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Richard L. Revesz

Richard L. Revesz

Richard L. Revesz, dean of NYU's School of Law, is an expert on environmental regulation and policy and co-founder of the Institute for Policy Integrity. ALL POSTS

Controls needed to protect consumer energy prices

Q: If the Senate moves away from a climate bill that includes cap-and-trade -- a strategy, which allows companies and organizations to buy and sell pollution credits to meet a national limit on greenhouse gas emissions -- what alternatives should be included in the bill instead?

An important addition to any new climate bill is a refund mechanism to protect lower and middle class families from increased energy prices. No matter what road Congress takes to control our greenhouse emissions, energy prices will rise to some extent. The costs businesses incur in their compliance of any new rules will be passed on to consumers.

We will all see small increases in our energy bills, at the gas pump, and many day-to-day goods because manufacturers and retailers will be paying more for their energy bills too. To buffer Americans from those cost increases, a new climate bill should include a refund that takes any revenue raised from a carbon pricing measure, like a cap or a tax, and refunds it back to individuals. If done well, the refund would keep consumers whole and in some cases come out a little ahead.

The biggest concern is shielding those in the lower and middle economic classes. Since these groups spend a larger percentage of their income on these items, they are at a higher economic risk than those with more resources. Without a buffer, these groups will be disproportionately hit by the changes.

But beyond a question of fairness, it makes political sense to ensure that voters are not paying the price of a century of burning dirty fuels. Compensating working families for price increases has the potential to appease many voters who are not convinced climate change is a priority. If the trio of Senators constructing the bill can ensure that consumers will not be burdened by the change, it is likely not to be met with as much resistance.

An added bonus is that, if structured correctly, the rebates will still encourage energy efficiency since individuals would get their reimbursements no matter what. They will know that they can save even money by using CFL bulbs or installing greener appliances.

But, of course, to be able to provide Americans with a financial buffer for increased energy prices, the government must raise the funds from polluters -- otherwise there will be no revenue to refund. That means any measure Congress adopts must include payments from emitters. It can come in the form of a tax or the auction of pollution permits, but there must be a funding pool with which to compensate lower and middle income Americans.

It has been reported that Senator Mary Landrieu has been advocating for a rebate to be included in the new bill being drafted now. In the past, Landrieu has helped slow down progress on the climate debate on the Hill so it is encouraging that the rebate mechanism might help bring her on board

Climate legislation, if it is enacted, will need to stand the test of time and changing public opinion. It is much more likely that a policy will remain popular if voters can know they are being compensated.

By Richard L. Revesz  |  March 5, 2010; 9:30 AM ET Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Here's the thing the government can NOT be trusted.. Sorry but it's true.. here in IL the consumers were told back in the 70's that our bills would double to build a Nuke power plant which would be owned by the citizens of the state and our electric bills would be really low.. well at some point no one will say when the state SOLD the plant the PEOPLE paid for.. and our rates continue to go up.. If you think the government will protect the people your dreaming. all this so called GREEN technology is the same kind of deal.. it's a scam on the people to force them into supporting what the powers to be want to make money on since they really can't make anymore money on the old technology..GE would be one that has invested millions in Green Tech and the present administration and they want a large return on their investment for their support.. Look at all the countries who implemented Green energy. they lost 2 jobs for every one they created.. and again it will be the middle class workers who will take the hit.. run both do not implement and type of tax.. Enough with propaganda and scare tactic's from the left..

Posted by: lcky9 | March 7, 2010 1:47 PM
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It appears that everyone who buys into this 'global warming' scam also buys in to the idea that we can have an infinite number of these schemes to "make the rich pay." Only the rich will pay for health care, only the rich will pay to reduce the deficit, now only the rich will pay to save the planet. Bunk. We could seize the entire wealth of the Forbes 400 and it would not run the US government for 3 days. The idea that there is an infinite sum awaiting us by "taxing the rich" is a scam.

Posted by: rhahn1 | March 7, 2010 9:12 AM
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People! Everyone can agree that there is climate change, right? The data for "man-made" global warming has been debunked. We had global cooling 30 years ago. Accept the fact that you have been scammed. Wind turbines can not be driven to work or flown to see grandma.

By what logic do any of you do anything but drop the subject and make Al Gore give his prize back.

Posted by: bornorange | March 7, 2010 6:54 AM
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Protecting lower and middle class families from increased energy prices is a nonsensical argument when health care is prohibitively expensive. I recommend ya all come to Australia. We have free health care and you won't know you have left home. There are "Golden Arches" all the way to infinity.

Posted by: homesellaustralia | March 6, 2010 9:30 PM
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Posted by: randomsample | March 6, 2010 6:48 PM
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Yes, efforts must be made to protect lower income & middle income consumers. I would advocate that we all get x number of LED lights as part of a refund for filing our taxes. Everyone gets x number of LED lights, since they reduce carbon dioxide significantly. What else might we do that would also work to help (short term), absorb CO2. Planting trees, flowers, shrubs that also absorb CO2. Roof top gardens, which could help cool down cities, which might result in less cooling needed for hotter cities (not as much power generated). Passive sighting of new homes would also help reduce energy consumption, & a massive effort to add insulation to homes could reduce the need for higher energy output, both heating & cooling.
There is no way that we can shift to alternative energies without a carbon tax. It makes the greatest sense, and in the short term (next one or two decades), there will be plenty of companies that should be taxed to provide more of that tax revenue for rebates for the lower income Americans the writer suggests.
I'd look @ any measure that allows a passive adjustment of our energy consumption, so that we can squeeze out every improvement possible without new costs for energy efficiency. I suspect there are many of these. Every "green job" that we create will carry millions of Americans into the 21st Century. Green conversion will be an enormous economic paradigm shift for our economy, and retraining people who worked in manufacturing, and are less well skilled workers, would be a great way to retain those "manufacturing follow on jobs," too.
When the economy improves, gas will hit $5.00 in a heart beat. Moving on mass transit will be one more way to reduce carbon emissions and not create bigger problems. Every thousand cars coming off the road will reduce emissions. So, too, will tax incentives to move people back into cities. Reducing commutes could allow some to ride bikes or walk to work, not even using mass transit. Wow!
Opportunities abound. Republicans are truly, the Party of "No," & the equivalent to "Flat Earthers."

Posted by: zennheadd | March 6, 2010 6:41 PM
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Political pablum - the kind generally dished out by people without the courage of their convictions, unwilling to be honest with the American people about the situation in which we find ourselves and the necessary, shared sacrifices that must occur as we add to the market the true costs to the commons of unsustainable multiply-polluting energy consumption.

A refund to "protect lower and middle class families" sounds as American as Apple Pie, but it is precisely these families, the core of our consumer-driven economy, that, through their adjusted spending and consumption patterns, will make any market-based approach effective, whether it be a traditional taxation regime or cap and trade.


Posted by: washpost29 | March 6, 2010 1:00 PM
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So your economic theory is this:

1) Raise taxes on energy across the board. And the reason that's being done ultimately is to force consumers to pay the cost of the carbon that is somehow damaging the environment.

2) This of course, will cause the cost of all goods and services to rise

3) That would bet terrible, because people won't stand for that.

4) So we'll have government give tax relief to most people so they won't really feel the impact

5) So therefore, I've achieved. Ummm. Nothing.


You took money out of the left pocket and then put it in the right pocket. And that's your theory? Seriously?

Either be a man and say "Wow, people consumer too much energy. Let's raise taxes on it through the roof and make them stop consuming so much"

Or be more honest and say "Goodness, this is the silliest idea we've come up with when you really think through the implications of it. And really only companies that broker carbon credits are the ones who will get rich, everybody else gets poorer, so on the whole, let's stop"

Posted by: Ombudsman1 | March 6, 2010 7:19 AM
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