By Mike Sandler, Cofounder of the Center for Climate Protection
Psst, you’re getting money back from a carbon price. The California Climate Credit is one of the best kept secrets in the world of climate policy. It was created in 2014 by the California Public Utilities Commission to return revenues from the State’s Cap & Trade program back to households through an inconspicuous line item buried somewhere deep in your electric bill. The State could make it an off-bill “dividend” and promote it like crazy, but so far they have chosen not to. The utilities are given free allowances representing emissions from the electricity sector. They sell those allowances to electricity generators, and return the revenues back to ratepayers. The so-called consignment auction is meant to “protect” utilities, since regulators are still traumatized from when utilities went bankrupt during the 2003 California energy crisis. Of course, shielding them from the price signal can also result in mixed incentives. But a consignment is still better than flat-out “grandfathering” where the allowances are given freely to emitters in certain sectors, and can result in “windfall profits” for those companies as has been shown in the European Cap & Trade program.
In 2018, the amount to households in PG&E territory is $39.42, which is applied twice a year to your April and October electricity bills. According to the Air Resources Board, the amount raised from consignment auctions is about $750 million per year. Starting in 2018, natural gas suppliers will also begin returning the revenues from their consignment auctions back to residential ratepayers. This could add another $550 million to the Credit. This $1.3 billion per year is significant money. For perspective, the amount spent on “investments” (this would be the “Cap & Spend” portion of the program) is about $1.4 billion in 2018.
The funds being returned to people could be the start of a broader climate dividend if the California Legislature and Governor decided to do so. Unfortunately for would-be dividend recipients, it is too tempting for legislators to throw auction revenues at whatever problem or pet project is at hand, whether it is high-speed rail, transit-oriented development (since the redevelopment agencies were disbanded), or wildfires. However, equity issues are always in play, even as the State looks at using funds in specific zip codes or disadvantaged communities. A universal “dividends for all” program would combine the benefits of basic income with an unbeatable political constituency: everyone. It would reinforce the vision of author Peter Barnes, who has written that the only way to address our economywide carbon problem is to give an escalating carbon price the political support it needs to weather the backlashes now seen in parts of Canada and Washington DC.
One way to stretch the value of your Climate Credit is to donate that amount to a research and advocacy group promoting climate dividends.
Psst, here’s another secret. I know of a good one. Talk about a credit investment that pays dividends! To donate your Climate Credit to the Center for Climate Protection, click here.