January 29, 2009


David Roberts says that, if his contacts in Congress are right, it's either a cap-and-trade bill or nothing:
Calls for a carbon tax, to the extent they have any effect, will complicate and possibly derail passage of carbon legislation.

It's possible that a carbon tax (and/or cap-and-dividend) bill will be introduced. One or both might even make it to a full vote, though I doubt it. But they won't pass. If you want carbon pricing out of this Congress, cap-and-trade is what you're getting. It follows that your energies are best spent ensuring that cap-and-trade legislation is as strong as possible.
I happen to agree with this, insofar as it means green groups need to rally around a particular carbon pricing scheme, whether that be a carbon tax or cap-and-trade. (With auctioned carbon credits for the latter, the two are functionally identical.) The key, as Ryan Avent and I (to blow my own horn) have noted, is there should be a rough consensus about how to proceed, just as health care advocates have come together around a Massachusetts-style plan for universal coverage. It might be better to have a single-payer system, but we can get most of what we want out of a Massachusetts-style plan, and have an easier time of getting it passed, too.

Of course, that doesn't mean we ought to accept any cap-and-trade system: For myself, a worthwhile scheme should, at a minimum, auction off the vast majority of carbon credits from day 1, make as little use of carbon offsets as possible, and rebate a substantial portion to the public, with a focus on low-income families. That leaves a lot of wiggle room, but understanding what our short-term priorities ought to be (i.e., getting political buy-in to carbon regulation, while laying groundwork for aggressive reductions in carbon emissions down the road) is essential to getting an effective climate change policy off the ground.

One other note about the politics of cap-and-trade: Besides achieving consensus on the desirability of carbon trading over a carbon tax, the success of a climate change bill depends on whether it can get shepherded through Congress without getting larded with earmarks, amendments, etc. (Already we're hearing talk from Nancy Pelosi and others of using cap-and-trade as a revenue stream, rather than as primarily a regulator of pollution.) Honestly, I think the best thing to do -- and which I've heard is being considered -- would be to just amend the Clean Air Act to authorize the EPA to create a cap-and-trade system for carbon dioxide, and let them take care of the details. Otherwise you risk trying to pass a 1,000 page monstrosity like Lieberman-Warner, which presents too many targets and can easily be watered down to insignificance.

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