Today, Sen. John McCain (R-AZ) delivered a major speech on global warming at the North American headquarters of the Danish wind-power company Vestas, despite having prevented the passage of critical renewable energy tax credits for the wind industry in December and February. His campaign also unveiled an advertisement that includes this voiceover:
One extreme thinks high taxes and crippling regulation is the solution. The other side denies the problem even exists. There’s a better way.
One half of the ad is true: A significant constituency of the right wing denies that global warming exists or requires action. Sen. James Inhofe (R-OK), the ranking member of the Senate Environment and Public Works Committee, promotes the Skeptic’s Guide to Debunking Global Warming Alarmism. Right-wing media promote false headlines about climate change science. And the U.S. Chamber of Commerce and Bush administration’s response to global warming is to embrace an energy policy of increased fossil fuel dependence.
But what “extreme thinks high taxes and crippling regulation is the solution”? Those calling for a carbon tax instead of a cap-and-trade system to set a price on emissions are primarily conservative economists like Glenn Hubbard and Gregory Mankiw, the chairmen of Bush’s Council of Economic Advisers from 2001 to 2005. Is McCain calling Wall Street conservatives “extreme”?
And what “crippling regulation”? The only thing McCain describes as a “regulation” is an energy efficiency standard for building codes. The global investment firm McKinsey & Company has found that mandatory energy efficiency standards, far from being crippling, overcome present market failures and policy distortions and can drive massive return on investment. Is McCain calling McKinsey “extreme”?
McCain’s just trying to have it both ways — his campaign is trying to promote the complex system of government regulation necessary to establish a fair and national carbon market and still pay homage to a right-wing ideology that considers any governmental solutions anathema.
So McCain’s talking points shout that his cap-and-trade system is “MARKET-BASED” in the hopes people will ignore the details.
By trying to be all things to all people, McCain’s cap-and-trade plan ends up being considerably worse than progressive alternatives. He refuses to embrace the genuinely free-market principle of making polluters pay to receive emissions permits — instead calling for “a commission to determine the proper amount of allowances to be auctioned and how much to be allocated to other entities.” That is, McCain’s plan is to establish more government bureaucracy to prop up a system of corporate subsidies. Economist James Barrett of Redefining Progress explains what a cap-and-trade system with free allocations looks like: “The end result is equivalent to a government imposed tax that companies levy on their customers but then keep for themselves.”
Similarly destructive is McCain’s call for unlimited use of domestic and international carbon offsets. With offsets, polluters covered by the cap-and-trade system such as coal-fired power plants could purchase “credits for reductions made from sectors of the economy outside the trading system” that are “certified, measured, and verifiable.” Some degree of offset use can drive needed investment into sectors that generate global warming emissions but are difficult to quantify — particularly agriculture and international deforestation. But McCain’s plan for using offsets as a cost-control mechanism is a plan for disaster. A recent Stanford University study looked at how the European Union’s offset program, the Clean Development Mechanism, has progressed, and found it lacking. Joe Romm describes the report’s conclusions in blunt terms:
What McCain fails to understand is that the reason offsets are so much less expensive than actual emissions reductions is because they are junk.
Sen. McCain’s cap-and-trade system will create a trillion-dollar market for carbon permits. His thoughtless embrace of offsets as an economic cure-all would either lead to massive fraud or the creation of a major new regulatory bureaucracy — and with the record of conservatives in the executive branch, it would most likely be both.