carbon by auctioning pollution permits and then would give the proceeds to taxpayers — divides supporters of climate action because “it has no chance whatsoever of becoming law but is serving to undercut the tripartisan effort by Graham, Kerry, and Lieberman to develop a bill that might get 60 votes.”

I would have agreed with Romm throughout all of last year.

The bill that passed the House was a version of cap-and-trade. The bill that passed the Senate’s environmental committee was a version of cap-and-trade. It’s the only plan on the table, the only one with a broad coalition of supportive stakeholders, and the only one actually moving through the legislative process.

Getting into a full-blown debate about what is the absolute bestest perfectest way to avert a climate crisis, when no solution is perfect and every one has political obstacles, was clearly recipe for inaction.

But this year, the game has changed.

The tripartisan effort Romm refers to is now looking to significantly alter the bill that cleared the Senate’s environmental committee, and is looking at the cap-and-dividend approach as a complement, not a rival.

Presumably, they are hoping that the cap-and-dividend idea of sending every taxpayer a check, out of the hides of greenhouse gas polluters, is enough to give the climate bill as fresh shot in the arm.

As Greenwire reported yesterday, the Senators see promise in using a cap-and-dividend for certain sectors of the economy:

…Graham said the talks are focusing on both sector-specific emission limits and a “cap and dividend” proposal from Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine) that auctions off allocations with the revenue returned directly to taxpayers. “It’s just reality,” Graham said. “Like with cap and dividend, there are some aspects that make sense. [And] the idea of a fee on carbon for some elements of the economy and a trading system for others.”

Reuters also reported on what such a “hybrid” approach could look like:

…a “hybrid” could be a system that imposes cap and trade on coal-fired power plants, coupled with “some sort of cap and dividend or emissions fee for other industrial sources” of carbon pollution.

So we don’t have to treat cap-and-dividend as a ploy to kill any bill. Cap-and-trade and cap-and-dividend can be friends!

Is this “hybrid” idea better or worse than the cap-and-trade bills that had been on the table? We can’t really say until there are details.

And Romm is absolutely right to flag the weaknesses in the Cantwell-Collins version of cap-and-dividend: potentially fewer reductions in emissions without stronger emphasis on implementation, a loophole that lifts the carbon cap if permits get a little pricey, carbon-heavy states could unfairly lose more revenue than they get back in dividends.

But Romm also notes that the cap-and-trade bills aren’t perfect either. He’s accepted a degree of carbon offsets loopholes — or, as Romm coined, “ripoffsets” — as a price to gain support from affected industries. But he continues to push for a gradual “sunset” of the giveaway by 2030.

So instead of enviros entering into a fresh civil war, there’s an opportunity to take the best parts of these two carbon cap ideas, close up the loopholes best we can, and smooth out any regional disparities.

Is that possible without breaking what has always been a tenuous coalition behind passing a climate bill?

In other words, can cap-and-trade and cap-and-dividend be best friends?

I don’t know. We can’t know until we push to see what is strongest bill possible, without making it impossible for Kerry, Lieberman and Graham to do a final deal.

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