July 22, 2008
CGD research fellow David Wheeler uses econometric analysis to discover why the U.S. Senate rejected Warner-Lieberman, the country’s first carbon cap-and-trade bill. He finds that state median income is the most powerful predictor of how senators voted; specifically, senators representing states with lower median incomes were much more likely to vote against the bill. Wheeler suggests that including in the next cap-and-trade bill a provision for an equal per capita payment of about $500 of the proceeds from carbon permit auctions would more than offset the burden of higher fuel prices on lower-income Americans, thus aligning them and their senators with the need to rapidly cut emissions.