Cap and trade's sad history

Over the past 13 years, the Senate has considered -- in one form or another -- a number of cap and trade proposals. While it has only formally voted on two, the Senate has considered a number of other versions at the committee level which never had enough support to garner a vote. No legislative proposal has received more than 48 votes* -- far short of the 60 necessary to pass such economically significant legislation.
Now that Senate Majority Leader Reid has made clear that no cap and trade legislation will be voted on this year, it is an appropriate time to reflect on its sad history. Most rational people would have concluded after 13 years of failed efforts that 60 senators or more are not willing to impose energy rationing on the American economy. While there has been a lot of rhetoric that cap and trade would produce ‘green’ job creation and spur innovation, virtually all independent and objective economic analyses conclude that a carbon trading system would impose large costs on the economy and consumers, lead to large job losses, and cause capital to flee to more friendly investment countries.

There are two separate but related explanations for why a fatally flawed approach to managing greenhouse gas emissions resemble zombies -- dead men walking who continue to haunt us and don’t seem capable of being killed. The first is the pressure and funding from major environmental groups who have an agenda of moving the nation off of fossil fuels. Kyoto and the subsequent cap and trade iterations were a way to do that and in the process make the providers of energy the culprits for the large energy price increases that would be the inevitable consequence of mandating large reductions in fossil energy use. The second and more cynical explanation is that once it became clear that no such legislation could attract 60 votes, support for cap and trade became a free vote for most liberal senators.

A majority of democrat senators appear to favor cap and trade but not enough to build a coalition that adds to 60. Moderate democrats from coal and energy producing states have been lukewarm at best. But, the process of pushing flawed legislation that could not be passed also became polarizing. Republicans have been almost unanimously opposed to legislation that would mandate large reductions below 2005 levels and that would only enrich traders and rent-seekers (companies who would profit from gaming regulations instead of the market place). Polarization and political gamesmanship have been obstacles to fashioning legislation that should be able to attract strong bi-partisan support.

The legislative solution to climate change begins with restoring some level of collegiality and then focusing on common ground. Anyone who is not influenced by zealotry knows that the goal of returning emission levels to some past level given a growing population and economy (hopefully) is an illusion. It just won’t happen.
What can happen to use a current term of art is to bend the emissions growth curve down. How do we do that? First, climate change policy has to be long term and focus on technology, faster deployment of current or about to be commercial technologies and more focused R&D on technologies that could be commercial decades in the future. These could include nuclear fusion, space based solar power, fuel cells, long endurance, low cost batteries, economical carbon capture and storage, and cellulosic low carbon biofuels. In the meantime, the private sector could be given incentives for deploying energy technologies in developing countries, accelerating the turnover of capital stock, and investing more in private R&D and public-private partnerships.

The biggest impediment to taking logical, cost effective steps to reduce our nation’s carbon intensity is not the lack of capability; it is the lack of will because of zealotry, climate orthodoxy, and the lack of collegiality that is required to seek common ground. Although our history has been built on statesmen seeking and finding common ground, that process is now reviled; not respected. Polarization is a destructive force that is undermining our future.

William O’Keefe, chief executive officer of the George C. Marshall Institute, is president of Solutions Consulting Inc.

* The Lieberman-Warner bill in 2008 had the most votes – 48. The McCain-Lieberman vote in 2003 had only 43 in support. (Climate Change – Cloture. “Motion to invoke cloture (thus limiting debate) on the Boxer, D-Calif., substitute amendment no. 4825 that would cap greenhouse gas emissions nationwide and set up a trading system for companies to buy and sell emissions allowances.” (S. 3036, CQ Vote #145: Motion rejected 48-36: R 7-32; D 39-4; I 2-0, 6/6/2008))