Our carbon pricing system should not be a shotgun marriage

Why two climate bills are better than one 8

As this is written, two House Committees — Energy and Commerce and Ways and Means — are considering climate legislation.  Both are following similar timetables, and hope to report bills by June.  

In the case of Energy and Commerce, chairman Henry Waxman has released a 648-page discussion draft.  The draft creates a large and complex carbon trading system but is silent on two key questions — whether initial permits will be auctioned or given free to polluters, and how revenue from permit auctions, if any, will be used.  Despite the silence on these questions, however, it is widely expected that the bill will give over half the initial permits to various industries for free, much as the European Union has done.  

By contrast, in Ways and Means, several short and simple bills — some involving a carbon tax, and others involving a cap with 100% auctions — are being considered.  All the Ways and Means bills have the same framework: they raise the price of carbon economy-wide and return the money to the people, thereby protecting families from the impact of higher prices.  In some bills the revenue is returned through tax reductions.  In Rep. Chris Van Hollen’s bill, it is returned through monthly per capita dividends.   

This post is not about the merits of either committee’s approach.  It’s about allowing both committees to complete their work and present to the full House a choice of frameworks for pricing carbon.  
 
At the moment, there is heavy pressure from many quarters to abort the Ways and Means Committee’s work.  The party line is that two bills would be a distraction, and that everyone needs to get behind the Waxman bill, whatever it turns out to be.  
 
In my view, this ‘my way or the highway’ approach is ill-advised.  It is too soon to shut down a wider discussion of carbon pricing, and too soon to eliminate alternatives.  The time will come when that discussion must end and a choice must be made, but that time is not yet.
 
Why do I believe this?  Putting a price on carbon (or as I would prefer to say, on air) is a BIG DEAL, comparable in magnitude to Social Security.  It has monetary impact in the trillions, a huge impact on families, and is something we’ll have to live with for 40+ years.  It’s important that the way we price air/carbon is not a shotgun marriage, but a marriage entered into with public understanding and consent. The purpose of having two bills and debating them is to foster that understanding and consent.
 
The approaches being considered by the two committees are significantly different.  One would create a complex, opaque system that favors politically powerful corporations, the other would create a simple, transparent system that returns higher prices directly to the people.  It is a GOOD THING for Congress and the public to know that these two approaches are possible, and to discuss them for a while. Snuffing out that discussion before it happens would be a disservice to the democratic process, and ultimately to finding a durable climate solution.
         
Moreover, putting all our climate eggs in one basket is risky.  If that basket breaks, as well it might, we’ll have to go back to square one, and we’ll have lost much valuable time.  It’s therefore prudent to offer more than one way forward.  What the Ways and Means Committee is doing is developing a second way to price carbon and putting it out for public view.  That is a service for which they should be praised, not condemned.  

 

 

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  1. wearewhatweeat Posted 7:15 pm
    15 Apr 2009

    Carbon trading and offset schemes are touted as beneficial. This is not the case. I recommend Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power by Larry Lohmann. The book concludes that the carbon trading approach
    is both ineffective and unjust. In addition, the Climate Justice Now!
    The Durban Declaration on Carbon Trading in 2004 calls for solidarity against it.  The bulk of fossil fuels must be left
    in the ground if climate chaos is to be avoided.

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  2. Clifford Wells's avatar

    Clifford Wells Posted 9:19 pm
    15 Apr 2009

    How come I get this sickening feeling that the first climate bill will be like the Clean Air Act of 1970, lots of noble ideas and big money, but really ineffective until it was revamped in 1990?  I guess we need something pronto, whatever it is.  That's progress.  But caps or taxes do not reduce global warming - people do.  Think about that for a minute.What the committees are working on is some great stuff and surely we have to start somewhere, and I have respect for that and honor thir intentions - good points by the story author.  Thanks for the post.But let me say that it has been nearly 40 years since the 1970 Clean Air Act and we still don't have that stuff right.  Seriously, some of it is rather a dirty joke we'd rather not discuss.  This is a loooong process folks.  Anybody expecting instant miracles and results will be sorely disappointed.  But onward we march.  -sam 

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  3. mwildfire Posted 7:17 am
    16 Apr 2009

    Seems to me this gets only half of its own point. Right, better to debate such an important and long-term policy so the final choice can get public buy-in (unfortunately, this assumes that what Congress chooses to do reflects the political will of the public, which is a fairy tale). More importantly, though, the bills in Ways and Means, as described, hover around what must be done to actually solve the problem. Waxman's is just another handout to corporate players, another way to use public money to reward those who have the sharpest tax lawyers. It's way too late for this kind of thing--we need effective action on climate change yesterday. It's highly doubtful that cap-and-trade will be effective even if all permits are auctioned. Much simpler would be a tax with the monies distributed back to taxpayers, preferably on a per capita basis so the very poor who don't pay taxes are not cut out.

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  4. SallyVCrockett Posted 8:30 am
    16 Apr 2009

    "In my view, this ‘my way or the highway’ approach is ill-advised. It is too soon to shut down a wider discussion of carbon pricing, and too soon to eliminate alternatives. The time will come when that discussion must end and a choice must be made, but that time is not yet." I couldn't agree more. And while I happen to think a carbon tax is the superior model, I feel even more strongly that this country needs to at least have the discussion if we are to find the best possible solution to AGW.

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  5. davefordemocracy Posted 12:05 pm
    16 Apr 2009

    I think we can also recognize the progress that has already been made in the form of a consensus, at least among Democratic lawmakers, that we're going to do cap and trade.Although a tax makes sense, it's too easy for me to imagine corporations asking for little loopholes that get bigger and bigger. Cap and trade works because of the cap. It's feasible because of the trade. And we know it workes because it's already reduced greenhouse gases in Europe:http://greeninc.blogs.nytimes.com/2009/02/16/group-says-european-cap-and-trade-system-reduced-emissions/#more-1097

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    1. Gar Lipow's avatar

      Gar Lipow Posted 1:23 pm
      16 Apr 2009

      OK, nonsense on trading reducing greenhouse gases in the EU. In three of four years greenhouse gases went up in traded facilities while they went down EU wide. In the fourth year they went down less than 2% in traded facilities while going down 6% EU wide. That is not exactly a freaking success.  Also according to an industry group only 40% of those reductions was due to trading, the rest due to economic conditions and differences in weather. But the industry group did not take into the consideration the lower cost of natural gas, and thus an economic incentive to substitute natural gas for coal. That basically would make the fourth year around zero percent of emissions being due to trading.

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      1. davefordemocracy Posted 3:08 pm
        16 Apr 2009

        The source I believe you're citing, New Carbon Finance, estimates that participants in the EU's Emission Trading Scheme (EU ETS) cut their carbon dioxide by 3% last year, and that 40% of the reductions were attributable to cap and trade. So according your own source, the EU's cap and trade system reduced CO2 by over 1% in just the 4th year of implementation.Cap and trade didn't just stop emissions, it lowered emissions.The report says that, among EU ETS participants, the power sector reduced its emissions by 2%, even while it was increasing electricity generation. The industrial sector reduced its emissions 5%, for a total of 3%.Here's the press release: http://www.newenergymatters.com/download.php?n=20090216_PR_2008Emissions.pdf&f=pdffile&t=pressreleaseI couldn't find anything that confirms or refutes your claim that the study didn't take into consideration the price of natural gas. Maybe you can post a link. In any case, it's the extraction and burning of natural gas vs. other sources that would have an effect on CO2 emissions, not the price. As to your argument that greenhouse gases went up during the EU ETS's infancy, the first few years were fairly tame compared to what might come out of Copenhagen in December. At any rate, you can't turn a ship around on a dime.New Carbon Finance is a well respected organization and, along with its own numbers, the report took into account data from several other organizations that study the economics of energy. Hey, I'm just a newbie around here, but if you're going to discredit an organization that gets cited by Bloomberg, NYT, and Reuters, you might provide some documentation.

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  6. wearewhatweeat Posted 7:08 pm
    16 Apr 2009

    Cap and trade is a scam.  I will reiterate:I recommend Carbon Trading: A Critical Conversation on Climate Change, Privatisation and Power by Larry Lohmann. The book concludes that the carbon trading approach
    is both ineffective and unjust.Until you read this book, you have a significant gap in your knowledge and cannot be serious about learning and therefore advocating the responsible approach.

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