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"Climate Rebates": Protecting Moderate-Income Taxpayers While Saving the Planet

 

Policies that restrict emissions that negatively effect our environment, such as cap-and-trade programs, are often implemented to spur energy efficiency and greater use of clean energy.  To combat the negative impact of rising energy prices on low and moderate income households, associated with restrictions on greenhouse gas emissions, the Center on Budget and Policy Priorities (CBPP) has designed aclimate rebate” planAccording to the CBPP, rebates are an effective way to assist households amidst higher energy costs because they allow consumers to maintain their purchasing power while also preserving the incentive to conserve energy and invest in energy-efficiency improvements.

 

Under its "climate rebate" plan, CBPP proposes a refundable tax credit program that would restore households’ lost purchasing power. The climate rebate would be given to households that do not make enough money to file tax returns as a monthly benefit.  The plan could be funded with revenues raised by the auctioning of emissions allowances under a cap-and-trade system.   

Why "Climate Rebates" are Needed:  A climate rebate program is needed because low-income consumers generally spend a larger portion of their money on basic necessities that heavily depend on fossil fuels compared to those who are more well off.  Additionally, those in the lower-income brackets are the least able to purchase new, energy efficient products.  Middle income consumers, however, are not immune to economic hardship and rebates can help those families purchase more energy-efficient homes and appliances to help our nation transition to less dependence on fossil fuels.  Therefore, a well-designed rebate system could be comprehensive, benefiting low and moderate income families.  

Financing Consumer Relief:  Fortunately, relief for working families can be financed directly through a cap-and-trade system. According to CBPP,  "auctioning the emissions allowancesunder a cap-and-trade system would generate more than enough revenue to pay for the consumer relief proposed." A paper by the Center for American Progress, states that the "Congressional Budget Office estimates that the monetary value of emissions allowances auctioned under a cap-and-trade system would range between $50 billion and $300 billion each year (in 2007 dollars) by 2020." These revenues could be used to finance consumer relief and other climate-related priorities.  In fact, it is predicted by CBPP that less than "60 percent of auction revenues would be needed to provide relief to a substantial majority of U.S. consumers" - leaving a significant percentage of revenue to fund other climate-related programs and research.

Taking Action:  In 2008, the Connecticut General Assembly’s Regulation Review Committeevoted for a plan proposed by Governor Jodi Rell to provide rebates to consumers from the state's share of cap-and-trade auction proceeds. Similarly, President Obama is discussing the use of proceeds from federal sales of carbon emissions permits to extend the recently approved $400 per adult tax credit from his economic recovery plan.  Both states and the federal government have an opportunity to use funds from emissions auctions as a mechanism to help combat climate change and reduce our dependence on foreign oil, in a manner that protects working families as we transition to a low-carbon economy. 

 

Resources

Center on Budget and Policy Priorities - Extending "Climate Rebates" to Include Middle-Income Consumers Center for American Progress - Investing in a Green Economy:  Using Cap-and-Trade Auction Revenue to Help American Families and Spur Clean Energy Innovation
Progressive States Network - Climate Justice: Promoting Equity in Dealing with Climate Change