Invest Cap-and-Trade Auction Revenues

Any cap-and-trade proposal that comes before the U.S. Congress must fully recognize the importance of utilizing auction revenues from emissions permits to drive public investment in the clean-energy economy and safeguard American consumers from any regressive impacts. Proposals that are overly generous in their giveaway of emissions permits will result in a massive transfer of wealth to polluting companies, instead of investing this revenue back into in the American economy. Thus, they will ultimately fall short of the objective of creating a prosperous, fair, and low-carbon economy. The scale of the global warming and energy challenges we face will require proactive federal leadership in both policymaking and investment, and in public private partnerships, requiring a level of national leadership perhaps not seen since the New Deal.

Promoting capital investment, increasing research and development funding, and reducing financial risk through smart public policies like loan guarantees, will leverage more rapid technological breakthroughs and encourage commercialization, helping private industry to achieve economies of scale and lowering the costs of clean energy and energy-efficient products and services for consumers. The EPA concurs, arguing that “[S]ubstantial cost savings could be achieved by combining direct emissions policies (e.g. cap-and-trade or carbon tax) with technology push policies (e.g. technology and R&D incentives) that correct for the market failure associated with the fact that the inventor of a new technology can not appropriate all of the associated social benefits.”

Revenue from a permit auction could create a large new stream of resources to invest in these “technology push policies,” including: clean energy research, development, and deployment; advancing low-carbon transportation choices including mass transit, vastly more fuel-efficient vehicles, and low-carbon sustainably produced biofuels; training a new clean-energy workforce able to rebuild our communities and the country; and preparing for and adapting to the effects of global warming. While auction revenue is just one source of funding for these key national priorities, it represents a major pool of public resources, and should not be allowed simply to result in windfall profits and wealth transfers to polluting corporations and their shareholders.

For more on CAP’s policies on energy, please see: