Comment Log Display

Dividends are the most effective use of revenue

We believe that the best use of revenues from an auction of permits
under the AB32 cap-and-trade program is to return auction proceeds
to the public through a dividend or rebate.  The ARB has divided
the carbon market into three sectors: industrial, electricity, and
transportation.  The electricity sector will likely see rebates to
electricity customers, based on the proceeding currently held at
the California Public Utility Commission. Based on the discussion
at this proceeding there is a real question whether low income
ratepayers will be eligible for these rebates, since they are
covered by the CARE program, so their rates are already subsidized.
 The group that studies have shown will most negatively impacted by
 a carbon price will likely end up an increased burden relative to
other income groups, unless the other two sectors also include
rebates to California households. Even if the PUC ruling protects
low income residents in the utility sector since costs from the
carbon price will be passed down to them in the other sectors as
well, we believe they should be include dividends as well.
UCLA issued a report on legal risk of various uses of cap-and-trade
revenues due to the Sinclair Paint nexus issues related to use of
revenue from  a fee.   The report concluded that projects resulting
in direct GHG reductions are most likely to be seen in court as
advancing the objectives of AB32. Next in line are expenditures
that accomplish the additional goals of AB32 relating to equity,
and maximizing additional environmental, economic, and overall
societal benefits. Unfortunately, the UCLA report considered those
additional goals to only apply to expenditures in environmental
justice communities, but overlooked how they could apply to
universal dividends. AB32 explicitly requires that the Air
Resources Board:
•	“Design the regulations in a manner that is equitable;”
•	“Maximize additional environmental and economic benefits for
California;”
•	”Consider overall societal benefits, including reductions in
other air pollutants, diversification of energy sources, and other
benefits to the economy, environment, and public health.”
Dividends help accomplish all of these goals.  
Furthermore, the moral basis for distributing proceeds of a sale of
pollution rights to the atmospheric commons must be grounded in
justice and equity, and the simplest formula to accomplish this is
a per capita dividend.
We request that ARB include dividends within its investment plan.
In these times of economic austerity, it should be easier for the
state legislature to pass a bill that allocates revenues to all of
Californians, than for any specific project or investment approach.
  We disagree with the analysis of the UCLA report for the reasons
stated previously that returning funds as dividends to the public
is as high risk under Sinclair, but in any case, the State has a
compelling interest to defend and approach that is fair and will
secure the long term viability of the Cap and Trade Program.
Weakness of purely investments approach to revenue allocation,
especially large infrastructure such as high-speed rail

The panelists at the May 24, 2012 ARB workshop on this topic
expressed support for a long list of programs including local
government programs, research and development, and projects in
sectors such as energy and water, transit, environmental education
or health studies in disadvantaged communities, and natural
resources such as urban forests or in the Bay Delta. Many of these
projects are worthy of consideration.  
There are two main issues presented by an strictly investments
approach. 1) How to decide between the myriad of investment
strategies and projects over multiple sectors? 2) What is the
correct amount of investment to fund with AB32 revenue to insure
effective implementation and positive public perception of the
program.? Deciding between projects will be a politically
contentious problem, time consuming for ARB staff resources and the
legislature and will likely require a high level of staff resources
to continue to manage and monitor. Dividends provide a partial
solution to these issues for ARB by reducing the amount of revenue
for investments.
Although a large existing project, like high-speed rail, might also
help ameliorate some of these issues, the problem with
multi-billion dollar infrastructure projects such as this is that
they could easily swallow up all the revenues from cap and trade,
yet still be unable to contribute significantly to the state’s GHG
reduction goals by 2020.  Investing solely in such projects will
not broaden bipartisan public support for a continuously increasing
price on carbon. Big projects will also do nothing to counter the
criticism that a carbon price is a regressive tax. 
There are also better sources of funding for investments in
renewables and efficiency.  Proceeds from the Cap & Trade program
are not a good source of funding.  The amount will fluctuate, and
we don't know how much it will be, making planning and effective
program delivery a challenge. A better source for the investments
would be to reroute fossil fuel subsidies or existing subsidies for
activities that cause emissions.  In California, taxpayer funds are
being continually invested in the parking structures, new highway
lanes and widening roads, resulting in higher GHGs.
Suggested framework for an Investment Plan based on the EAAC
recommendations: 75% Dividend, 25% investments