Twice each year, all California households will collect a small “climate dividend” from money raised by the state’s new global warming cap-and-trade system, utility regulators decided Thursday.
The dividend will be worth an estimated $20 to $40 and will appear as a credit on utility bills, possibly starting in mid-2013.
The idea won unanimous approval from the California Public Utilities Commission as part of a broader plan to use some of the revenue from cap and trade. The system caps greenhouse gas emissions in California and forces companies to buy permits to release carbon dioxide and other heat-trapping gases into the atmosphere. The state held its first auction of carbon permits, called allowances, in November.
By placing a price on emissions, cap and trade will probably lead to higher prices for electricity and gasoline. Those prices will give Californians a powerful reason to conserve. But state officials want to cushion the blow so that residents don’t turn against the program, which is being closely watched nationwide.
The plan approved by the utilities commission Thursday will use some of the auction proceeds to hold down electricity rates for homeowners and small businesses. In addition, residents will receive the biannual dividend, which will be the same for all households. Its size will depend on the price of allowances sold at auction.
“It’s the first time in the history of cap and trade that I know of … that most of the value of allowances will flow directly back to households,” said commission President Michael Peevey.
Although allowance trading has already begun, California officials still haven’t figured out what to do with all the money. Some of the funds will be controlled by the Legislature, which is still debating how to use the money. By law, it can’t be treated as tax income and dumped into the state’s general fund.
Some cap-and-trade revenue, however, will flow through the state’s utility companies.
Under cap and trade’s complicated rules, the state gave the utilities millions of allowances for free and ordered the companies to sell those allowances at auction. State officials wanted that money – estimated to range from $5.7 billion to $22.6 billion over the next seven years – used to cushion the impact that cap and trade might otherwise have on electricity bills.
Thursday’s decision spelled out exactly where that money will go. About 85 percent will go to homeowners, either through the dividend or by restraining future increases in electricity rates.
David R. Baker is a San Francisco Chronicle staff writer. E-mail: firstname.lastname@example.org