McCain-Lieberman bill is backward; Bingaman got it right

If you have two options for how to get a job done, and one option is simpler and lower-cost, the choice is easy, right? Not when you are distracted by politics and inertia.

The McCain-Lieberman climate-change bill has been lauded for its ambitiousness and bipartisan support. By contrast, Sen. Jeff Bingaman’s (D-N.M.) alternative plan has taken heat in Congress for being excessively modest in its environmental goals. But the fundamental difference between the McCain-Lieberman energy bill and Bingaman’s is not one of degree but of basic structure, and it is Bingaman who has the clearly superior plan. Bingaman’s proposal will accomplish any given greenhouse gas target that Congress sets, with less fuss and less cost.

Bingaman’s bill, by targeting the primary producers of fossil fuels, promises straightforward implementation and results that can be measured immediately. The McCain-Lieberman bill, which focuses on end-users in the energy production chain, is a bureaucratic nightmare destined to collapse under its own weight.

The goal of both these bills is to reduce emissions of carbon dioxide, the primary greenhouse gas that is released as a by-product of fossil fuels (coal, natural gas and petroleum products). Both bills employ cap-and-trade schemes that permit specified levels of emissions while providing for allowances to be bought and sold among different businesses as an incentive for cost-effective reductions.

The difference is that Bingaman’s plan, by focusing upstream, deals with fewer than 2,000 companies. The McCain-Lieberman downstream plan requires oversight of potentially tens of thousands of emissions sites and still leaves a significant amount of the nation’s carbon dioxide emissions outside the system.

The Bingaman approach places a far smaller information burden on the private sector. It would simply require coalmines, oil refineries, and natural gas processors to report the amount of carbon they produce or process, figures that are easily derivable. This information is already available as part of fossil fuel production reporting.

The McCain-Lieberman bill, on the other hand, addresses more than 3,500 separate electricity generators and over 380,000 manufacturing establishments, few of which are currently monitored for carbon emissions.
Moreover, the Bingaman bill covers all fossil carbon sources without making exceptions for favored sectors. By including all producers, it draws on the maximum possible number of opportunities for reductions in emissions.

The McCain-Lieberman bill contains a wealth of complex and hazy exceptions, rules to avoid double counting, continuous emissions monitoring, differential treatment of various industries and impossibly complex systems of reporting that leave room for any number of errors and misrepresentations. Because of gaps in its coverage, it may actually induce economically inefficient movement of emissions from covered to uncovered sources.

Why would we choose a system that requires implementing a vast number of new monitoring and reporting structures when we can achieve the same thing using existing measurements at a relatively tiny number of data collection points?

The real barrier to the upstream approach is, most likely, inertia. We have always focused downstream in controlling other pollutants. But no policymaker prior to Bingaman has looked closely enough at the science to realize that carbon content is uniquely reliable in producing a measure of pollution at the end of the cycle. The environmental result is the same whether you control the amount of carbon entering the system at the front or the amount of gas being released at the end of the cycle. Why not take advantage of this characteristic and simplify the process?

Whether the caps are placed upstream or down, on a couple thousand primary fossil-fuel producers or tens of thousands of manufacturers, electricity generators and others, the users of energy are going to have to adapt to a new constraint on carbon. With Bingaman’s plan, there will still be adaptation downstream, but it will be in response to a price signal instead of weak public encouragement or inefficient controls.

The McCain-Lieberman bill is awkward, clumsy and will lead to endless negotiation and probably litigation. The Bingaman bill is sleek and simple to implement. It is Rube Goldberg versus Steve Jobs.

This is not to say that the Bingaman bill is without flaws, but there is one unequivocal point: In terms of the basic architecture of the program, Bingaman got it right.

Ken Richards is an associate professor in Indiana University’s School of Public and Environmental Affairs, specializing in environmental law and public policy. His recent work with the Pew Center on Global Climate Change has focused on strategies for carbon management.