Fee-and-dividend is superior to cap-and-trade for effective carbon emissions reductions

The following guest post by Steve Kirsch presents a persuasive case that cap-and-trade systems (also called an emissions trading system[ETS]) are NOT the right way to put a price on carbon. This is relevant to the US Waxman-Markey bill, and Australia’s Carbon Pollution Reduction Scheme [CPRS]. Instead, a ‘fee and dividend’ approach is advocated. Read on to find out why…


Four key reasons why it is important that we use a fee-and-dividend approach to regulating carbon emissions:
1) Fee-and-dividend is, without any doubt, the best way to regulate carbon emissions.
There is near universal agreement among experts including Al Gore, Jim Hansen, the inventors of cap-and-trade, economists, the CBO, EPA regulators, and Sierra Club that fee-and-dividend is the best way to achieve the goal of carbon emission reductions because it puts a predictable price on carbon. Conversely, cap-and-trade, even in the most optimistic scenario, would achieve virtually no reductions and in any practical, real-life scenario, would actually make the problem worse because at best it would lock in today’s emissions for decades.
2) Fee-and-dividend is popular with voters.
Fee-and-dividend is politically viable. In British Columbia where the opposition party made it an election issue, they proved it was political suicide to oppose it. The opposition party now supports it. There are now carbon fee laws all over the world, including in the US.
3) Fee-and-dividend helps our economy and our environment: it is a double-dividend.
Fee-and-dividend helps our economy whereas cap-and-trade would hurt our economy. So fee-and-dividend is a great idea even if you don’t believe in global warming; we pass the bill for the economic benefit and we get the environmental benefit for free. Economists call this double benefit (economy and environment) the “double dividend.” Cap-and-trade does not have a double dividend.
4) Cap-and-trade would irreparably harm our environment and hurt our economy.
The cap-and-trade bills would, even under ideal circumstances, insignificantly reduce emissions by 2020 according to the CBO analysis. Under any practical scenario, it would hurt the environment irreparably because it allows business as usual (BAU) for 17 years. This is why Jim Hansen is so against it and why key individuals within the green groups are personally opposed to the cap-and-trade part of the House and Senate bills. Cap-and-trade is a “double whammy,” hurting both our economy and environment.
Cap-and-trade must be defeated because it will do irreparable damage to our ability to mitigate climate change and hurt our economy at the same time. There is no analysis anywhere that disputes what Hansen says.
The alternative, substituting Senator Cantwell’s bill (CLEAR Act of 2009) for the cap-and-trade section of the Senate bill, will help both the economy and the environment. Unfortunately, nobody is paying attention to Cantwell’s bill because cap-and-trade is sucking all the oxygen out of the room. It can easily replace the cap-and-trade part of the Senate bill. There is also an excellent 10-minute YouTube video entitled “The Huge Mistake” which summarizes the case for fee-and-rebate. I highly recommend this video.