Clear Act: A Climate Bill That Can Pass

For nearly a decade, green NGOs in Washington worked closely with corporate polluters to promote "cap and trade" as a climate solution. The deal was, there'd be a leaky carbon cap with lots of money flowing to polluters and Wall Street. It was far from perfect, but better--so the NGOs said--than nothing.

During the Bush years this strategy made sense--no other approach could survive a presidential veto. After 2008, when Democrats came to power, it made less sense, but the NGOs stuck with it.

In 2009, they squeezed a cap-and-trade bill through the House with 50.3 percent of members voting for it. For the past year they've been pushing a similar bill in the Senate, where 60 percent is needed to end debate. With John Kerry and Joe Lieberman doing the deals, they tweaked and re-tweaked the cap-and-trade bill to please coal-burning and nuclear utilities, oil and gas companies, agribusiness and manufacturers, and more. The result was a giant mishmash that confused everyone and didn't pick up votes. Finally, in late July 2010, Harry Reid, the Democratic leader, threw in the towel. This "sum of all lobbies" strategy simply wasn't working.

What now? With Republicans poised to gain seats in November, the future for climate legislation seems bleak. Any climate bill will have to overcome Republican objections that it is a "national energy tax," and indeed, will require active Republican support if it is to have a chance of passing.

Fortunately, there's a plan that can do this: the bipartisan CLEAR Act cosponsored by Senators Maria Cantwell (D-Wash.) and Susan Collins (R-Maine). The CLEAR Act puts a rising economy-wide price on carbon, mainly by auctioning permits to bring carbon into the economy. It then returns three-quarters of the auction proceeds directly and equally to all legal U.S. residents, enough to assure that a majority of families in every state gets back more than they pay in higher prices.

The CLEAR Act, a.k.a. cap and dividend, has the potential to attract Republicans because it's the opposite of a tax--it makes most Americans financially better off. Moreover, it's entirely market-based: it raises carbon prices but keeps government out of the dicey and costly role of picking winners. Best of all, its cap-and-cash-back mechanism can be easily understood by skeptical American voters.

None of this means the CLEAR Act can pass without some political horse-trading. But the deals needed for passage can be based on publicly supported principles rather than private gain.
The main area for deals involves the 25 percent of auction revenue that isn't returned directly to the people. What if, for example, that money were allocated to two grand public purposes: grants to states for job creation, and federal debt reduction? The proportions could change over time, with more job creation early on and more debt reduction later. When coupled with direct cash back, such a simple, transparent carbon pricing system could attract fence-sitters on both sides of the aisle.