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Dear ARB,

Returning proceeds to disadvantaged communities is
well-intentioned, but will the funds actually help individuals,
households, and communities who carry a disproportionate  burden of
emissions, poverty, and future regressive carbon price impacts? 
Please consider these issues below as rules for distributing cap
and trade funds are developed.

1) Emissions reductions paid for with cap and trade revenues will
result in no net emission reductions.  This may sound
counterintuitive, but the reason is because the cap sets the
emissions level, and so additional emission reductions paid for
with cap and trade funds will result in a lower price for
allowances, but that reduction in price signal will encourage
companies to increase emissions back to the level of the cap.  The
lesson here is that cap and trade funds should be put towards other
goals of AB32, not just emission reductions.  One of those goals is
to alleviate impacts on disadvantaged communities and households,
so the State can still fulfill its noble goals there, while
preserving a higher carbon price signal.

2) Is it better to create programs for low-income and disadvantaged
communities, or is it better to return the funds directly to those
households?  Most government workers and program administrators
will say the programs are preferred (by them), but it would be
useful to ask non-program-affiliated individuals and families in
those areas if they would rather have certain programs, or if they
would prefer a cash transfer that allows them to decide what to do
with the money (a climate "dividend").  In the absence of such a
survey, it is only speculation that programs are preferred by the
communities themselves.  Skepticism that the money would actually
reach families may lead some respondents to hesitate in their
answer.  This is a reflection of the unfortunate history of
appropriation of funds that do not reach the intended recipients. 
That skepticism is understandable.  The cap and trade funds provide
an opportunity for ARB to improve the perception of the cap and
trade program overall by ensuring the funds are returned directly
to people.  In the international development field, researchers are
studying the effects of programs that provide direct cash transfers
(a well-known one is called "Give Directly") on the poor.  The sad
counterpoint is the funds sent to Haiti for relief efforts, with no
documented outcome.  The goal here would be to alleviate impacts on
low-income and disadvantaged communities and provide a template for
a future national cap and dividend program.  How do regulators in
Sacramento know if a family has health care expenses, or need funds
for bus fare, or any number of other impacts that a carbon price
may have.  The families that receive a climate dividend can make
that decision the best.  Would the funds be "wasted" on big screen
TVs?  Once again, it doesn't matter, since the cap sets the level
of statewide emissions.  But the State can encourage families to
spend their dividends on low-carbon products such as Energy Upgrade
California, or potentially transit subsidies, etc.  But it should
be up to the individuals receiving their share of the atmospheric
commons to decide how to spend their windfall.  Further information
may be found in the recent book by Peter Barnes, "With Liberty and
Dividends for All" and on my website www.carbonshare.org.

This is a hugely important topic, how to alleviate poverty while
addressing climate change.  They are interconnected.  

Thank you for your consideration.

Mike Sandler
www.carbonshare.org