03/30/2009 05:12 am ET Updated May 25, 2011

Family Income and Climate Security: We Can Have Both

Which one can crash faster: the American economy or the planet's fragile atmosphere? It almost seems like a cruel race these days. Thankfully, one Congressional response could help solve global warming while putting serious dollars in the pockets of hurting Americans. And by dollars I don't mean distant energy-efficiency savings or the vague promise of avoided oil wars. I'm talking about actual monthly wire transfers right now to real American families while the climate heals.

Washington is awash in creativity these days when it comes to the long-ignored problem of global warming. Legislative proposals include everything from a "cap and trade" approach to a carbon tax to a regime to "cap and invest" in green energy.

But only one idea, in my view, meets the critical requirements of fairness, rapid climate results, and guaranteed voter appeal. That idea is the so-called "cap and dividend" concept. Already, the idea of giving carbon dividends to U.S. citizens is supported by a wide spectrum of leaders, including Sen. Bob Corker (R-TN), New York mayor Michael Bloomberg (independent), and former Clinton Labor Secretary Robert Reich.

Why? The economy, for starters. After the Wall Street collapse, Americans want policy clarity and fairness in the face of falling incomes. Unfortunately, many of the "cap-and-trade" approaches would cap greenhouse gas emissions while creating tradable carbon "allowances" for companies under rules that tend to be complicated and uneven in their societal benefits. Are voters really ready for "carbon derivatives" handled by expert traders in a system few can understand?

A cap-and-dividend system, on the other hand, would boldly and directly move energy markets toward clean fuels while generating billions of dollars in monthly dividend checks shared equally by all American families -- guaranteed.

Impossible? Not at all. That's because this approach begins by asking the right question: Who owns the sky? The government? Corporations? No, we all share equally in the benefits and potential hazards associated with our one-and-only atmosphere. So if any company wants to put harmful pollution into the sky, then it must first pay the equivalent of a land-fill -- or "sky-fill" -- charge. That money must then go back directly to every man, woman, and child in America.

Simplicity is the key. A bill being introduced by Rep. Chris Van Hollen (D-Md) would create a national dividends plan by establishing an "upstream" cap for carbon fuels. This means only companies who first introduce carbon into the economy would have to purchase a sky-fill permit. This differs from most "cap and trade" approaches which use complex regulations to monitor end-point emissions at every smokestack and tailpipe in America. A dividends approach, on the other had, would monitor only the "point of first sale" and would affect only a few hundred companies. When the raw oil, coal or natural gas is mined or offloaded from a tanker, a permit is required before it can be sent to wholesale markets and up through the national energy food chain.

All carbon permits used for this purpose would be auctioned by the government and the revenue sent directly to the U.S. Treasury. These permits would, by design, cause carbon-based fuels to rise in price, including gasoline, coal-fired electricity, and natural gas. The resulting "price signal" would effectively push markets toward a rapid embrace of wind energy, solar power, energy-efficient appliances, cars, etc.

But during the transition, as carbon fuels rise before 100 mpg cars hit the market, average Americans will see an increase in their aggregate energy bill. That's where the dividend comes in. The hundreds of billions of dollars raised by the upstream carbon cap each month would be evenly divided and transferred by check or electronic wire to every American with a social security number. A struggling single mom with three kids would get the same amount as the wealthy mansion owner.

The carbon cap would start small and then ramp up per our climate needs. As for dividends, the initial sum would probably be around $80 per month per family member, or nearly $1000 per adult annually. That's more than enough to guarantee that 60 percent of all Americans - i.e. nearly everyone at lower- and middle-income levels -- will financially gain from this system. I repeat: They will have more net dollars to spend each year despite changing energy prices. Wealthier Americans who typically use more energy per capita can gain too by simply accelerating their own efficiency improvements at home. Incentives abound at every turn under this system.

Thankfully, President Obama himself has already endorsed most features of a cap-and-dividend approach. During the campaign he said all carbon permits must be auctioned under any climate plan, and that "a huge chunk" of the revenue returned to all Americans. He also promised to never raise middle-class taxes, something that most cap-and-trade proposals actually achieve by capping carbon and not returning most of the money to voters. The Van Hollen bill would give back no less than 90 percent of the money while using the rest mostly to re-train and assist coal miners, oil drillers and other workers adversely impacted by the nation's transition to clean energy.

But the clincher for this approach is the great politics. We need to solve the climate crisis, yes, but we can't do it without popular support, without voters picking up the phone and telling Congress to do the right thing. The dividend policy unifies many environmentalists, fiscal conservatives, and champions of energy security. And it will make the phones ring in Congress. Simply put, it's rare that voters get to do the right thing and see immediate rewards for their household budgets. That's why a cap-and-dividend bill is the right approach for solving the climate crisis in 2009.

Mike Tidwell is director of the Chesapeake Climate Action Network