Dear Virginia Department of Environmental Quality,

Please accept these comments on the Virginia Department of Environmental Quality’s consideration of adding a CO2 Budget Trading Program to Part VII of 9VAC5-140 (Regulation of Emissions Trading).

As background, I am the co-founder of the Center for Climate Protection, based in Sonoma County, California. For about 10 years I advocated for California’s Cap and Trade program to return a portion of revenues back to households as a “climate dividend.”  I run a website at www.carbonshare.org focusing on carbon pricing that returns revenues back to households.  I have a graduate degree in Urban Planning with a specialty in Environmental Analysis and Policy from UCLA, and I have served as a city planning commissioner.  I have lived in Virginia with my family for the past 4 years.  It is our society’s collective responsibility to pass along a livable planet to the next generation including my two small boys.

Climate change is real.  It is a dangerous threat to people, human health, the environment, agriculture, the economy, and national security.  My friends were affected by the Sonoma County California wildfires last year, and my friends’ families were displaced by hurricanes in Puerto Rico.  Climate change is not theoretical anymore.  It is not about future generations.  It is happening here and now, and it is frightening.  We must take aggressive action.

Regarding carbon pricing, I have two main recommendations:

1.       Auction 100% of permits
2.       Return the revenues back to people as a climate dividend

Auctioning is important because we have seen in other carbon trading programs the tendency to overallocate permits, leaving the price at the minimum.  The Regional Greenhouse Gas Initiative (RGGI) and the European Emissions Trading System (ETS) have both had this problem.  Industry will lobby for additional permits and exemptions.  Everyone thinks they are a special case, and that the economy will collapse unless they are grandfathered in.  Politicians are tempted to delay turning the screw, and worried about causing “leakage” or an economic downturn, and so they provide 95% or more of the previous year’s allocation for free.  Yet, the economy does innovate, in RGGI’s case, power plants switched from coal to natural gas, leaving the program overallocated and the permit price at $2/ton.  In the next ten years, I expect solar and battery storage to undercut the business as usual case, and make current baselines obsolete.  This can be partially remedied with an escalating price floor on the permit price (and that is what California did), but auctioning 100% of permits is better because it lets the market determine the impact of innovation on the permit price. (Note: DEQ should study how a "consigned auction" differs from a straight non-consigned auction.  Is the purpose of the consignment to protect the companies from the price signal?)

The climate dividend is important, but many people misunderstand it.  Some environmental groups would prefer revenues to be used to invest in solar and wind technologies.  In California, billions of dollars in Cap & Trade revenues are being used for a high speed rail line.  In Virginia, the equivalent would be to cover Metro’s shortfall. But really, this is the people’s money.  Who owns the sky?  We all do.  If companies are going to have to buy permits to pollute, that money belongs to all of us.  An equal per capita dividend addresses the regressive impacts of the carbon price on low-income households, and allows for widespread support for the program.  In an age of economic inequality, a climate dividend could become a bi-partisan tool to unify the public for collective action to fight climate change.  A climate dividend could become part of a basic income, addressing unemployment and social justice aspects.  More information on climate dividends or “shares” may be found at www.carbonshare.org.

In addition to a price floor on permits, DEQ should consider limiting or banning offsets.  There should be no exemption for onsite fossil fuel plants.  Virginia should adopt its own cap and rules before joining RGGI.  Once in RGGI, it may be difficult to change, and I have heard that many RGGI states would prefer a tighter cap but are unable to get consensus among all members.  Virginia’s cap should be the tightest possible (less than 33 million tons).  Virginia should look at an economywide cap, not just on the electricity sector.  A good first step would be Virginia joining the Transportation and Climate Initiative (TCI) http://www.transportationandclimate.org/.

Finally, the Department of Mines, Minerals and Energy (DMME) should change its name to the Department of Sustainable Energy.

Thank you for your consideration.

Sincerely,

Mike Sandler

Springfield, VA

mike@carbonshare.org