Could Dividends Help North Dakota Say "Yes" to a Carbon Cap?

A recent article on the New York Times website via ClimateWire implied that North Dakota may hold the key to Senate passage of a U.S. climate bill version of HR.2454 (also called ACES).

I found this interesting because my research at UCLA showed that North Dakota could face the highest average carbon cost from electricity in the 50 states. They have very high per capita energy use, partly due to the cold climate. The average ND household consumed over 12,000 kwh in 2005, twice that of the average California household. ND's coal in their electricity mix leaves them with the highest carbon intensity per unit of electricity. But coal is cheap, so in 2005 ND only paid about 7 cents per kwh, while Californians paid over 12 cents per kwh (a carbon price could change this).

So we should not be surprised to find North Dakota's senators a little sensitive about the costs of climate action. In a recent op-ed in the Bismarck Tribune, Senator Byron Dorgan gave his reasons to worry about unregulated carbon markets. Dorgan stated:

"I'm willing to cap carbon to address the threat to our environment. But it has to be done right. I will support a plan that establishes workable caps, invests in technology to decarbonize fossil fuels and sends the majority of the revenue raised to consumers to offset increases in the price of electricity resulting from the caps."

He also said he wants the program to "...use the majority of the revenue from a plan that caps CO2 to provide refund payments to those who would otherwise experience increased energy costs."

This seems to place Senator Dorgan in the Cap and Dividend camp, those who advocate for returning revenues back to the people, rather than giving out free allowances to utilities or spending permit auction revenues on government programs.

The Democratic leadership, with the exception of Rep. Chris Van Hollen, have decided against the Dividend, in favor of a strategy that 1) hands out allowances to utilities and other powerful lobbies, and 2) hopes carbon costs will remain low (the so-called "postage stamp a day"). Since Dorgan's op ed veers from this strategy, he was immediately attacked by economist Paul Krugman and Climate Progress' Joe Romm.

When Congressman Earl Pomeroy (D-ND), voted no on the Waxman Markey bill in the House, he stated,

"[Because the coasts have cleaner energy and we have more coal, this cap and trade system]... creates a stage for wealth transfer from the Midwest to the coasts - and we don't like that. We are going to pay more and they are going to get a windfall. What's the point of that? It's a big issue for Midwest legislators."

I don't blame Dorgan and Pomeroy for being sceptical of the "postage stamp" strategy. Their state will face major costs, and the strategy puts supporters at risk in the 2010 or 2012 elections. The Senate could still choose al alternative strategy. They could set aside Waxman and Pelosi's vision of realpolitik (that had almost everyone holding their noses by the end of House debate) and take Dorgan's critique seriously. An alternative strategy would be to level with the American people, tell them that costs might be high, but auction revenues will provide them with a dividend to help cover the costs. Perhaps Van Hollen's Cap and Dividend bill could be modified to limit the tradability of the auctioned permits, and then return the revenues to the people, bypassing the lobbyists and financial speculators.

Such a proposal would have to tread a narrow path past these entrenched players:
- K Street lobbyists (and utilities) that want free allowances (now in the name of "consumer protection"),
- Big government liberals who want to spend the revenues on programs,
- Pro-market traders who want little government oversight on trading and unlimited offsets,
- And the unusual bedfellows of the U.S. Chamber of Commerce and those environmental justice groups that distrust carbon pricing (The Chamber would rather climate action remained "voluntary" and the EJ groups would prefer command and control regulation over market mechanisms).

If Cap and Dividend would help get a few more votes for a climate bill, then now is the time for Dorgan and other midwestern legislators to let the Senate leadership and the White House know that there is a way to get them to say "yes."

Comments

[BobBeresford]

The whole ' Let's save the world via Emissions Cap and Trade schemes " is a con. The real reason is to allow the Financial Globalists - currently destroying America - to get a death grip on the world via a ridiculous mutual debt system which will choke industry via compliance costs and dangerous bureaucratic control.
That will be a powerful world bureaucracy, since anyone emitting too much carbon will be a threat to world security. That might include your pet cow.

Here in New Zealand the biggest issue with this world Kyoto/Copenhagen emmissions control/ exchange program is that our dairy cows are emmitting too much methane/carbon ( by belching and farting ) !!!
We already paid 2 million dollars to Russia for some Emmissions Trading reason.

These schemes are a worldwide con trick and the Emissions Unit would soon default to a currency..­..probably the Euro....si­nce it would all be controlled off European computers.

Then, as the price of carbon goes up, the Financiers will make a fortune trading Carbon Credits.
The world was warming slowly since about 1700 - on cycle - and has been cooling more steeply since 1998.
There is no CO2 threat, but best allround to clean the place up and plant more trees.

[Aaror]

Crazy idea!
Announce a carbon tax, and say it will reduce the income tax, or pay for something we would otherwise have to tax!
Heck, tax carbon and put all the revenues into EITC, who can argue against that? Increase the amounts and caps for the earned income tax credit and more folks will be rewarded for working (while fewer will be punished), which encourages working. Meanwhile we replace punishing people for working with taxes with punishing pollutors for CO2 with taxes.
Why is this not obvious?