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California’s historic climate dividend

On November 16th the California Public Utilities Commission announced its decision on how it will handle the revenue generated by auctions in the utility sector in compliance with AB 32 the state’s Global Warming Solutions Act. The decision supports using this revenue to shield utility ratepayers from electric rates which will increase due to the state’s cap on carbon emissions. Although this will make adjustment to the new law easier, it will blunt the carbon price signal, probably the greatest inducement to reduce our carbon footprint.

The CPUC is including volumetric rebates (larger rebates for larger customers) to industries who might be tempted to move out of state to avoid increased electricity costs, to help small businesses transition in 2013-2014, and to reimburse residential customers for the portion of costs directly associated with the Cap & Trade program. Volumetric rebates also dampen the carbon price signal and reduce the incentive for energy conservation.

The best news and biggest win from CPC’s perspective is that the  remaining revenues would be distributed non-volumetrically, equally on a per residential account basis.  The CPUC calls that remaining amount the “climate dividend.” This is an important precedent, reflecting the CPUC understanding of the arguments for equal dividends from the Commons – that the atmosphere belongs to us all equally.  The CPUC lists one of its priorities is to “Distribute Revenues Equitably Recognizing the Public Asset Nature of the Atmospheric Carbon Sink.”

This dividend would be distributed to residential ratepayers twice a year, but the mechanism will be through a bill credit, which will again undermine the price signal and the impact of the dividend on the consumer. This is a decision that Climate Protection Campaign along with a coalition of environmental partners worked on to try to get a dividend to consumers that would maintain the integrity of the carbon price. The major, historic creation of a dividend is a huge step forward.  CPC will comment on ways that we believe that this achievement can be made more effective before the board of the CPUC finalizes the decision on December 20th.

For more on this subject see Mike Sandler’s blog “The Birth of Carbon Pricing and Delivering California’s First Climate Dividend