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Are you ready to receive $1,100 to save the planet? Under a new Senate bill, called Carbon Limits and Energy for American Renewal (CLEAR) Act, you might just do that. Known as cap-and-dividend, a similar bill HR 1862, was introduced last April in the House.

The new legislation would require oil, coal, and natural gas companies to buy permits each month to sell their fuel. Three quarters of the proceeds would be returned to the public each month in the form of a dividend check (estimates are $1,100), with the remaining money going towards renewable energy, conservation or assistance programs.

The proposal differs from the standard cap and trade program, traditionally the way for firms to trade carbon credits and offsets. The main difference between cap-and-trade and the new cap-and-dividend idea is the cap-and-dividend cuts out the trade part, and with it the Wall Street traders. So who cares what the methodology is, right?

The Good The cap and trade system is fairly complex, for one thing. Cap and dividend will be much more simple to operate (and for consumers to understand). Another benefit: with the cap and dividend program, the cost of fossil fuel becomes more expensive and makes renewables more competitive. Supporters say the plan will result in the same emission reductions as the current cap-and-trade bills before Congress.

The Bad Critics of the cap-and-dividend program claim the proposed bill would essentially shift money around within the U.S. economy, whereas cap-and-trade could potentially inject new capital. Another criticism is that by cutting out Wall Street, you are eliminating a lot of players from the market, and therefore competition to ensure greenhouse gases are cut for the cheapest price possible.

Other Alternatives? A straight carbon tax is probably the most economically efficient policy approach for tackling climate change. It would create less regulatory apparatus and rent-seeking potential than a cap-and-trade system. But particularly in the current economic climate, any kind of obvious energy “tax” is political poison. With cap and trade, the costs to consumers are indirect, passed along by business.

Program Highlights

• Each month, coal, oil and natural gas companies would be required to buy permits to sell their greenhouse gas-emitting products to Americans.
• Three quarters of the proceeds would be returned to the public each month in the form of a dividend check, with the remaining money going towards renewable energy, conservation or assistance programs.
• Naturally, higher costs for energy distributors would mean higher prices for consumers, but the proposed measure would return 75 percent of the companies’ fees to consumers. The remaining 25 percent would apparently go to development of sustainable energy sources.

To read the full text of the House bill, you can visit washingtonwatch.com. To read the text of the Senate Bill, visit the bill web page.

What’s your opinion? Should there even be any regulation on greenhouse gases? What method do you think would be the most efficient? Tell us about it by leaving a comment!

Sources: CNN Money Financial Post

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