By KEN TOOLE |

We can do better than the current carbon cap-and-trade legislation.

Current cap-and-trade legislation moving through Congress seems to be getting worse and worse. Just like the health care debate, powerful special interests are carving themselves out of the equation while trying to make everyone else pay the cost of a serious problem. The result is legislation that fails to fix the problem and is grossly unfair to most Americans. There is a better way. It's called cap-and-dividend.

But first let's look at the current debate about carbon cap-and-trade legislation. It is very clear that many people who oppose carbon legislation simply do not believe that carbon emissions pose a very great threat. To the extent they agree there is a "threat," they often say it is not worth paying much to avoid it. But, from red trees to melting glaciers, the evidence continues to point to a real problem. We need to act.

Opponents also argue that we simply can't achieve the reductions we need to stem the effects of carbon in the atmosphere. But, wind and solar power, hybrid vehicles, bio-fuels, energy efficiency programs and smart-grid technologies all offer great opportunities and all have moved beyond sci-fi to being commercially available and practical. There is a lot we can do right now.

Still others argue that we shouldn't waste our time and money because China and India aren't doing anything about carbon. But, there are opportunities for the U.S. to develop technologies we can export to these countries to use energy more efficiently and move to alternatives to fossil fuels. That is providing real leadership.

It is going to be expensive to address climate change. But, it will be much more expensive in the long run to do nothing. And the big question is, "who is going to pay how much?" Unfortunately, the maneuvering in Congress is making it very clear (once again) that those with power and influence are very likely going to be the ones to decide. The result is carbon legislation that fails to address the problem and moves money into the pockets of large polluting industries.

The basic standards for any carbon legislation should be:

1. It reduces carbon emissions

2. It is simple

3. It is fair

There is a proposal that meets those goals but it's not the one you are reading about in the papers. It's called cap-and- dividend. This approach raises money from polluters by requiring them to buy "carbon credits" for every ton of carbon they put into the air. Of course, industry passes those costs on to us consumers. That is where the dividend comes in. The cap-and-dividend system rebates the money raised from selling carbon credits to every American citizen. A cap-and-dividend system raises money from the polluting industries and sends it directly to the consumers to help off set the cost of cleaning up the environment.

HOW CAPO AND DIVIDEND WORKS:

The idea of all of the carbon regulation schemes being bandied about is to use a market based approach by putting a price on carbon and providing incentives for polluters to reduce emissions. Cap-and-dividend maintains that market based approach to reducing carbon. This is how it works:

The cap - We know how much carbon is emitted and where it is coming from. In any capping system credits are created using current carbon levels. A price is established for each credit. The number of credits is then reduced each year. As the price of credits increases because there are fewer issued each year, polluters have more and more incentive to reduce emissions to avoid having to buy more costly carbon credits.

The auction - Much of the current wrangling in Congress is about who gets how many credits and what the credits cost. And of course big industries are successfully carving out their own special deals by getting credits at reduced rates or by getting free credits. The fair way to do this is to put all carbon credits up for public auction with no exceptions. Let the polluters bid on the credits to establish the market price. The money then goes to trust, or even the U.S. Treasury.

The dividend - Of course the problem is that polluters will pass their costs through to consumers. In a cap and dividend system the money raised by the regular credit auctions is then sent to every citizen on an equal basis. The simplest way to do this is through the existing Social Security System. Consumers can then use the money as they see fit to off set price increases in gasoline, electric bills and consumer goods.

For a detailed discussion of cap-and-dividend, please see www.capanddividend.org.

Ken Toole is vice chairman of the Montana Public Service Commission.