James Pethokoukis

Politics and policy from inside Washington

Tea Party’s other big win: death of cap-and-trade

Nov 5, 2010 18:42 UTC

Looks like Tea Party America has busted a cap in cap-and-tax. Following sweeping Republican election victories, President Barack Obama has conceded his cap-and-trade plan to cut carbon emissions is dead for the foreseeable future. “I think there are a lot of Republicans that ran against the energy bill that passed in the House last year, Obama said at a Nov. 3 press conference. “And so it’s doubtful that you could get the votes to pass that through the House this year or next year or the year after.”

Yet Obama added that cap-and-trade  “was just one way of skinning the cat.” You see, the president has a plan B: Let the Environmental Protection Agency work its magic on American business. The EPA would begin regulating pollution from large factories and power providers starting in January. Now Obama acted like the agency has no choice. “The EPA is under a court order that says greenhouse gases are a pollutant that fall under their jurisdiction,” he added.

But that isn’t quite true. The Supreme Court ruled in 2007 that the EPA had the right to regulate emissions of greenhouse gases under the Clean Air Act – but it was not mandated to act. Even regulators admit this alternative is more economically harmful than a system where companies can offset carbon use by purchasing tradable permits. (And a straight carbon tax offset by payroll tax cuts would be even better.) But that drawback is a desirable feature to the White House. They’ve been hoping the threat of onerous EPA action would spur business to bring Republicans around.

The GOP response earlier this year was to try and strip the EPA of its relevant authority. The effort didn’t work, but it might next year. Republicans could try the same approach or attempt to cut funding for what it now mocks as the Employment Prevention Agency. Either measure would easily pass the GOP-controlled House. The Senate, still run by Democrats, would be a tougher slog. But between six additional Republicans and a dozen nervous red-state Democrats up for reelection in 2012, an anti-EPA bill might have the 60 votes needed for passage.

Obama could still veto the bill, of course. But legislation that merely forestalled EPA action until the economy perked up might stay his hand.  Or Republicans could attach it to some more important spending measure, reducing the chances of a veto. And the threat of defunding — and endless Capitol Hill hearings — could make the EPA think twice

If all else fails, business has its own Plan C: tie the agency up in court. The EPA’s last big clean air effort inspired a decade of legal challenges. One tactic works regardless of which party is in power: If you can’t legislate, litigate.


How many climate scientists did it take to change a light bulb? NONE. But they did have consensus that it would change.
Why wasn’t Climate Change ever regarded as the number one issue of prime importance to everyone since we were told climate change was to have been immanent death for the planet, as in SAVE THE PLANET?
Why did we enjoy condemning our kids to their graves with CO2 death warrants and CO2 death threats? This is liberal love?
Was it necessary to threaten my kids with death by CO2 just to get them to turn the lights out more often?
Why were there thousands of more “consensus” scientists than protesters?
Why did CO2 levels rise despite our contributing less with the world economic downturn?
Wouldn’t the plants have shown effects long before the climate would shown effects?
Why did the leftwing hope for the CO2 misery to really have happened and the rightwing discounted it as corrupt exaggerated and politicized science?
Why were scientists not called what they were, fallible and mortal human beings and lab coat consultants?
Didn’t scientists pollute the world in the first place with their chemicals?
Why didn’t the countless thousands of consensus scientists march in the streets if this was certain death we were facing?
Since Climate Change denied ancient climate, did the doomers therefore deny evolution too? Who’s the knuckle dragging neocon now?
Why didn’t the people know that the UN’s scientific warning, predicted the effects of CO2 were to have been anything from “nothing at all” to “unstoppable warming” (death)?
Will history view climate scientists as being to science what witch burners and The Crusades and abusive priests were to religion?
History has already shown that Climate Change was to the Democrats what the Iraq War was to the neocons, lies, and fear and politics.

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Raise taxes by $751 billion to save $19 billion

Jul 8, 2010 20:01 UTC

Kevin Williamson of National Review doesn’t think much of the CBO report that finds a climate change bill would reduce the deficit by $19 billion:

That piffling $19 billion deficit reduction is achieved by imposing a tax hike of three-quarters of a trillion dollars — the CBO puts the number at $751 billion — on the American people, and then spending all but the last $19 billion of the revenue generated. Here’s a radical idea: If you want to reduce the deficit by a (paltry, embarrassingly tiny, too slightly to really seriously mention it) $19 billion, how about you just pass a $19 billion tax hike and skip the part where you spend more than the cost of the Iraq War creating a new politically driven securities market to chase marginal atmospheric benefits related to the emission of carbon dioxide, which is not even the most important greenhouse gas? For perspective, you could just cancel the Depression-era farm-income stabilization program and save a nice round $20 billion.

That $19 billion in savings is great — if you only look at the balance sheet at Treasury and ignore cap-and-trade’s effects on the economy, the actual economy that exists out there in the real world. The Obama administration estimates the cost of cap-and-trade at 1 percent of GDP per year ($146 billion dollars), scholars at the Heritage Foundation put it at $393 billion per year, and others have estimated even higher costs. You know what the Obama administration’s numbers and the Heritage Foundation’s numbers have in common? They’re all a heck of a lot more than $19 billion — orders of magnitude bigger.


Has anybody in DC checked their electric bill lately or does somebody else pay for that as well?

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Obama’s clean energy pivot goes awry

Jun 16, 2010 17:51 UTC

Imagine if your local fireman started lecturing you on fire safety and the need for more research into advanced flame-retardant materials while your house was engulfed in flames. (“Dude, shut up and save my dog!”)

I mean, maybe Barack Obama’s Oval Office address would have been an effective energy speech had the Gulf gusher already been capped. But the oil is still flowing. And until it stops, shifting from the BP spill to the broader White House energy agenda seems an awkward political and policy pivot. The whole thing had an air of unreality to it.

Obama tried to cleverly argue that the spill is less like a natural disaster than it is an epidemic. One does its damage in minutes, the other in months or years. So not only must America be patient, but it is also entirely appropriate to use the oily mess in the Gulf as a catalyst to quicken America’s long-term shift away from fossil fuels.

But an appeal to focus on the future sure seems like a hard sell to an American public watching damage estimates rise daily. A government panel announced the same day as Obama’s speech that it thinks as many as 60,000 barrels a day are flowing into the Gulf. That’s double last week’s projection and way above the original guess of 5,000.

But in his speech, Obama could offer no new hope for a quick end to the crisis, only plans for cleanup (including how BP will pay) and prevention — and a potential clean energy future. But the president’s green dreams may turn into a nightmare if Republicans smash the Democrats in the November congressional elections. And the spill is making such a rout ever more likely by slowly eroding the president’s popularity.

But Team Obama and his Democrat allies on Capitol Hill don’t see it that way. They believe the oil leak disaster has helped persuade voters that action is necessary even if it creates a short-term drag on the economy. And they are betting more Republicans will decide they can’t any longer merely oppose Democratic plans.

For his part, Obama says he wants to “aggressively accelerate” America’s shift away from fossil fuels through business subsidies, government R&D funding and carbon emissions pricing through a cap-and-trade system.

But is there any evidence any of this would actually work? Obama’s 2009 stimulus package increased funding for alternative energy research, and currently the government is spending about $5 billion a year on everything from renewables to smart grid technology. And a new group of business execs, including Microsoft’s Bill Gates and GE’s Jeff Immelt, is pushing Washington to triple that level of funding. They point to such successful government R&D efforts as Internet and Human Genome Project.

But energy has been tricky for Uncle Sam. For instance, the 1970s energy crisis led to a federally funded synthetic fuels project beset by cost overruns and technical failures. (The 1980s collapse in oil prices didn’t help, either.) And a 2003 OECD study found that government-led R&D doesn’t seem to boost economic growth, or at least not in ways that can be easily measured by economists.

But first things first, Mr. President. The Pivot can wait.


What is needed are energy systems that are inexpensive, clean, and self contained, do not rely on fossil fuels and can be developed and maintained locally. You think I am dreaming I can feel that in my bones! Yet over the past (give or take ) hundred years or so, scientists, inventors and various curious people, have developed ideas and innovations, that would help us move totally away from our reliance on the presently accepted norms of oil, coal and gas – aka ‘fossil fuels’. Consider the work of Nikola Telsa and Stanley Meyer for starters!

If our governments are sincere in their attempt to reduce carbon emissions, and also reduce our dependence on fossil fuels, then why have they hidden this information from us? It is known that they have had knowledge of most of these innovations and scientific discoveries for a very long time. How do you define ‘sincerity’? Or better still can you say ‘sincerity’ and ‘government’ in the one breathe? An oxymoron!

http://just-me-in-t.blogspot.com/2010/06  /define-sincerity.html

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Bill Gates’ Big Government plan for clean energy ‘miracle’

Jun 14, 2010 15:26 UTC

Bill Gates and a bunch of other top corporate executives want Uncle Sam to spend a lot  more on clean energy research and development. Here’s why:

Energy innovation is a commitment to long-term prosperity. If the United States invests in its clean energy future now, our nation can reap immense benefits. We have seen this work in other sectors, and it can work in energy. Public- and private-sector innovators have made miracles happen right here on home soil—Americans developed the computer and the Internet, delivered air and space travel and decoded the human genome. Standing on their shoulders, we can see a clean energy future within reach. By scaling the good technologies of today and discovering new technologies that do not yet exist, we have an opportunity to achieve a similar miracle in energy.

So they have created a new group to push their agenda, the American Energy Innovation Council. Here are some of its members:

Norm Augustine, former chairman and chief executive officer of Lockheed Martin; Ursula Burns, chief executive officer of Xerox; John Doerr, partner at Kleiner Perkins Caufield & Byers; Bill Gates, chairman and former chief executive officer of Microsoft; Chad Holliday, chairman of Bank of America and former chairman and chief executive officer of DuPont; Jeff Immelt, chairman and chief executive officer of GE; and Tim Solso, chairman and chief executive officer of Cummins Inc. The Council is advised by a technical review panel consisting of preeminent energy and innovation experts and is staffed jointly by the Bipartisan Policy Center and the ClimateWorks Foundation.

And group has five big recommendations:

1) Create an independent national Energy Strategy Board; 2) Invest $16 billion per year in clean energy innovation (vs. $5 billion currency); 3) Create Centers of Excellence with strong domain expertise; 4) Fund the Advanced Research Project Agency-Energy at $1 billion per year; 5) Establish and fund a New Energy Challenge Program to build large-scale pilot projects.

And this is how they plan to pay for it:

When there is a system to reduce greenhouse gas emission in the United States, it will likely generate revenue—in the form of permit sales, for example. The first $16 billion of these greenhouse gas revenues should be devoted to RD&D— because new technologies will make it far cheaper to reduce emissions. This is a virtuous cycle. The United States employs other user fees on the energy system today that could be expanded. Wires charges (a small fee on electricity sales) are a natural way to finance improvement in the electric sector, just as gasoline taxes pay for transportation infrastructure. Reducing today’s subsidies to fossil fuel industries could also cover much of the distance.

Me: Why, exactly, do they think this will work? Granted, when you are talking about trillion dollar deficits, this is not a great deal of money. So maybe it is worth taking a flyer. But the evidence would indicate it is a long-shot at best. A 2003 OECD study on what drives economic growth in advanced economies found “no clear-cut evidence” that government R&D — as opposed to private sector R&D — provides any economic benefit.

What does boost economic growth, according to that study? Avoiding this scenario, for one thing: “For example, high personal income tax rates can discourage entrepreneurship since entrepreneurs are self-employed and/or managing unincorporated businesses, whose profits are taxed through the application of a progressive rate schedule to personal income.”


Just to throw the conspiracy cookie in here: why do you think private industry would not stifle creative clean energy research as they have for the last 80 years? This is why government-sponsored research, with appropriate oversight, through private contractors could yield better results than a straight-up free market program.

Of course the interference could always be done (as it is now, also) through lobbying efforts, but it’s much easier and cheaper to buy competitors than congressmen.

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Create jobs, don’t go green

Apr 6, 2010 19:18 UTC

As usual, Joel Kotkin nicely encapsulates the problem at hand:

Now the question is whether the president can refocus on jobs. This will take, among other things, backing off the economically ruinous climate change agenda. Even the most gullible economic development officials are beginning to realize that “green jobs” are no panacea. In fact, as evident in Spain, Germany and even Denmark, over-tough green legislation can destroy the productive capacity of the most enlightened industries. Similarly in green strongholds like California and Oregon, the mounting climate change jihad could slow and even explode the incipient recovery by imposing ever more draconian regulation on businesses that can choose to migrate to less onerous locales.

There are some hopeful signs of Obama’s repositioning. His recent moves embracing nuclear power and off-shore oil drilling, however inadequate, show that he’s at least trying to triangulate between the green purists and the unreconstructed despoilers. Some sort of moderated energy legislation–there’s no way to get the more radical House version through the Senate–would reassure businesses and the public that the president has jobs as his No. 1 priority.


I agree with Liberty Lover with one caveat. Private industry necessarily makes it’s decisions with some weight on long term considerations and most weight on what will sustain their enterprise in the short term.

Fossil Fuels are a finite energy source with geographical and political aspects that can be ignored only at our peril.

Like it or not, a country’s local, state, and federal governments collectively make many decisions every day. Those decisions should place more weight on long term factors than private enterprise is able to do.

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Drill, baby, drill — at least in some places

Mar 31, 2010 19:17 UTC

The new POTUS offshore drilling plan may be more aggravating for what it does not include (drilling in the Pacific, for instance) than pleasing for what it does. And as the Houston Chronicle points out:

But it is unlikely to win strong support from the fiercest drilling advocates in Congress and the energy industry, who have accused the administration of slow-walking conventional oil and gas production. They are expected to oppose many of the administration’s decisions — including the cancellation of planned lease sales in Alaska and potentially years-long waits before new drilling along the East Coast.

Me: And is it, along the WH nuke power plan, to make some version of cap-and-trade palatable? I don’t think it will be enough to get a comprehensive energy bill passed, Here is a bit from my RBV column today:

Even so, America will continue to be depend on imports to meet its vast energy needs. In the case of oil, nearly 60 percent of consumption is supplied internationally, including half from OPEC and a fifth from Canada. Similarly, Obama’s recent announcement of new loan guarantees for nuclear power plant construction is unlikely substantially change that sector’s share of the U.S. energy portfolio. But the White House hopes both efforts will help supply needed momentum to its energy and climate change agenda. Many Republicans and centrist Democrats favor an “all of the above” energy policy. Although a bill containing a nationwide cap-and–trade scheme for limiting carbon emissions passed the House, a parallel effort is dead in the Senate. Such caps are anathema to coal-state members of both parties.


More spin by Hussein. Puts this out there after the Public had been screaming for drilling all year, and he tried to sell Picken’s windmills and Gore’s Global Warming and knows all that stuff is decades away. Like his stimulus which he will claim is adding more jobs, he’ll take credit for the meager few Wells he will allow to be drilled. And speaking of seriously examining the sites for a year is another lie. The entire drilling map has been well documented for decades. Now with California bankrupt and sitting on top of capped oil wells, already dug , does he advocate taking off the caps and spreading the wealth ? When is America going to wise up to this fake ? The biggest scam to be hidden from the electorate , and one that would have made Barnham proud. There’s a Sucker born every minute “.. He never thought that America was a Nation of Suckers . But when he said it, America was full of Americans. Get ready, because Hussein is about to release an Amnesty bill that will unleash 30 million more illegals unto the ” Help Me ” rolls.

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Problem with cap-and-trade is substance, not style

Mar 11, 2010 15:20 UTC

Washington is obsessed with optics and messaging. Indeed, U.S. proponents of limiting carbon emissions hope rebranding their “cap-and-trade” proposal as “pollution reduction” will boost the flagging proposal on Capitol Hill. But the real problem is the product, not the packaging. There are far more politically feasible and economically effective ways of dealing with climate change.

1) As it is, the Obama administration and Capitol Hill Democrats are late to the name-change game. Republicans have already effectively rebranded “cap-and-trade” as “cap-and-tax.” And as much as Washington insiders argue that America is woefully undertaxed, the American public heartily disagrees. Higher taxes are still political poison. Especially ones that hit the broad middle class. And especially during a time of historically high unemployment. Americans aren’t stupid. The whole point of a cap-and-trade plan is to eventually make carbon more expensivee. And that “cost” or “tax” or “pollution reduction” will eventually come out of their pockets.

2) Whatever you call it, an overarching, national cap on carbon emissions is going nowhere in the Senate after passing narrowily in the House. (The recent scientific clash over climate change data hasn’t helped its prospects in the upper chamber.) A possible Plan B is a gradual, sector-by-sector approach to cap-and-trade starting first with electric utilities and eventually expanding to various manufacturing sectors over the decade.

3) But that misses the point. The core political problem here is not how carbon is priced or what the method is called, but rather what is done with the revenue. The original Obama plan was to take some of the money from auctioning carbon permits and devote it to clean energy research. The rest would, temporarily, pay for middle-class tax cuts. But the suspicion has lingered that the money would eventually be funneled toward healthcare reform funding.

4) For the public to accept a rising carbon price, the money must be permanently returned to the public. Gaining momentum is a bipartisan plan where 100 percent of carbon permits are auctioned with 75 percent of the revenue returned as “dividends” and 25 percent invested in energy research. And in his new book, 2012 Republican presidential frontrunner Mitt Romney echoes an Al Gore idea of a carbon tax whose revenues are used to offset individual payroll taxes. Indeed, there are indications that key anti-tax crusaders would be willing to accept a carbon tax plan if the potential revenue was fully refunded in some fashion.

So forget the rebranding. Time to launch a new product.


Yes, use the most powerful economic medicine available — prices — to dislodge the “incumbent technologies”: fossil fuels. For example, as long electricity can be made from coal at a fraction of the cost of renewable alternatives, low-carbon energy alternatives can’t gain a foothold.

Cap-and-trade is a hidden, volatile and regressive carbon tax, which Wall St would set and collect.

A revenue-neutral carbon tax is explicit, predictable and with revenue recycling as you suggest, it’s progressive. See http://www.carbontax.org.

Obama bails on ‘cap-and-trade thing’

Feb 3, 2010 16:07 UTC

President Barack Obama is now calling the carbon trading scheme that is supposed to heal the planet a “cap-and trade-thing.” That can’t be a good sign for the concept.

Here is the president in New Hampshire yesterday: “”The most controversial aspects of the energy debate that we’ve been having — the House passed an energy bill and people complained about, well, there’s this cap and trade thing. And you just mentioned, let’s do the fun stuff before we do the hard stuff. The only thing I would say about it is this: We may be able to separate these things out. And it’s conceivable that that’s where the Senate ends up.”

Whatever the impact on the environment, the probable demise of President Barack Obama’s cap-and-trade carbon plan would be a much bigger fiscal failure for the White House than the implosion of healthcare reform, at least over the near term. Taxing carbon was the hidden key to funding his administration’s policy agenda while limiting budget deficits. Now the White House is scrambling for a realistic Plan B.

For months, the Capitol Hill consensus has been that a legislative limit on carbon emissions isn’t going anywhere in 2010 or beyond. New job-killing regulations and taxes just aren’t popular when unemployment is in double digits. Now the White House seems to agree on the plan’s political prospects. But there already were hints of this in the new Obama budget proposal. Now Obama’s budget last year assumed auctioning emissions permits would generate $646 billion in revenue over 10 years. Of that amount, a fifth would have gone toward funding clean energy research, and four fifths to funding a worker income tax credit.

The administration’s new budget proposal simply contains an accounting line labeled “allowance for climate policy” followed by, well, nothing. Not a single dime of revenue is assumed for the years 2011 through 2020. The line item looks to be nothing more than a placeholder to keep hope alive for greener Democratic voters.

The near-term impact is that the worker tax credit won’t be renewed after 2011. But longer-term, the proposal’s failure would stymie administration efforts to get closer to balancing the federal budget.

Internal White House estimates predicted cap-and-trade auctions might generate two or three times as much revenue as forecast in last year’s budget, or up to $1.9 trillion. By contrast, proposed tax hikes on upper-income Americans would raise $678 billion. The extra money from cap-and-trade could have taken a big bite out of the $8.5 trillion 10-year deficit projected in the latest budget — just the kind of broad-based, if politically stealthy, tax that Obama’s economic advisers think is necessary to balance the books.

The administration’s healthcare plan was supposed to knock another $132 billion off the 10-year deficit, according to the Congressional Budget Office. With that on the back burner too, Democrat deficit hawks are left hoping Obama’s proposed fiscal commission can somehow create a menu of spending cuts and tax increases that could actually win congressional approval in 2011. Sadly for Obama, that’s about as likely as that “cap-and-trade thing” passing.


He is right, it is the latest ‘thing’ in hats, i.e. “de Bono hats”, and the speech writer better look for another job.

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Copenhagen a eulogy for US cap-and-trade

Dec 22, 2009 14:44 UTC

I have been saying for some time that I do not think Congress is going to pass cap-and-trade in 2010, or probably ever. (I think the threat of EPA action is empty given the flurry of litigation that would surely follow.) My Reuters news pals seem to agree somewhat and paint an alternate scenario:

1) But the Copenhagen Accord did not include emissions targets. This will make it difficult for lawmakers to argue that the United States should have a cap while China, the world’s top emitter of greenhouse gases, and other big polluters are not legally required to act on climate. “We were previously of the view that cap and trade was becoming an increasingly hard sell in the U.S.,” said Paul McConnell, an energy markets analyst at Wood Mackenzie. “But I think the events in Copenhagen have probably made that even more difficult.”

2) Alternatives to cap and trade will emerge, such as mandates and incentives for increasing levels of energy from low-carbon sources like solar, wind and nuclear.

3) The healthcare debate has delayed U.S. Senate action on climate, and financial industry reform legislation will likely push back the cap-and-trade debate into early next year, analysts said. The longer the delay, the harder it will be to convince undecided Democratic senators to vote for a cap-and-trade plan. “For a lot of moderate Democrats who are up for reelection, they don’t want to be seen as closely attached to this because of the concerns about job losses and higher energy prices,” said Divya Reddy, an analyst at the Eurasia Group in Washington.

4) Kerry said in Copenhagen last week that the Senate bill may not contain cap and trade, and other options are being discussed. So-called “Plan B” alternatives to cap and trade could include carbon taxes and national mandates for power generators to produce higher levelof cleaner energy sources, Reddy said. A new climate strategy could also include elements of a “cap and dividend” plan recently introduced by two senators. That aims to cut Wall Street’s role in emissions markets by auctioning permits to polluters and delivering most of the proceeds to the general public. But Kevin Book, an analyst at Clearview Energy Partners, LLC, said many senators and many companies, like oil major ConocoPhillips and power generator Duke Energy Corp, are already sold on cap and trade. Some power companies that have invested in low-carbon electricity generation feel they could compete better against companies that burn mostly coal under a cap-and-trade regime.


No carbon bill of any kind will be passed by congress and EPA will not attempt to enforce carbon limits. That would be political suicide for Obama. He’s stupid, but he’s not that stupid.

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While Obama talks in Copenhagen, support in US crumbles

Dec 18, 2009 14:29 UTC

Here is what the POTUS told COP15:

I believe we can act boldly, and decisively, in the face of a common threat. That’s why I come here today — not to talk, but to act.

But back in America, it’s the Senate that’s acting — and not in a way that Obama likes. First, Maria Cantwell and Susan Collins have come up with a cap-and-dividend alternative that could steal support away from the cap-and-trade efforts of the White House and Kerry-Boxer-Lieberman-Graham. And now there is also an effort in the Senate to negate the Environmental Protection Agency’s finding that greenhouse gas emissions endanger health and the environment. It’s the EPA ruling that is supposed to be the catalyst for action on climate since most everyone agrees that EPA regulation would be even more ham-handed and onerous that congressional action.