How to Reduce Carbon Emissions

Rep. Chris Van Hollen (D-MD), co-chair of the Renewable Energy and Energy Efficiency Caucus, introduced the Cap and Dividend Act of 2009 on April 1. The Cap and Dividend Act would auction 100 percent of the carbon permits, and auction proceeds would return to consumers in a monthly dividend. Every lawful U.S. resident with a social security card would receive a monthly dividend. The Act sets emissions reduction targets at 25 percent below 2005 levels by 2020 and 85 percent below 2005 levels by 2050.

“The strength of cap and dividend lies in its simplicity and durability. All permits are sold at auction, and all proceeds are given back to the American people. As the price of energy rises, the monthly dividends will keep American consumers whole,” Van Hollen said.

The chair of the Senate Energy and Natural Resources Committee’s energy subcommittee, Senator Maria Cantwell (D-WA) is not sure about a cap and trade program. A cap and trade program, like a cap and dividend program also sets emissions reduction targets and auctions off carbon permits. However, a cap and trade program allows companies to sell permits after buying them in an auction. It creates an emissions trading market.

“I have serious concerns about how a cap-and-trade program might allow Wall Street to distort a carbon market for its own profits,” Cantwell said in an interview.

A recently released report by the Friends of the Earth (FOE) titled, Subprime Carbon, declared that a U.S. carbon trading market could create the same types of problems that subprime mortgages did. The author, Michelle Chan, referred the problems a carbon market could create as “subprime carbon.” Subprime carbon would likely come from “shoddy carbon offset credits,” according to the report.

Most cap and trade bills do not contain adequate carbon market regulations which would create a “potentially huge regulatory gap.” The report also expressed concern about the cap and trade congressional bills because they do not focus enough on regulating secondary carbon markets “which will be dominated by speculators and will dwarf the primary trading markets.”

“It’s imperative that Congress move quickly to put solutions in place, but it’s also important to be careful and do this the right way from the start,” Chan said. “If we aren’t careful, we could end up creating a massive, poorly regulated derivatives market that not only poses risks to the broader financial markets, but also undermines efforts to save the climate.”