How much cap-and-trade is politically feasible?

By Felix Salmon
May 12, 2009

John Kemp has a great column today on the politics of cap-and-trade in America. This is particularly interesting:

The White House included revenues from permit sales in its budget plan for symbolic reasons — to show it was committed to implementing cap-and-trade; it would spend the political capital needed to get legislation through Congress; to showcase the benefits auctions could bring; and to show how low-income groups could be protected against the impact of rising permit and energy prices by redistributing the proceeds.

But officials have been careful not to rely on the anticipated revenues too heavily. The president’s plan allocates the money to discrete tax breaks and research spending rather than general government revenues. If the permit revenues do not materialize, the tax breaks and research funding will be cancelled, and there will be no implications for the deficit.

The big picture here, in other words, is unchanged: you do what’s possible. A cap-and-trade bill is possible while a carbon-tax bill is not possible, so you do a cap-and-trade bill. A 100% auction cap-and-trade bill, as promised by Obama during the election campaign, is not possible, so you give away emissions permits at the beginning and then dial them back over as long as 10-15 years.

All of this is fine, as Kemp says, just so long as it’s automatic — ie, that Congress won’t have to vote again in order for the move to a 100% auction system to be completed. And just so long as the caps are inviolable, regardless of how many of the emissions permits are given away and how many are auctioned.

I’m cautiously optimistic that something can be cobbled together, and that it will create an infrastructure which can be fine-tuned in the future. But of course I’d be much happier if we could start with a 100% auction system on day one, as happened with RGGI. Obama has a strong mandate, it seems, but unfortunately it’s not that strong.

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Congress is just dying to hand out carbon credits to its big donors and constituencies. That is why it is more attractive than a carbon tax, which will not give individual legislators as much power. Forget about automatic processes or a 100% pure auction.

I guess you are hearing it here first.

If it wasn’t for religion (the economic kind), we would just be implementing a carbon tax, which is far simpler and more efficient than a cap and trade system. People don’t like the word tax, but cap and trade is a tax, anyway. Let’s not tax carbon, let’s charge usage fees on forms of energy that emit carbon. Will that feel better?

Posted by KenG | Report as abusive

We pray that honest officials are able to save us from Obama’s criminal cap and trade scam.

Cap and Trade “would be the equivalent of an atomic bomb directed at the U.S. economy—all without any scientific justification,” says famed climatologist Dr. S. Fred Singer. It would significantly increase taxes and the cost of energy, forcing many companies to close, thus increasing unemployment, poverty and dependence.

To increase their power and wealth at our expense, Obama and his billionaire fraudulent friends (Gore, Soros, Goldman Sachs, the Chicago Climate Exchange guys, GE, etc.) have been trying to brainwash us with the man-made global warming scam.

GE, for example, has bombarded us with daily propaganda — through its NBC networks, that includes MSNBC and CNBC — to make us swallow the scam. Why? Because they stand to make BILLIONS from the scam. Not only GE is the largest wind turbine generator maker, but it may benefit as the sole “secondary market” trader of the cap and trade credits.

More and more scientists and thinking people all over the world are realizing that man-made global warming is a hoax that threatens our future and the future of our children. More than 700 international scientists dissent over man-made global warming claims. They are now more than 13 times the number of UN scientists (52) who authored the media-hyped IPCC 2007 Summary for Policymakers. http://www.climatechangefraud.com/conten t/view/3562/218/

Additionally, more than 30,000 American scientists have signed onto a petition that states, “There is no convincing scientific evidence that human release of carbon dioxide, methane, or other greenhouse gases is causing or will, in the foreseeable future, cause catastrophic heating of the Earth’s atmosphere and disruption of the Earth’s climate.” http://www.petitionproject.org

Yes and after we hurt our own energy industry (not that I love all they do) and our economy, will Russia, China, India, Iran, Brazil, etc. all fall in line with carbon limits???? Not likely so we help how much?

Globally there isn’t any math or science out there that says Europe and American carbon limits will save the world. We better hope that the science is wrong, which is very suspect to begin with. Note that “Global warming” is now being rebranded as “Climate change” or “climate crisis”. Gee why can’t you stick to your message?

Posted by whit | Report as abusive

Hi Felix –

It’s fascinating that in the U.S. “a carbon-tax bill is not possible,” while British Columbia voters yesterday returned to power the provincial government which implemented a serious carbon tax last year.

Carbon tax is much better than cap and trade. It could be a good idea provided it’s cheap and easy to measure carbon consumption/emissions and it’s revenue nuetral. When the tax is implemented, there needs to be reduction in other taxes on current carbon users. This way reduction in CO2 is incentivized over time without immediate shocks.

If we are so worried about CO2 emissions then why did we close down the Yucca Mountain facility for storing nuclear waste? I am Britt Borden, and as I have stated in my other comments, nuclear power is the most practical way to reduce CO2 emissions NOW! Even if you don\’t like nuclear it would be a heck of a compromise for you. As far as the length of time that nuclear waste is dangerous I would say, in a few hundred years if we don\’t have the ability to cheaply put it on the moon or even Venus or Mercury then the cockroaches have taken over, so what does it matter? Comment by Dr Britt Borden MD.

Posted by Dr Britt Borden | Report as abusive

I agree with Britt Borden that we should have never closed down Yucca Mountain facility. I believe that global warming is a legitimate issue, but to many liberals it is just something to get upset about. I am not a conservative, just an in the middle person, but I am sick and tired with liberal over reaction to a problem followed by a lack of non-pragmatic actions or should we say inaction; bravo Britt Borden on your insight; nuclear energy was a pragmatic way to fight global warming, and it was President Obama and Harry Reid that killed nuclear power in America.

Posted by Frank C | Report as abusive

Democrats are beginning to sour on the idea of Cap and Trade. Like I, Britt Borden stated above, having killed of nuclear energy many moderate democrats are now afraid to embrace cap and trade.

Posted by Dr Britt Borden MD | Report as abusive