You’ve heard of cap-and-trade. But what about cap-and-dividend?

By: - April 25, 2019 12:09 am

Stock image. Creative Commons via Pixabay.

Maybe you’ve heard of cap-and-trade, but what about “cap and dividend?”

Even as Virginia moves to limit the amount of carbon it allows power plants to release, a Northern Virginia Democratic congressman is pushing again for federal action to drive down emissions of the greenhouse gas driving climate change.

U.S. Rep. Don Beyer, D-8th, who represents the northeastern part of Northern Virginia, and Sen. Chris Van Hollen, a Maryland Democrat, have introduced a cap-and-dividend proposal that would combine market-based mechanisms and government oversight with the goal of drastically reducing carbon output over the next 20 years.

Drawing on 2018 conclusions by the Intergovernmental Panel on Climate Change, the Healthy Climate and Family Security Act of 2019 draws a clear link between greenhouse gases and climate change that is giving rise to increasingly catastrophic weather events such as flooding, violent storms and drought. Even reports issued by the administration of President Donald Trump, who once called global warming a “Chinese hoax,” have been increasingly dire.

The “cap” portion of the legislation would set an upper ceiling on the nation’s carbon emissions and require the first sellers of fossil fuels into the U.S. market — crude oil refineries, petroleum and coal importers, coal mines and natural gas producers and processors — to purchase carbon permits at auction.

Over time, the cap would drop. Taking as its baseline the United States’ level of carbon emissions in 2005, ambitious targets for emissions reductions would be set at 12.5 percent by 2020, 35 percent by 2025, 50 percent by 2030, 60 percent by 2035 and 80 percent by 2040.

The “dividend” portion of the law would then use the proceeds of those auctions, as well as any penalties imposed on first sellers for not complying with the legislation, to establish the Healthy Climate Trust Fund. Every quarter, a dividend would be paid out to all U.S. residents with a Social Security number. Those payments would not be considered part of individuals’ gross income, but would instead act as a kind of tax rebate.

Writing for the New York Times in 2014, University of Massachusetts–Amherst economist James Boyce claimed that while the cap would cause fossil fuel prices to rise, “more than 80 percent of American households would come out ahead financially” because of the dividend, and companies would be incentivized to invest in clean energy.

This most recent proposal of the act — the fourth time it has been introduced in Congress since 2013, when Van Hollen first put it forward — comes as Virginia stands on the precipice of joining the Regional Greenhouse Gas Initiative, a nine-state agreement to cap and reduce carbon emissions.

On Friday, Virginia became the first southern state to cap carbon when the State Air Pollution Control Board approved a regulation that would cap and reduce carbon emitted by large energy generators that rely on fossil fuels. That rule sets an initial cap of 28 million tons of carbon dioxide and would reduce emissions from these facilities by 30 percent by 2030. It would also usher Virginia into RGGI.

In a release from the state’s Department of Environmental Quality, Secretary of Natural Resources Matthew Strickler said that the decision “sets the commonwealth on a path to slow global warming, and signals to clean energy businesses that Virginia is poised for a significant expansion of solar and wind power.”

Nevertheless, the cap’s future remains uncertain, as language inserted in the state budget by Republicans prohibits Virginia from using any funds for RGGI. A number of Republicans, most notably Del. Charles Poindexter, who represents the Franklin region, have opposed the state’s participation in regional carbon cap agreements.

Aaron Fritschner, the communications director for Rep. Beyer, said that while Beyer “supports a broad array of efforts to fight climate change … a federal solution is clearly called for given that the problem is a national one and the RGGI, while successful, only includes a small portion of the country.”

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Sarah Vogelsong
Sarah Vogelsong

Sarah is Editor-in-Chief of the Mercury and previously its environment and energy reporter. She has worked for multiple Virginia and regional publications, including Chesapeake Bay Journal, The Progress-Index and The Caroline Progress. Her reporting has won awards from groups such as the Society of Environmental Journalists and Virginia Press Association, and she is an alumna of the Columbia Energy Journalism Initiative and Metcalf Institute Science Immersion Workshop for Journalists.