This is something I've though of recently. However, the fact that I've never heard it elsewhere likely means there is something very stupid about my idea I have not noticed.

Every producer of electricity gets an amount of credits based on how much they produce. Call them megawatt points. A 800 megawatt solar plant gets 800 points, a 1000 megawatt coal plant gets 1000 points. However, the coal plant obviously emits more than the solar plant, so it has to buy credits. The "carbon value" of a megawatt point goes down over time, so 1000 points now might allow for 1000 tons, but maybe in 5 years only allows for 900 tons. It rewards immediate action by dirty producers and instant incentive for renewable energy, and rewards them for having been built already.

Money can be made by taxing the trading of permits rather than auctioning them off, so it doesn't look like the government is selling a public good.

This seems really simple to me, but there's probably something I am overlooking. And obviously it only works for electricity, but it could be applied to other industries too, though probably not on an individual level. Let me know what you think.

I like to think of your proposal as the C.A.R.E system (Cap & Auction, Refund Everything). I think it is good as far as it goes, but it is only one part of a three part program.

No matter how high prices get or how low caps go, you won't get emissions lowered unless you have public investment. Examples:

Freight rail to switch freight from trucks to trains

passenger rail to switch some travel from cars to trains.

We need efficiency regulations too. For example we already have mature pasivhaus technology that can cut climate control consumption by 90% compared to a tradition U.S. home at a 5% to 10% construction premium. More than 65,000 units have been built worldwide to this standard. Don't know why we should license any new residential construction that does not meet the same performance standard (without insisting that it use the same means). Note that if price incentives would do this, it would already be being done; payback is damn quick and the added payments on a 15 year mortgage are close to invisible, and a lot less than monthly savings.

Incidentally, I know you don't think of your system as price driven, but ultimately it is. The cap determines total number of permits. But what the individual making the decision sees is not "OMG can't get a permit", but the price of the permit, or more likely the price of the fuel or the good or service incorporating the price of the permit. So C.A.R.E really is a price based system, even though formally a cap.

It's true that Lieberman Warner devolved into funneling most of its revenue towards pork projects of dubious merit.  However, while everyone stood up and opposed it on these grounds, that doesn't necessarily mean changing it will win bipartisan support.  Politicians oppose bills for reasons other than the ones they state publicly.  No one stood up and said "I'm kinda worried about higher energy prices with inadequate consumer relief, but the real deal-killer is insufficient pork for my important contributor."  But there are definitely a lot of Senators that were thinking exactly that.  

I don't mean to be overly cynical, but I'm afraid that the political reality just isn't quite as encouraging as we're making it out to be.  Any sufficiently 'pure' bill  will inherently have major political enemies because its point is to make major changes in consumer and investor behavior.  And its not just coal.  Emissions intensive manufactures got greedy as well, and a lot of Senators are more sympathetic to them. Manufacturing isn't viewed as negatively as coal, so losing their support can be a PR as well as funding issue for Senators.

And there are a lot of policy issues that need to be resolved as well (more money should be for research, not deployment; helping  consumers pay for higher prices, not trying to mitigate the price increases themselves, etc) although the major issues definitely are political.

And dcrawford, interesting idea, but you don't want to tax the trade/sale of permits.  The efficiency of a cap/trade comes from the trade part allowing the credits to make their way to where they're needed most, and so the actual reductions get made where they're cheapest.  Restricting the trading forces the economy to make more expensive cuts, raising prices for everyone.  If you could cut emissions easier than I could, we don't want policy to get in the way of your selling your credits to me.  

i like this plan, for getting a price in place, and giving power to the people to find new directions.

also to build a new supply/demand relationship.

on the demand thing: i hate to say this about my fellow primates but we're not very bright with reading fine print. if you show them this:

IT'S FREE!

a lot of them won't see the asterisk. (see: housing bubble.)

"this is the cost over five years" is a mystery.

"this is the cost right now" is a decision.

for instance, on tuesday, after apple anounced a new iphone, a local newspaper ran a full page photo of it with the headline

iDiscount!!!

because it cost half the old price. $200 less. only, it didn't, because you couldn't buy one without a 2-year contract that cost $240 more than the old contract. you pay 2% more, or, "pretty much the same." do you get more, because it's faster and has GPS? i don't know. but "half price" is false advertising. if you want to use the phone, you can't not use "the iphone plan."

but the newspaper people totally bought the hype, and you see this everywhere, in the "no down payment" thing. how much will it cost a month? how long will i be paying it? how well will i be able to deal with other costs? i have no idea! it's FREE!

we've made ourselves into trained monkeys.

this is why i think carbon prices should either be high enough, quickly enough, to really differentiate inefficient from efficient equipment, or efficient equipment's self-payback period should be rolled forward, somehow, into the purchase price.

people will pay the price of electricity. i'm not talking about subsidizing supply. i was thinking of something like this:

*ding dong

"yes?"

"ma'am, we are here to seal your cracks, insulate your walls, and replace your windows."

"no thank you."

"we will pay you $1,000."

"uh -- what?!"

so the deal for this would be through the utility. they would pay the installation service and also the homeowner. and then, instead of the homeowner's bills dropping immediately, they would decline over a period, until some amount of money was recouped.

this is a pretty severe example that i have absolutely not figured properly. the question is then can you do the same thing with, like, coffee pots, televisions. transparently. no forms or special knowledge. or do you just say, "sorry, these technologies are simply too energy hungry -- they're forbidden."

oh i bet people have already thought this through.

there are supposed to be asterisks. there is no warning that asterisks don't work. there's some secret text interpreter?

simply compare the effect of the plan on individual consumers.  Raise carbon prices by adding 10 cents per kwh in cost passed onto consumers.

A consumer installs a solar panel, it pays off in a few years with power at 21 cents per kwh.  

But everyone else pays higher rates.

give a 10 cent subsidy instead, diverted from corporate subnsidies, and the solar investor still has the same incentive, but power rates don't soar because of the policy.  

Much more politically acceptable.

It raises much less money, but targets it exactly where it is needed for consumers to choose the best technology.  it makes a real free market possible, where demand can be supplied.

Cap and whateve schemes have the mga pork, mega hedge fund, mega corruption factor.  Siphoning tax dollars for nefarious purposes for the most part.

Then there's the cap, which can be raised anytime the GOPgets a little power back.

http://amazngdrx.blogharbor.com/blog

If the Climate Security Act had been short, Republicans would've said it was a half-baked liberal fantasy that would be left to bureaucrats to implement.

But since the Climate Security Act was detailed with all scenarios and possibilities addressed, they called it an earmark-filled monstrosity. We were screwed either way.

But thank YOU, Peter Barnes, for parroting Republican talking points when they suit your needs.

http://www.nwf.org

Miles, let's try to be adults and discuss policy without name calling.  

Barnes is just saying the same thing that Bill McKibbon, George Lakoff, Robert Reich, Jim Hansen and others are saying- So please don't try to impugn him by calling them right-wing talking points (your quick descent to name calling is illustrative of the weakness of your arguments).

The truth is that solving climate change will cost us all some significant money in the short term.  That cost is the single biggest hurdle to passing climate legislation.  

The sooner we stop ignoring that fact or just thinking about it as a PR problem the sooner we'll actually be able to pass something that matters. Wishing doesn't make it true.  

Lieberman-Warner was just a bad bill, based on seriously flawed thinking (most environmental groups core message was "strengthen it" not even "pass it").  It's time to move on and find something that works.

The Barnes, Reich, Hansen, McKibbon, Lakoff plan looks like a good place to start.  

It's not just Peter Barnes who is advancing this idea. Robert Reich, Dr. James Hansen, Bill McKibben and others also support returning 100% of the auction revenue to consumers to support households, the economy and to build popular support over the long run for the major economy-wide changes that need to be made.

Are you saying he didn't quote Bob Corker to support his argument? When you quote someone who voted to support the Republican filibuster of the Climate Security Act, I question whether you're putting your personal goals (i.e. Peter's fondness for cap-and-dividend) ahead of the global warming solutions Congress is actually debating. That's not a personal attack, that's a real question about his credibility.

http://www.nwf.org

A Republican saying something doesn't make it a Republican talking point or even untrue. In fact, thoughtful people might point to it as a political reality that needs to be dealt with.  

The bottom-line is that Lieberman-Warner (Wait, they're both Republicans! The bill must be one big Republican talking point!) was bad policy, bad politics and never had a hope of passing.  It's time for a new direction, new thinking and a change in climate policy.  

The science debate is over, and the next battle is over costs. We must have an answer to Inhofe when he writes a WSJ OpEd calling L-W a tax on the poor or when the Chamber runs ads to scare people about costs.  

That answer can't just be spin--it needs to have a base in policy.  If it doesn't it probably won't pass or won't have the political legs to last through dozens of election & economic cycles.  

So why not stop the name calling and start looking for solutions that work?