Earth Equity News

As Prospects for Cap-and-Trade Bill Fade, Attention Shifts to 'Plan B'. Commentary by Robert Shapiro, SoneconBlog, October 22, 2009. "Beyond the public's view, major players in the climate change debate are reassessing their options. In fact, as the prospects of Congress approving a cap-and-trade system fade, discussion is shifting to 'Plan B.' One reason is that the version of cap-and-trade which just barely passed the House of Representatives a few months ago, the Waxman-Markey bill, made so many concessions to polluting interests that its support among environmentalists has eroded badly... In the Senate, progressives are said to be determined to oppose any legislation that ends up as weak as Waxman-Markey. And the moderates and conservatives who make up a majority of the Senate remain wary of climate-change engineering in a cap-and-trade form, since it would both raise energy prices for average Americans and make those prices more volatile for business. The upshot is that the prospects of corralling 60 votes for the Kerry-Boxer cap-and-trade bill in the Senate have faded to nearly zero...

"The debate behind the scenes is moving to the alternatives. The two leading options are direct EPA regulation of GHG emissions or a revenue-neutral carbon tax. The courts recently held that EPA already has the authority to regulate GHG emissions, and the eclipse of cap-and-trade will shine a new spotlight on this approach. The alternative is one which a good share of the environmental community, most economists, and climate-change leaders like Al Gore have all supported: Apply a tax to energy based on its carbon content, and recycle the revenues as cuts in payroll or other taxes. Given how economically costly direct regulation can be -- and the uncertainties about what such regulation would look like under the next conservative president, compared to our present liberal one -- its prospect could quickly expand support for a carbon tax program. That approach also has the virtue of a successful record: While Europe's cap-and-trade system has yet to reduce European GHG emissions, Sweden's 15-year experiment with carbon-based taxes cut the country's emissions sharply even as its economy grew 50% larger.

"For its supporters, a carbon tax is simple, transparent, and produces a steady price for carbon which businesses can use to plan large investments in developing and adopting more climate-friendly fuels and technologies. To its opponents, it's just another tax. That objection should be at least partly neutralized by recycling the revenues through other tax cuts -- if the debate remains reasonable. In the end, environmental and business leaders, and ultimately the White House, will have to defend a carbon-based tax against the forces of politics as usual, which in this time seem dominated by the power of entrenched interests and the partisan politics of just-say-no-to-everything. If we can't manage that, we may well lose the best chance in a generation to take serious action to defend the climate our children and grandchildren will inherit."