The following is an article written by Meg Power, Senior Advisor to the National Community Action Foundation (NCAF). NCAF is the Washington, DC representative of the nation’s 1100 local Community Action Agencies, which deliver many services and investments in all the nation’s low-income communities including Low-Income Home Energy Assistance and the federal Weatherization Assistance Program. NCAF has endorsed the CLEAR Act.
Why the CLEAR Act is Fair to Low- and Moderate-Income Households
By Meg Power
About one-third of US households have incomes lower than 60% of the median income of their state and qualify for the federal Low-Income Home Energy Assistance Program. Their average annual residential usage is just 87% of the average for the other 2/3 of consumers. The gasoline consumption of the lowest income drivers is less than half that of median income households. Their houses are smaller, albeit more inefficient per square foot; they own fewer appliances, buy few finished goods and drive fewer cars. Their carbon footprint is far lighter than that of middle income consumers.
However, these Americans are extremely vulnerable to increases in energy costs; on average they spend from 18% to more than 23% percent of an entire year’s income directly on energy, including home fuels and gasoline, depending on the fuel prices in a given year. This percentage is known as the
Climate change policies must:
a. Ensure that all consumers can afford the quantities of residential and transportation energy that meet their basic needs;
b. Ensure that no households experience economic insecurity as a consequence of climate change policies;
c. Ensure that vulnerable consumers who lack the capital or credit to reduce or eliminate their use of carbon-based energy in their homes and vehicles have access to cost mitigation programs such as weatherization, energy efficiency programs and clean energy technologies;
d. Ensure that disadvantaged communities have access to a fair share of any funds designated for investments in infrastructure such as green homes and buildings, renewable energy technologies and easy access to low-emissions transit.
e. Ensure that emissions of greenhouse gases are subject to regulation by government acting for the public and
f. that any value created by the regulation belongs entirely to the public.
In each case, it is the results, not the mechanism, of a policy that “puts a price” on carbon that need to be evaluated.
The first “a” criterion is aspirational and requires a look at whether the households that are already priced out of the market for household energy and transportation fuels before the policy is in place have a better chance of meeting their basic energy needs. The CLEAR Act generally meets the test well. More than half of US energy consumers can expect to receive at least as much in return via the “dividend” feature as the average increase in their expenditures due to the legislation. It does even more for many low-income consumers. Because most lower-income households use less energy than higher-income households, the per-capita dividend design will give them greater spending power than they had without the dividend. Some who are today disconnected from their utility or who are limited as far as access to labor markets in rural areas may be able to meet some basic energy needs not satisfied today.
However, criterion “b” is that NO vulnerable consumer experience greater economic insecurity; realistically, this can only be satisfied by ensuring that no groups or categories of households are systematically and continuously injured by the rising price of carbon. Today, the energy costs and burdens vary greatly between households in similar economic circumstances based on the kind of fuel they use for household heating, between urban and rural consumers, and among regions. Pricing carbon may exacerbate today’s disparities or create different fault lines among groups. Yet, because under CLEAR the emissions permits are purchased by extraction and production industries, the prices will be spread far more evenly among energy users than would be the case under the House-passed ACES bill, which returns much of the revenue from the program to distributors of energy and the industrial users. To pass this test with high marks, the CLEAR Act’s dividend distribution system would need to be adjusted so that it reserves resources to respond to regressive effects of the price changes that are not anticipated at the outset.
With respect to the tests “c” and “d” above, the CLEAR Act is a vast improvement over alternative proposals, partly because it only spends a small share of auction proceeds to fund limited types of programs and more basic research into technologies that may transform the economy for all. One good start: the list of programs includes the low-income Weatherization Assistance Program. While its requirements with respect to assuring fair distribution among the programs are not prescriptive as introduced, there are simple changes that could assure that test is met.
As to the last two tests