Democrat proposes carbon cash: $1,000 for every American

Rep. Chris Van Hollen, D-Md., the ranking member of the House Budget Committee. Rep. Chris Van Hollen, D-Md., the ranking member of the House Budget Committee. Photo: J. Scott Applewhite / J. Scott Applewhite / Associated Press Photo: J. Scott Applewhite / J. Scott Applewhite / Associated Press Image 1 of / 3 Caption Close Democrat proposes carbon cash: $1,000 for every American 1 / 3 Back to Gallery

A leading House Democrat is laying out a new approach for the party to controlling carbon pollution that ultimately could return as much as $1,000 to every legal U.S. resident.

The money would come from auctions of pollution permits to oil, coal and natural gas producers.

Rep. Chris Van Hollen, a Maryland Democrat whose name has come up as a potential replacement for House Minority Leader Nancy Pelosi of San Francisco should she retire, introduced the legislation Tuesday as a marker for Democrats heading into the 2016 presidential election, when he said he expects climate change to play a prominent role.

Several Bay Area Democrats signed on as co-sponsors, including Contra Costa County freshman Rep. Mark DeSaulnier, Rep. Barbara Lee of Oakland, and San Jose Reps. Mike Honda and Zoe Lofgren.

The cap-and-dividend scheme is modeled on Alaska’s Permanent Fund, which shares the state’s oil royalties with every resident. Last year, every Alaskan — children included — received a check for $1,884.

Van Hollen billed his Healthy Climate and Family Security Act of 2015 as a market-based approach both to climate change and income inequality. The dividends would start at just under $400 for every U.S. resident but would grow as the pollution cap was lowered.

The cap-and-dividend scheme would cap total U.S. carbon pollution and auction pollution permits to producers of oil, coal and natural gas. The cap would be ratcheted down gradually, raising the market price of the permits.

The plan would return 100 percent of the revenue to every legal U.S. resident, regardless of age or income.

UC Berkeley economist Severin Borenstein, an expert on energy taxes, said economists generally would prefer that revenue from such schemes be used to reduce the payroll tax or other taxes on labor, or to invest in research on alternative energy. But politically, Borenstein said, the dividend plan “may be much more viable” in generating public support.

California has its own cap-and-trade system that also auctions pollution permits, but it spends the bulk of the revenue on free emissions allowances to utilities that are passed through to customers. The rest goes into a Greenhouse Gas Reduction Fund to finance efforts to cut emissions, including the state’s high-speed rail project.

Van Hollen, the top Democrat on the Budget Committee, has emerged as his party’s idea man, a role played for Republicans by former vice presidential candidate Rep. Paul Ryan, R-Wis.

In January, with Pelosi’s blessing, Van Hollen provided House Democrats with a bolder proposal to deal with income inequality — a tax cut for middle-class workers, paid for by a fee on Wall Street transactions and reduced tax breaks for top earners — than the party’s proposed increase in the minimum wage, which proved ineffective in November’s election.

“Once you’ve recognized the reality of climate change,” Van Hollen said, “you have to be prepared to have a proposal for how you’re going to deal with it.”

Carolyn Lochhead is The San Francisco Chronicle’s Washington correspondent. E-mail: clochhead@sfchronicle.com