Cap and dividend

Cap and dividend is a market-based trading system which retains the original capping method of cap and trade, but also includes compensation for energy consumers. This compensation is to offset the cost of products produced by companies that raise prices to consumers as a result of this policy.

The process begins with some governments setting aggregate pollution quotas (e.g., for carbon emissions) and selling pollution permits to the public respectively. Polluters are required to buy those credits to match their pollution outputs. Some of the cost producers pay for pollution will result in higher costs for consumers, who as citizens are additionally faced with the environmental costs of the pollution. Under the cap and dividend system, public revenues raised from the sale of pollution credits is rebated to citizens or to consumers as a subsidy for increasing efficiency.