Summer Reading Recommendation: The Case for Carbon Dividends

For some climate activists, the impending doom of climate catastrophe is interfering with our summer vacation travel plans.  How can I offset the emissions from my flight?  Are offsets even real?  A better use of that money would probably be to donate to a group such as Feasta, which is working to cap total global carbon emissions, which would put us on a path to fixing the enormous problem rather than just a tiny bandaid (did that metaphor work?).

If you are looking for a quick easy read for your summer “stay-cation,” James K. Boyce, a Professor at the University of Massachusetts Amherst, recently released a short book titled “The Case for Carbon Dividends.”  It walks the reader through the reasoning behind Cap & Dividend, the solution advocated by Peter Barnes, some Feasta members, and others.

I came to know Professor Boyce when he was a member of California’s Economic and Allocation Advisory Committee about 10 years ago when California was designing its cap and trade program.  I submitted written comments on behalf of the Center for Climate Protection urging California to adopt features of Cap & Dividend.  In the years following, Professor Boyce authored impressive studies showing how various states, and various income populations would fare under a Cap & Dividend program, and he helped inform the bills put forward in Congress by Senators Cantwell and Collins in 2009 (“the CLEAR Act”) as well as more recent versions from Senator Chris Van Hollen (D-MD), Rep. Don Beyer (D-VA).

Dr. Boyce’s new book proposes a remedy to the problems of carbon pricing programs set up in the early 2000s such as the European Emissions Trading system (ETS) and the Regional Greenhouse Gas Initiative (RGGI) covering electricity in the northeast United States (and to some extent the California Cap & Trade program).  The low carbon prices of those programs have raised some funds, but have not been successful in reducing emissions.  Their “caps” have been too high.  All of the prices are near the “price floor” of their respective programs.  All of them have “overallocated” allowances, either by grandfathering them to existing polluters for political reasons, or by failing to predict economic downturns, or by allowing banking of allowances that carries surpluses out many years, overwhelming demand.

Program designers today could learn from those earlier efforts in the following ways:

  1. Tighten the cap and move it upstream to fossil fuel producers and importers.
  2. Auction 100% of allowances representing emissions under the cap.
  3. Return the value of allowances back to people as a climate dividend.

A few weeks ago it appeared that Oregon was going to become the second U.S. state to join the Cap & Trade club with an economywide system emulating California’s design.

But Republican lawmakers literally fled the state to prevent a quorum, and encouraged angry farmers and armed militias to set up a blockade to prevent a vote from happening, reflecting the dark turn American politics has taken.  The bill died, but it may come back next year in some form.

If and when it does, Oregonians should prepare by reading Boyce’s book to learn about an alternative to the Cap and Invest (i.e. California) model.  California has given millions of dollars in free allowances to polluters. In 2016 I estimated that the Petroleum Refining, Natural Gas Extraction, and Cement sectors received over 49 million free allowances worth over $629 million per year.  The State has also chosen to devote hundreds of millions of dollars from Cap & Trade funds towards high-speed rail project and affordable transit-oriented housing, which helps mostly urban constituencies.  California’s new Governor Gavin Newsom said he was re-evaluating the high speed rail program, so that could free up some funds for other uses, such as climate dividends.

The 2020 Democratic Presidential race is also seeing some discussion of climate dividends.  Dividends are mentioned in the plans of some of the 23 (or more) candidates (including Buttigieg and Yang).  Note that their proposals talk about “fee and dividend” rather than “cap,” which is important since a fee without a cap raises funds but may not actually decrease emissions.  As of this writing, many environmental groups are petitioning the Democratic National Committee to sanction a debate among candidates focused specifically on climate change.  In the meantime, CNN has agreed to host a “town hall” on the subject.  Hopefully dividends will come up.  Awareness of dividends is also rising as the basic income movement gains attention.  And as proponents discuss what policies would be included in a future Green New Deal, Boyce’s book has the potential to sway the discussion.

The Case for Carbon Dividends” is important summer reading, and if you read it on a plane, then remember afterwards to donate to a group that is fighting to make dividends a reality.