Cap and dividend [Editorial]

Our view: Maryland congressman's innovative plan to reduce greenhouse gas emissions — but shield average Americans from higher energy prices — deserves serious consideration

August 04, 2014

How would you like to receive a quarterly check from the federal government? Most taxpayers would surely be happy with such an arrangement. But here's the really good part: What if by accepting that check you were also helping your country reduce a form of air pollution that is a threat to human health and responsible for climate change while simultaneously developing a rational, sustainable energy policy?

That sounds too good to be true, but remarkably, it may not be. Under The Healthy Climate and Family Security Act introduced last week by Maryland Rep. Chris Van Hollen, companies that drill for oil and gas or mine for coal would have to purchase through auction a permit to do so. Not a dime of the resulting revenue would be kept by the government but would simply be forwarded as checks to every man, woman and child.

Whatever costs the energy companies pass along through higher retail prices (and given that the permits are certain to rise in value over time as the total carbon production would be capped and gradually reduced, higher prices are a near-certainty) would be off-set by higher and higher dividend checks. And here's another payoff built into the proposal — consumers who conserve energy (driving more efficient cars or insulating their attics, for instance) would come out further ahead as the dividend rises but their energy costs fall.

Invest in renewable energy and you'll really come out ahead — as will the rest of us. The nation can achieve energy independence by using the invisible hand of the market rather than fretting over rules and regulations written by government agencies.

Various formulations of a carbon tax have been discussed before, but the appeal of Mr. Van Hollen's concept is its simplicity. He doesn't attempt to use the tax to pay for government programs or even reduce the deficit. He doesn't put an income qualifier on the dividends to address income inequality either. It's just an attempt to wean the United States from fossil fuels while shielding families from higher costs.

The notion that Americans might receive a royalty check for fossil fuels taken out of the ground isn't exactly a new concept either. In Alaska, they've been cutting billions of dollars worth of such checks for years, and the program is very popular. In 2008 alone, the Alaska Permanent Fund paid out more than $3,200 to every eligible resident of the state.

Big energy companies and their allies are likely to oppose the legislation if only because it would reduce demand for their products. But they ought not be the ones setting energy policy for this country or dooming the nation to a future of flooded coastal areas and weather disasters due to global warming or shortened lives from heart disease, cancer and other maladies that come from having to breathe in filthy air.

Nor is the bill likely to impress climate change deniers — although he law would be helpful to U.S. interests even if it we were unconcerned about the rising levels of carbon dioxide and other greenhouse gases in the atmosphere. The proposal includes a provision to protect U.S. manufacturers from the potential adverse impact of rising energy costs when they try to sell their products overseas so opponents can't claim it hurts U.S. competitiveness.

In short, the concept makes a lot of sense — in terms of promoting conservation, reducing pollution and greenhouse gases and supporting renewable energy — with the added benefit of making such a transition a bit easier for anyone with a valid Social Security number. It is the ultimate consumer-friendly approach to a rational U.S. energy policy with the chief shortcoming being that it doesn't serve the agenda of any deep-pocketed special interest group and so may have trouble finding broad support in Congress.

Still, it gives Mr. Van Hollen something to talk about on the campaign trail this fall and demonstrates that he and many of his fellow Democrats are at least exploring opportunities to address the threat of climate change. Meanwhile, their political opponents can explain why doing nothing about rising temperatures, melting glaciers and worsening weather due to this impending man-made disaster is somehow in the voters' interest.


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