James Pethokoukis

Politics and policy from inside Washington

3 reasons why cap-and-trade is in trouble

Sep 8, 2009 20:23 UTC

The man who will almost certainly become Japan’s next prime minister, Yukio Hatoyama, is promising to cut the nation’s greenhouse gas emissions by 25 percent from 1990 levels by 2020.

That is a far more ambitious target that can be found in the legislation currently making its way through Congress. The cap-and-trade bill passed by the House of Representatives would trim U.S. emissions by 17 percent from 2005 levels. That translates to around a 6 percent cut from 1990 levels.

But even that lesser reduction seems unlikely to happen anytime soon. Climate change legislation faces a tough road in the Senate, and it may get pushed back to 2010 or beyond.

Cap and trade is, like healthcare reform, in trouble, and for many of the same reasons:

- There doesn’t seem to be an acute crisis. Polls show that the vast majority of Americans are satisfied with their healthcare. Reasons for complacency can also be found in recent developments in climate change. A new NASA study notes global temperature increases have stalled out this decade, likely because of decreasing solar irradiance.

Obviously some dire event, such as a terrible swine flu season or a brutal spike in temperatures, could refocus public attention and concern. But for now there doesn’t seem to be an emergency to motivate either voters or lawmakers.

- Most people won’t see an immediate benefit. Proposed changes in the U.S. healthcare system wouldn’t immediately change the current insurance coverage of most Americans, despite new government spending and higher taxes. Likewise, cutting carbon emissions will likely incur big costs today with any tangible benefits coming later this century. During a recession, neither provides the sort of cost-benefit analysis that strapped Americans are likely to find compelling.

- Both plans seem off point. If you asked Americans what was the biggest problem facing America, polls show, the most common answer would probably be unemployment rather than healthcare or the environment. And that is one problem, at least as gauged by the unemployment rate, seemingly getting worse rather than better.

To quote the man who jumped from a burning airplane with no parachute, “First things first!” Americans seem to agree.

Given a possible weak economic recovery and worker anxiety about jobs, neither a strong cap-and-trade climate change bill, nor a carbon tax bill, may happen anytime soon.

Instead, a better option might be more government-funded research into technological fixes. The Bjorn Lomborg-led Copenhagen Consensus recently released a list of proposals — such as marine cloud whitening and carbon storage — that could give more bang for the buck than new regulation and taxes.

If politics is the art of the possible, new green technology may be all that environmentalists can realistically expect from America.

COMMENT

Any impact will come from technology to scrub CO2 from the atmosphere, not lower emissions. Only working to lower emissions to stop global warming is like taking your foot off the gas when you’re in a car headed down hill with no brakes. You might crash at a slower speed, but you still crash.

The way forward on climate change …

Sep 7, 2009 15:50 UTC

This, from Tom Barnett amplifying on a Bjorn Lomborg op-ed, seems like a policy that could actually work in the real world. Reducing economic growth is a sure loser:

Instead of CO2 cuts, why not focus on adaptation? Why cut GDP growth over the century by 12-13% when the costs of adaptation will be much lower (“the majority of economic models show that unconstrained global warming would cost rich nations around 2% of GDP and poor countries around 5% by 2100.”). And Lomborg argues that putting serious technology efforts online as part of this adaptation effort can actually make it a winning proposition.

Meanwhile, “a high carbon tax will simply hurt growth if alternative technology is not ready, making us all worse off.”

In short, spend (on technology) to save, not cut (emissions).

COMMENT

With reference to the above article, the short article below explains the scenario in the Asian Climate Change context.

“Green Energy : A Paradigm Shift in Sustainability”

Green energy is not something new since the discovery of the depletion of the ozone layer and global climate change as a direct impact of green house effect on a worldwide scale.

Various international conventions/agreements on the reduction of green house effect will remain forever on glossy papers if countries around the world are not serious in committing themselves towards real implementation within national boundary.

Political will power, or even real politics for that matter alone, is insufficient in promoting green energy as attested by the economics of reality in both developed and developing countries.

A paradigm shift is needed in forging a new instrument of international co-operation within the wider framework of Free Trade Agreements and joint conviction shared by stakeholders such as the OECD, major banking bodies(i.e. IMF, World bank, ADB) and leading industrial/corporate entities.

……………………………….
Jeong Chun-phuoc
lecturer-in-law
[an an advocate of Competitive & Strategic Environmenting]
Jeongphu@yahoo.com

Posted by JEONG CHUN PHUOC | Report as abusive

More business attacks on climate change bill

Aug 28, 2009 12:28 UTC

I don’t think cap-and-trade is going anywhere soon, but its opponents are not letting up on the pressure (via The Hill):

Advocates for manufacturers and small businesses are launching a multimillion-dollar ad campaign against climate change legislation in states represented by senators likely to determine the bill’s fate.

The National Association of Manufacturers (NAM) and the National Federation of Independent Business (NFIB), groups that have historically leaned Republican, are targeting the House Waxman-Markey bill as a threat to the economy because it would raise energy costs.

COMMENT

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Republicans, the carbon tax and the 2010 election

Aug 26, 2009 18:15 UTC

My pal and superbrain Jon Henke got all excited for a minute when he thought that U.S. Senate candidate in Connecticut Rob Simmons was in favor of a carbon tax where the revenue would be used to eliminate payroll taxes. But then the Simmons campaign clarified the matter:

Never mind.  See the comment section at the news article, where the Simmons campaign manager says “Rob Simmons does not support a carbon tax. He does believe that supporters of “cap and trade” should be more straightforward about their intentions and propose a carbon tax if that is what they desire so the American people can make a clear judgment about the consequences of such a policy – a policy Rob opposes.”

Me:  GOP congressmen Jeff Flake and Bob Inglis have come out in favor of just such a proposal, only to get hammered by anti-tax groups in private.  But as one Republican economist told me recently, GOPers need to get into the game on climate change. And certainly this is one way of doing it that looks proactive, besides either a) denying climate change or b) calling for greater technological research. Here is a bit more from Henke:

We could eliminate the payroll tax and take this environmental issue off the table for Democrats. But no, Republicans are content to keep the payroll tax and settle for complaining about Democrats.

COMMENT

The Republican economist is right: a revenue-neutral carbon tax could and should be supported by a preponderance of Republicans. It’s a shame, really, that many seem to choose political expediency over good public policy.

How Goldman Sachs is hurting cap-and-trade

Jul 20, 2009 14:39 UTC

My sources have been unrelentingly negative about the chances of a cap-and-trade bill getting passed, but far less so about a renewable energy standard on electricity providers. So any suggestion to split the Waxman-Markey approach into separate cap-and-trade and RES bills, as  Sen. Byron Dorgan is doing,  is a big negative for capandtraders.  It’s also amazing to see how the current anti-Wall Street sentiment is hurting cap-and-trade because of the perceptions that financial firms will make a mint in the trading of emission permits. Here is a bit from a recent Dorgan op-ed piece:

For those who like the wild price swings in the oil futures market, the unseemly speculation in mortgage backed securities or the exotic and risky financial products such as credit default swaps that pushed our economy into the ditch, this cap and trade plan will be the answer to their prayers.

Just last year, speculators overwhelmed the oil futures market, and every day they were trading 20 to 25 times more oil than was being produced. That speculation drove the price of oil from $60 to $147 a barrel and gasoline to more than $4 a gallon.

Then the same speculators forced the price back down and made money in both directions. The American public paid the price for it.

And remember the financiers who wallpapered America with risky derivatives and credit default swaps that they traded in dark markets before the financial collapse last year? We shouldn’t need a second expensive lesson in how manipulation in financial markets can hurt our country.

Don’t’ get me wrong. I like free markets. But given recent history, I have little confidence that the large financial markets are free or fair enough to trust them with a new, large cap-and-trade carbon securities market.

Shock! Climate change expert favors hyping global warming threat

Jul 15, 2009 17:14 UTC

This bit from an  interview with Nobel Prize-winning economist and climate change worrier Thomas Schelling is a stunner (bold is mine):

Well I do think that one of the difficulties is that most of the beneficiaries [of fighting climate change ] aren’t yet born. More than that: Most of the beneficiaries will be born in what we now call the developing world. By 2080 or 2100 five-sixths of the population, at least, will be in places like China, India, Indonesia, Africa and so forth.  …  It’s a tough sell. And probably you have to find ways to exaggerate the threat. And you can in fact find ways to make the threat serious.

COMMENT

“This from those wonderful people who can’t predict the weather three days in advance.”
- Posted by Bob Makin

I think you are confusing Meteorology with Climatology – two very distinct scientific disciplines. Google to find out the differences and/or read this link.
http://www.weather.com/blog/weather/8_78 77.html

Posted by John Haythorn | Report as abusive

A global green war on the wealthy?

Jul 7, 2009 01:56 UTC

This report from my Reuters colleagues is a stunner:

WASHINGTON, July 6 (Reuters) – To fairly divide the climate change fight between rich and poor, a new study suggests basing targets for emission cuts on the number of wealthy people, who are also the biggest greenhouse gas emitters, in a country. Since about half the planet’s climate-warming emissions come from less than a billion of its people, it makes sense to follow these rich folks when setting national targets to cut carbon dioxide emissions, the authors wrote on Monday in Proceedings of the National Academy of Sciences. … The study suggests setting a uniform international cap on how much carbon dioxide each person could emit in order to limit global emissions; since rich people emit more, they are the ones likely to reach or exceed this cap, whether they live in a rich country or a poor one. …  Is this a limousine-and-yacht tax on the rich? Not necessarily, [author] Chakravarty said, but he did not rule it out: “We are not by any means proposing that. If some country finds a way of doing that, it’s great.”

My spin: Scary stuff. A green version of (high) tax harmonization. Tax something, you get less of it.  Where do the greenies think all the innovative, high-tech solutions are going to come from, nonprofits?

COMMENT

Oh smack! You just got beat down Pethokouis. Way to be a shoot from the hip libertarian. I suppose LESS oversignt aand regulation (or big government as you might call it) would have prevented the credit crisis too. Put down the Ayn Rand and find your way to reality.

Posted by Samm Hall | Report as abusive

This is what Pelosi should have said about cap-and-trade …

Jun 30, 2009 16:36 UTC

This is much punchier than “jobs, jobs, jobs, jobs.” James Lovelock (via the Climate Progress blog):

If we can keep civilization alive through this century perhaps there is a chance that our descendants will one day serve Gaia and assist her in the fine-tuned self-regulation of the climate and composition of our planet. We have enjoyed 12,000 years of climate peace since the last shift from a glacial age to an interglacial one. Before long, we may face planet-wide devastation worse even than unrestricted nuclear war between superpowers. The climate war could kill nearly all of us and leave the few survivors living a Stone Age existence.

COMMENT

Reference contact is bjcoppa3 at gmail dot com

Posted by Brian | Report as abusive

Pelosi, a vision in white — but not green

Jun 30, 2009 09:39 UTC

It was Nancy Pelosi’s star turn. (The blindingly white pant suit — Armani? Lovely.) The House speaker giving the closing argument at the end of the cap-and-trade debate that she personally pushed to the floor. The final pitch. “Just remember these four words for what this legislation means: jobs, jobs, jobs, jobs. Let’s vote for jobs.” Then the victorious vote. The greatest achievement of her legislative career. “An extraordinary piece of legislation,” said President Obama.

But what did Pelosi really accomplish, other than momentarily satisfying the powerful Green Lobby?

1) Getting major energy and environmental legislation passed in the House of Representatives isn’t by itself a landmark accomplishment. Been there, done that. In 1993, Democrats passed an energy tax by a vote of 219-213. And doing it again by a similarly razor-thin 219-212 vote — after more than a decade-and-a-half of intense political lobbying, numerous scientific studies, global media attention, Hollywood hectoring and, of course, Al Gore — doesn’t show a whole lot of tangible political progress for green Democrats.
[Why Obama's big economic gamble is failing.]

2) One of Pelosi’s goals also was to get the bill passed without the votes of Democrats who might suffer at the polls in the 2010 midterm elections if they voted for the bill. (Many Democrats suffered for their BTU votes in the 1994 congressional elections when the Republicans won back the House.) Mission accomplished, then. But it speaks poorly for Democratic messaging that cap-and-trade was such a risky vote for so many of the party’s members. It surely would have been better for the current momentum and eventual legislative success of the cap-and-trade bill for it to have passed the House by a wide margin.

3) The same delicate, precise formula that allowed the bill to succeed in that chamber won’t work in the Senate. For instance, more than a quarter of the bill’s House support came from the California and New York delegations whose members account for a fifth of the House. But those two states, notes Jay Cost of RealClearPolitics, make up just four percent of the Senate. A cap-and-trade bill that can’t pass the House by a big margin probably can’t pass the Senate by even a narrow one.
[Why Obamacare might be flatlining.]

4) And of course, the Senate, where you need 60 votes to end a filibuster, is a different manner of beast. Yes, Senate Democrats currently have 59 votes and seem likely to get a 60th from Minnesota. But there may already be as many as eight Democrats ready to vote against Pelosi’s creation. And as unemployment continues to rise, climate change may sink further down the list of American voters’ priorities and that of centrist senators.

5) Then there was that final pitch. Jobs, jobs, jobs, jobs. A sign of desperation, really, since the traditional economic argument for dealing with climate change has never been that it was inherently pro-economic growth or a job creator. Rather, the intellectually honest argument is that the economic costs of climate legislation would be less than the impact of doing nothing and letting carbon emissions skyrocket. But cap-and-trade is not a free lunch, and the Pelosi Democrats and eight Pelosi Republicans shouldn’t suggest it is.

Bottom line: President Obama surely would love to have a signed bill in his pocket by the time he wings his way to the global climate conference in Copenhagen next December. But rather than passing cap-and-trade, it is more likely that the Senate will have either voted it down by then, or not voted on it at all. (Recall that the 1993 B.T.U. bill never made it to a vote.) By then, that simple carbon tax-payroll tax swap some conservatives (and Gore) keep touting might start looking awfully inviting to Pelosi.  But hey, she sure did look great in that pant suit.

COMMENT

“Nancy Pelosi makes me nauseous, can we have term limits please or can she step down?”

Yes we can have term limits! Support law professor Randy Barnett’s initiative to amend the constitution for federalism. Google “federalism amendment” and you’ll find the website for the bill. Good luck!

Posted by willis | Report as abusive

Obama’s techno-optimism

Jun 29, 2009 18:20 UTC

The president on cap-and-trade, via the WSJ): “My strong belief is, is that innovation and technology are going to accelerate our process beyond these targets, and that we’re going to look back and say we can do even more.” Despite conservative naysaying about alternative technologies, there could well be huge leaps forward. But the same is also true of nuclear energy technology, which is why it is such a shame that the Obamacrats want to push it out of the debate .

COMMENT

I do think that the idea is good, but with the economy being very unstalble it may not be the way to get it done. On the energy front we can use the shotgun approach and waste a lot of good money and have a bunch of useless programs along with a few good ones, or we can have an open discussion and listen to both sides and point to where we want to go. As a country we are very unstable right now and it may be our undoing.

Posted by f belz | Report as abusive
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