Graham, Kerry, Lieberman almost ready to run their bipartisan climate and clean energy bill up the flagpole

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"Graham, Kerry, Lieberman almost ready to run their bipartisan climate and clean energy bill up the flagpole"

But will 60 Senators salute?

UPDATE:  Since many commenters seem confused about my position on cap-and-dividend (CAD) and the Cantwell-Collins (C-C) version of CAD, I elaborate below.

http://blog.nj.com/hobokennow_impact/2008/07/large_balloonofftheground.JPG

Senators to propose abandoning cap-and-trade

Three key senators are engaged in a radical behind-the-scenes overhaul of climate legislation, preparing to jettison the broad “cap-and-trade” approach that has defined the legislative debate for close to a decade.

That’s the lead WashPost story today.  My sources say the final proposal is not fully baked, so this scoop is closer to a “leaked” trial balloon [shaped like a flag, of course, to put all my metaphors in the mixing bowl].  Indeed it’s not even clear whether Graham, Kerry, Lieberman will float a final bill or something closer to a discussion draft.

Frankly, I’m not sure they have the winning proposal yet, but here’s what’s out there:

According to several sources familiar with the process, the lawmakers are looking at cutting the nation’s greenhouse gas output by targeting, in separate ways, three major sources of emissions: electric utilities, transportation and industry.

Power plants would face an overall cap on emissions that would become more stringent over time; motor fuel may be subject to a carbon tax whose proceeds could help electrify the U.S. transportation sector; and industrial facilities would be exempted from a cap on emissions for several years before it is phased in. The legislation would also expand domestic oil and gas drilling offshore and would provide federal assistance for constructing nuclear power plants and carbon sequestration and storage projects at coal-fired utilities.

“This is a different bill,” Lieberman said in an interview. “We haven’t abandoned the market-based idea, but we’re willing to negotiate with colleagues who have different ideas.”

My sources say that what they’re proposing isn’t actually a carbon tax on gasoline, nor is it the original cap-and-trade proposal, but something in between.  Since the notion is complex and confusing — and no final decisions have been made — I won’t try to explain it fully here.

Basically, refiners (the kissing cousins of Big Oil) don’t want to have to buy all the allowances for their refined products, even though they can pass almost all of those costs onto consumers.  They want the government to pass the costs on directly and leave them out of it.  The refiners say they can’t pass 100% of the costs on and don’t want to be blamed by consumers for higher prices.  One can sort of understand that, but in fact it makes little difference.  While some oil companies may support this approach, my guess/fear is ExxonMobil/API will simply attack the new bill as a gasoline tax — indeed, that may be their plan.

While Obama has continued to assert the need for any climate bill to raise the price of carbon-based fuels, the American Petroleum Institute has been running television ads during the Winter Olympics saying “Americans say no to raising energy taxes.”

In any case, it’s still an uphill battle for the bill:

Many lawmakers and lobbyists say even a radically different climate bill would face big hurdles to passage, given conflicting corporate and consumer interests, regional divides and a crowded Senate calendar. Energy industry lobbyists have turned much of their attention to proposing numerous variations of more narrow energy legislation….

Environmental advocates, eager to pass comprehensive climate and energy legislation before the November midterm elections, said the shift in strategy represents the best shot at getting something done this year.

“The Senate is understanding this is not a simple problem — it’s multiple problems, and it requires multiple solutions,” said Carl Pope, executive director of the Sierra Club.

The change in policy, which might even include giving money raised through carbon pollution allowances directly back to consumers, a scheme known as “cap-and-dividend,” could appeal to some wavering senators. Senior Obama administration officials have also been studying the cap-and-dividend approach. But it remains unclear whether that would be enough to produce the 60 votes proponents need, especially when the Senate has yet to finish work on health-care legislation and a jobs package.

Cap and dividend as currently constructed is neither politically nor environmentally viable, as I’ve noted.  The only reason that isn’t obvious to everyone is that few big players in the debate took it seriously enough to look closely at it until recently.

Powerful business leaders have their own priorities. Michael Morris, chief executive of American Electric Power, a heavily coal-based utility, said one much-discussed proposal for a cap-and-trade plan limited to utilities was “ridiculous” because it would place an unfair burden on coal-based utilities. He added that “cap-and-dividend would be equally inappropriate.” He said it would take money from “mom in the Midwest and dividend it to Paris Hilton.”

The lack of regional equity is one of the political Achilles heels of that approach, though that would be far less true if you refunded just the portion of the money generated by the carbon price on gasoline — hence some of the interest in that approach.

UPDATE:   People seem confused about my position on cap-and-dividend (CAD) and the Cantwell-Collins (C-C) version of CAD, so let me elaborate.   If C-C  were written in a way that its enforceable mandatory 2020 target was  anywhere near close enough to the 17%  reduction Obama promised before Copenhagen, I  would have a different view of it — and its political untenability would be less … salient here.  Waxman-Markey, for all its faults, passed the House, a staggering achievement.  If not for the filibuster rule, we’d probably have health care and a climate bill by now.

I have talked to major players in the House and there is no chance C-C could pass it.  Indeed,  I doubt it could get many more than 2 votes in the Senate.  Fundamentally, C-C is a cap plus trading, so I’m  not certain how anyone’s statement “cap and trade is dead”  would not apply to C-C.  But since C-C can’t enable a global climate deal, it’s hard to imagine why anyone would want to spend a lot of effort finding out whether it could get, say, 10 votes in the Senate.  C-C really does a disservice to the idea of CAD, since its 2020 target is too weak, it’s floor price is too low, and it has a pure safety valve.  Hard for me to get excited about that, even if it had meaningful political support in both houses, which it most certainly does not.

Even some moderate Republicans, seen as possible supporters of a new climate bill, remain opposed to the idea of putting a price on carbon, which Lieberman still calls “sine qua non,” or an essential ingredient, of any such bill. Andy Fisher, a spokesman for Sen. Richard G. Lugar (R-Ind.), said the senator, who has opposed cap-and-trade and carbon taxes, could support pricing carbon “potentially at some point, but not at the moment.”

Senate Majority Leader Harry M. Reid (D-Nev.) told Kerry this week that he and his colleagues need to produce a bill as soon as possible to have any chance of passage in 2010. Jim Manley, Reid’s spokesman, said it is the majority leader’s “hope to bring it up to the floor for a vote,” adding, “But we’ve got a whole host of other things on our plate, and a Republican Party that’s making it difficult for us to pass all but the most routine legislation.”

Kerry said that although the package the three senators will unveil will not have 60 votes when it becomes public, he is confident that it will win over skeptical lawmakers.

“What people need to understand about this bill is this really is a jobs bill, an economic transformation for America, an energy independence bill and a health/pollution-reduction bill that has enormous benefits for the country,” Kerry said.

I’m not sure they have the winning proposal yet — the set of ideas needed to get 60 votes for a bill that sets a shrinking cap and rising price to achieve true domestic reductions, jumpstart the clean energy economy, move toward energy independence and enable a global climate deal, while harnessing the power of the marketplace to set the price and promote innovation.    The president understands that is the bottom line:

But President Obama has continued to push for broad legislation that he says would make the U.S. economy more efficient, slow climate change and fulfill U.S. pledges in international climate talks in December to cut the country’s emissions by 17 percent by 2020. A U.S. failure to fulfill that commitment could undercut the determination of other nations to live up to their pledges.

It may be that nothing can get the 60 votes in this political climate (see “The central question for 2010: Will anti-science ideologues be able to kill the bipartisan climate and clean energy jobs bill?“).  But it’s quite clear that all roads to 60 go through the White House — and that the President will not be engaging personally on this bill until we are far closer to the end of healthcare reform (which has been true for months and months and months).

It is certainly one of the great political blunders of our time that the more important (and more politically popular) bill on clean energy and climate has had its fortunes held hostage to — and undermined by — the overall incompetence of the effort to pass health care reform.

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32 Responses to Graham, Kerry, Lieberman almost ready to run their bipartisan climate and clean energy bill up the flagpole

  1. I think there are some benefits to the Cap and Dividend: that is is easy to persuade consumers/voters of its solution to what the public has been led to believe will be expensive. And that only regulated (capped) utilities will engage in trade. (Not “Wall St bigwigs”, and gasp! Horror!!! “Al Gore!!”…sigh…)

    But it has not been scored by the CBO, unlike, S1462 (energy only bill: Failed CBO score) and CEJAPA (Huge success! Creates $800 billion for renewable energy funding by 2020 and doesn’t hurt the consumer/voter – rather it harnesses fees on polluters.)

    And WRI says it doesn’t pull down carbon as fast as CEJAPA. Given that CEJAPA has passed the House (as Waxman-Markey) and it works best, and Rs vote against ecverything anyway) why not put CEJAPA up for a vote, maybe when there are a few absent Rs? You only need a few people to miss a vote. We really are close.

    I also think that PayGo passage last week helped end the magical thinking about the Energy Only bill, thank goodness:
    http://cleantechnica.com/2010/02/26/return-to-paygo-rule-kills-dirty-energy-bill/

  2. Jeff Huggins says:

    A Price on Global Warming Emissions, One Way or Another

    We need either one, or both, of two things:

    — An approach that will assign (or result in) a price to global warming emissions (or the products that cause them) in one way or another. This could include a cap-and-trade approach, a carbon tax, or whatever.

    — A direct legal restriction on the amount of such emissions.

    Any good and honest economist will tell you that the marketplace will not act diligently and effectively to reduce global warming emissions on a large scale unless there is a cost associated with such emissions (or the products that generate them).

    I just “can’t wait to hear” what these folks are coming up with. I hope it makes sense and is not watered-down. I hope it could pass a basic class in economics. If it somehow includes neither a cap-and-trade approach, or a carbon tax, or another mechanism to result in a “motivating” price for carbon across the economy, then I think it should probably be thrown in the junk heap.

    Keeping my fingers crossed in hope!

    Jeff

  3. Chris Dudley says:

    We don’t need a price on carbon, we need a limit on emissions. Price may be a consequence but it is not the main goal. We already have a policy in place that we could use to limit gasoline use equitably called the Standby Gasoline Rationing Plan that congress has already approved. It has what is called a White Market in rations where people who don’t use up their ration can sell it to their neighbor. That puts a price on rations but not carbon which is merely limited at the source. It is doubtful that emissions from gasoline will ever be captured for sequestration so limiting carbon limits emissions in this case.

    Rather than treating sectors separately, it makes more sense to treat fuels differently. Rationing gasoline, shutting down coal plants and encouraging natural gas seems like a simpler more effective approach that breaking things up along transportation, generation and industry lines.

  4. fj2 says:

    In total agreement with Earth Policy Institute’s Lester R. Brown action on the climate crisis is not a question of political reality but, dire scientific reality and it is long overdue that we advance beyond tribal warfare, timidity, trepidation and bizarre economic discussions, and attempt to limit the unprecedented devastation of the emergency that is rapidly unfolding around us.

  5. Robert says:

    OT question about an old post, hope you’ll forgive the distraction. In 2008 you wrote up a list of amplifying feedbacks:

    * The defrosting of the permafrost
    * The drying of the Northern peatlands (bogs, moors, and mires).
    * The destruction of the tropical wetlands
    * Decelerating growth in tropical forest trees — thanks to accelerating carbon dioxide
    * Wildfires and Climate-Driven forest destruction by pests
    * The desertification-global warming feedback
    * The saturation of the ocean carbon sink

    I wonder, given the frail nature of the Arctic ice, where change in albedo secondary to the loss of summer ice ice would rank on this list. Do you think that it is a significant amplifying feedback?

    [JR: “change in albedo” is a fast feedback already in the big models.]

  6. Zach H says:

    I can’t help but see some irony in this, that the Republicans are trying to take the market-based provisions out of the bill when all they seem to spout is how we need to let the free market dictate how we get to the solution. I’m incredibly disappointed at the lack of ability to get something done, and I fear the consequences of the do-nothing republican stance on everything.

    Wasn’t 2010 supposed to result in a better climate bill than what we would have passed in 2009?

  7. Leif says:

    Keep it simple!
    Make it work!

    Is that so hard?

    Humanity First, Status Quo, NO!

    Gray Panther…

    Fist held high…

  8. SecularAnimist says:

    I cannot express how depressing this is.

    It seems that the BEST we can hope for — and even this is still far from assured — is a bill that will not be particularly effective at reducing emissions because it will put corporate profits ahead of reductions, and will squander vast public resources on what is essentially the McCain/Palin “energy plan” from 2008: expanding offshore oil drilling (good god, I can’t believe we are even discussing that in 2010!), the nuclear boondoggle and the “clean coal” hoax.

    And the stated emissions targets of these proposals are already known to be FAR from what science tells us are needed, if we are to have any hope of avoiding the most catastrophic outcomes of AGW.

    On both climate/energy and health care reform, the House has passed bills that are really quite good at addressing the problems. But in the Senate, corporate power reigns supreme, and to the corporate-stooge “moderate” Democrats and their fellow Republicans, the House bills are “off the table”, and it is all about protecting the wealth and power of the wealthy and powerful against the best interests of the American people.

    One small suggestion.

    The obstructionist legislators commonly called “coal state Democrats” should be called “coal corporation Democrats”.

  9. UnReal2r says:

    The simplest, most direct, approach is to make fossil fuels illegal. Phase them out over 5 to 10 years. The energy companies will either adapt and evolve, or go extinct. But the market for alternatives will expand exponentially. The government can facilitate the market shift by extending the patent protections on new energy technologies – and redirecting the direct and indirect subsidies currently enjoyed by fossil producers towards alternatives.

  10. Ken Johnson says:

    Whatever the political rationale for cap-and-dividend, why wouldn’t tax-and-dividend have the same appeal? A tax would eliminate price uncertainty and market volatility; and although a tax lacks the “environmental certainty” of a cap, that means emission reductions could potentially be much greater — not necessarily less — than expected.

    The problem with dividend schemes is that they impose high costs on industry, but does effective policy need to be costly? Suppose that a $100-per-ton carbon price is applied to electricity. That would mean coal-generated energy would cost about 10 cents per kWh more than renewable energy. But that doesn’t require imposition of a 10-cent-per-kWh carbon fee to coal power; the same result could be achieved by applying a 10-cent-per-kWh subsidy to renewables. Alternatively, a revenue-neutral combination of fees and subsidies could be used. If subsidies are focused on new sources (as in a feed-in-tariff), then fees would initially be zero (because there would be no “new” sources at the outset). So a high price incentive does not imply high costs.

    What would be the impact of an immediate $100-per-ton price incentive in the electricity sector?

    In the case of transportation policy, there should be no need for carbon pricing because fuel savings already create an incentive on the order of $300 per ton-CO2 for reducing fuel consumption. What is needed is effective financing mechanisms, which would make fuel savings visible in upfront vehicle prices. Buyers of fuel-efficient vehicles would qualify for financing that would, in effect, be paid back out of fuel savings; and buyers of gas guzzlers would, in effect, be making loans to themselves to cover a portion of their vehicles’ lifecycle fuel consumption.

    What would be the impact of a $300-per-ton price incentive applied to transportation vehicles?

    See the recent letter from the Western Environmental Law Center to Senate leaders, recommending “a focus on pragmatism [to] help bridge political divides and forge a bipartisan consensus”.

  11. Jeff Huggins says:

    Let’s Be Clear

    Two points …

    If anyone thinks that ExxonMobil (and some others) would not recommend one approach from one side of their mouths only so they can complain about it and shoot it down from the other side of their mouths, such a person hasn’t been paying attention and understands very little about ExxonMobil.

    To be clear: Some companies may “insist” on a carbon tax in their lobbying or discussions with politicians, to be administered directly by the government, so that they can avoid the need to pay the price themselves and pass it on to consumers, MAINLY IN ORDER TO complain about a carbon tax and “government involvement” directly to the public, in order to shoot down the whole thing, water it down, or place the blame on politicians rather than on the fact that the products those companies produce and market are messing up the climate.

    And how silly and ridiculous and hypocritical and illogical can you get? I mean really? A full understanding of economics and the “free market” and so forth says that if you’re going to make and sell a product, and if all factors are to be considered so that the marketplace can do its thing, fairly, then you need to consider all the costs of your product (including those associated with any ways that your product creates repercussions and messes up the environment).

    The oil companies want to use public land for drilling. They want tax breaks. They want protection. They draw us into military conflict with other countries in order to protect and achieve stability in far-away places — mainly (from their standpoint) for the purposes of oil. They want this and that and the kitchen sink too. And they SAY that they want the free marketplace to work, that they understand economics, and that they are scientifically minded. Then, when it turns out that their products harm the environment, on a large scale, and that it’s necessary to REFLECT THAT in the price of the products, they all-of-a-sudden want the government to do the hard part. Where is that “toughness” that the oil industry likes to project??

    I can say this with some credibility, I think — and I really should be using harsher words, but if I did, my comment would probably not get printed. I was a chemical engineer and worked in the oil industry. I’ve had offers from Chevron (which I took, way back then) and from Shell and from Exxon, who was just “Exxon” back then, before the Mobil acquisition. And I was a Baker Scholar at Harvard Business School and a McKinsey consultant. I’m sorry to say those things — I mean, I’m not trying to toot my own horn — but I’m just trying to convey that the public (and politicians) should not be taking such “BS” from folks like ExxonMobil and the API. Period. End of story. Hydrocarbons in gasoline generate immense amounts of carbon dioxide when the gasoline is used. Science shows that that is bad for the climate and must be addressed. The companies that provide those products — and that insist on providing them — and that insist that we’ll still need them — should be charged every penny of the costs that should be reflected in the prices of those products, period. They should not be allowed to run behind momma’s skirt — or the government.

    I mean, really. What are the mainstream media going to do with this? Sit around on their hands? Am I to understand it correctly that ExxonMobil and the API and etc. would favor the government charging a price or tax in some way so that they don’t have to get involved. Well then, here’s what I favor: The elimination of ALL tax subsidies to the oil industry; the raising of lease rates when the oil industry wants to use public lands for drilling; and the need for the oil industry to pay for any military activity that they deem to be necessary to protect U.S. oil interests overseas.

    Politicians, get some guts.

    Cheers,

    Jeff

  12. If Maria Cantwell’s simpler more transparent cap is really the only cap left in the game, how is it useful to continue pushing message that it’s not viable?

    [JR: Because it isn’t. It’s never been in the game.]

    Solves many political problems, and the one you cite as major is quite minor compared to the political problems it solves: energy ‘tax'; toxic derivatives in carbon; free permits worth hundred of millions for the whining polluter in the WaPo story who complains that Cantwell’s bill helps Paris Hilton.

    [JR: Uhh, it’s still as much an energy “tax” as the House bill. The derivatives can easily be removed from any bill. Whether the “free permits” are a political problem or a solution remain to be seen.

    But the House Bill was slammed for a tiny amount of regional inequity. Cap and dividend has a vast amount. Plus it has essentially no mandated reductions by 2020!]

    Many resources on her site, cantwell.senate.gov/issues/CLEARAct.cfm

    What others are saying about her approach: supportclearact.com/what-people-are-saying-about-clear-act

  13. I’d be willing to bet that a Paris Hilton lifestyle uses enough energy that she’d be walloped by cap and dividend, and that the average Ohio mom would come out ahead. Someone else will have the numbers, but this doesn’t strike me as an unanswerable sally.

    [JR: CAD would get few if any Midwestern or Southern votes once folks understand it. Sorry. And it’s MUCH harder on businesses, since they don’t get the dividend. Politically, the public already supports the bill and have for a long time, so I don’t see what CAD gets you there. It’s energy-intensive businesses that hate CAD, and I’m afraid they drive the process more than the public. If public support mattered, we’d have passed a bill a long time ago!]

  14. Fire Mountain says:

    The deniers and disinformers fight a moderate correction to a failure in the market economy, the failure to capture in market prices the cost of climate change. The correction is intended to tip the market toward low-carbon solutions and innovation. This is about reforming capitalism, not ending it. The other side should consider what will happen if they successfully block this action and in a few years the full extent of global climate catastrophe becomes evident. The whipsaw will be in full effect, and the mood will not be moderate. More like the angered mob with pitchforks and torches. Those who wish to preserve capitalism should take note.

  15. prokaryote says:

    “The simplest, most direct, approach is to make fossil fuels illegal. Phase them out over 5 to 10 years. ”

    Make positive carbon emissions illegal.

    Bio-energy with carbon capture and storage (BECCS) is a greenhouse gas mitigation technology which produces negative carbon emissions by combining biomass use with carbon capture and storage.[1] It was pointed out in the IPCC Fourth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC) as a key technology for reaching low carbon dioxide atmospheric concentration targets.[2] The negative emissions that can be produced by BECCS has been estimated by the Royal Society to be equivalent to a 50 to 150 ppm decrease in global atmospheric carbon dioxide concentrations.[3]

    The concept of BECCS is drawn from the integration of biomass processing industries or biomass fuelled power plants with carbon capture and storage. BECCS is a form of bio-energy with carbon storage(BECS). BECS also includes other technologies such as biochar and biomass burial.
    http://en.wikipedia.org/wiki/Bio-energy_with_carbon_capture_and_storage

  16. David Smith says:

    One lesson that should have been learned by now is that if you produce legislation that is to complicated to be understood by a person of average intelligence and can be communicated on say 50 pages or less, it will be picked to death intil there is little meaningful left in it.

    I propose that every single unit of energy, or gallon of fuel or cord of firewood that through its creation or use produces emissions should be taxed based on the amount of emissions produced in each case. Every one pays the tax, every person, every company, every corporation, (since they are people too).

    Energy produced by means that do not produce emissions do not pay the tax. Personally I think Nuclear energy producers should pay something because they are creating waste that no one seems to have a clue about what to do with it permanently, but I guess that is a different issue. Right now, dirty energy is used by companies to produce wind turbines and PV technology. They pay also.

    If you use dirty energy or burn stuff, you should pay the price. The point is to stop the behavior that may well be killing us. If the market for dirty energy dried up, they would just stop producing.

    Legislation of this sort could probably be written on 2 pages. The only thing that any one could argue was that for some reason they should be excluded because they are special. not.

  17. sasparilla says:

    What can one say…this is extremely disappointing news. Now we’re having to abandon that not nearly good enough Senate bill for one that starts dividing things up into pieces (where the lobbyists for those little areas can have an even greater influence on the legislation that is written – to make it meaningless of course). The term divide and conquer comes to mind.

    What could be better for our Coal Industry (the largest part of the power generation sector by far $$$) than to have power generation handled separately where they can really affect things (since they can really throw around the $$$, same for transportation and manufacturing – and the advertising from those groups is already starting (just watch the commercials on the Olympics).

    It seems like we’ve watched our chance to actually fix this (before its too late) just melt away in front of our eyes over the last year. My gut is saying “we’ve blown our chance” when I read this.

    I sure hope that feeling is wrong.

  18. Leif says:

    If the Senate fails to enact meaningful reforms, then I fear I see only two roads out. I believe that the Military is expected to defend the Nation from all viable harmful threats from outside our boarders but from within as well. The evidence is clear, to all but a delusional few, that AGW, global climatic disruption, and related life-support system collapse qualifies on every level for Military involvement. At this point, it may take the military to keep the Tin-hats in check. One of the Militaries’ agenda is to keep themselves funded and relevant. You got to love saving the Nation, but saving the human race as an aside, what a rush. All they have to do is transpose from a “Killing Machine” to a Benevolent Organization. They have adapted to women, G & Ls, surely “nice” is not too big a stretch. They could even do it kind of slow, (not too slow or we are toast) 1/3 this year, 1/3 next and they could keep a third in the “Killing Mode” for old time sake. (Still about three times larger than China defense budget.)

    That would even get the support of this life long Pacifist. Business loves a war posture, the GOP love it, hell people even love it if no one is getting killed. Who is left?

    I forgot the second road.

  19. Ronald says:

    Maybe Cap and Trade is dead. But Tax and Dividend would be bad also, as explained in this article. Tax and Dividend could also be described as “the China full employment program” since it would be taxing United States businesses and giving money back to people that could be easily then spend money in heavy import related industries (Walmart.)

    A way to do it better is to tax an import related industry to support a domestic one.

    Remember the saying, “don’t tax you, don’t tax me, tax the guy behind the tree.” There’s a way to do that.

    There are about 100 million households in the Unided States.

    The U.S. uses about 150 billion gallons of gasoline a year.

    Put on a tax of 67 cents a gallon on Gasoline in exchange for reducing every households residential property tax by 1,000 dollars.
    (100 million householdes x 1,000 dollars= 100 billion dollars)
    (0.67 dollars/gal. x 150 billion gallons= 100 billion dollars)

    The U.S. uses more than 7 billion barrels of oil a year, of which some 4 billion barrels are imported. During the highest import years (about 2007) the U.S. had a trade deficit of 800 billion dollars. We now (2010) have a trade deficit of 500 billion dollars.

    Oil at 80 dollars a barrel and we import 4 billion a year adds about 320 billion to the trade deficit alone.

    So trading taxes by taxing carbon fuels and especially imported carbon fuels more and taxing what is already in the U.S. less will help our trade deficit and our general economy. So we will buy less of the imported carbon fuel and make our house costs less.

    To make it easier for some states to sign on, what a state pays out in gasoline taxes, they get back in their states property tax reduction. Also those states with car and vehicle sales taxes and parts and repair sales taxes would be asked to drop those to make multiple vehicle families that live under one roof would be hurt more. Sell this that everybody in your community gets a tax break, you do, the house next door, the house 2 houses down, etc. Put some of the money into government run homeless shelters, etc.

    What people are sick of is a government that takes, takes, takes.

    That’s what the Cap and Trade system was going to be doing. It was going to carbon tax everybody, then swerl that money into some blackbox of special politically connected and economically connected elites that would determine where that money would go. And somehow that system was supposed to be accepted?

    Make it so people can at least understand how the money is going to be used and where it is going to be going.

  20. Ben Lieberman says:

    There is also a trade component that has barely been mentioned: how long are countries that adopt emissions caps going to accept the current trading regime with countries that do not adopt emissions caps? The same question could also be posed about consumers.

  21. Andy says:

    Exxon, Pickens, Schlumberger, etc. all of the big oil folks know that global warming is real and will eventually cause us to ditch coal and tar sands oil (at least) and seek energy elsewhere. That’s why they are all doing whatever they can to increase their holdings of natural gas deposits, ability to exploit gas (drilling technology), and natural gas transmission capacity.

    http://www.chron.com/disp/story.mpl/headline/biz/6884291.html

    http://www.chron.com/disp/story.mpl/headline/biz/6880246.html

    They will fight global warming legislation because it takes away a tiny bit of their power. Unfortunately, they are gambling with nothing less than the planet Earth. Just as Wall Street didn’t know the depth of their folly and so led us into a recession that may yet become a global depression; Big Energy doesn’t know how close we are to tipping the Earth into disaster.

    And they also miscalculate. They assume that just as Wall Street (think Goldman Sach’s recent profits) is for the most part immune to our financial woes, they will be immune to possible calamity on Earth. They miscalculate on many levels.

  22. Peter Barnes says:

    Joe:
    You keep perpetuating the myth that cap and dividend would take money from “mom in the Midwest and dividend it to Paris Hilton.” Where are your numbers to prove that? The studies I’ve seen show that to be a big fat fib, perpetrated by the very companies you approvingly quote.

    [JR: No myth. A $30/ton CO2 price would raise gasoline prices by $0.25 cents, gas-fired power generation by 1 cent/kwh and coal power up 3 c/kwh. In short, a CO2 price hits coal electricity users harder than anyone else. That’s just reality. If you are in an area that gets most of its power from coal, you’re going to be hit disproportionately hard — and that money is going to go back to people in states with low-CO2 electricity. Sure, you can throw in the gasoline and other stuff to make that reality seem relatively smaller, but it is what it is.]

    The best analysis of state-by-state costs and benefits from cap-and-dividend is this one by James Boyce and Matt Riddle: http://cantwell.senate.gov/issues/State%20by%20State%20–%20Boyce%20and%20Riddle.pdf. It shows that Paris Hiltons in all 50 states — that is, people with high-polluting life styles — would lose money under cap-and-dividend, while working moms and dads with average and low-polluting life styles would come out ahead IN ALL 50 STATES. Nationwide, over three-quarters of Americans would gain, while only the most polluting households would lose (as they should). In other words, wealth redistribution under cap-and-dividend is from high-polluting households such as Paris Hilton’s to everyone else in every state. If you’ve got numbers that show otherwise, let’s see them.

    Of course, companies will always claim they can’t pass through 100% of their higher carbon costs to consumers. Pity them! In some cases they may only be able to pass through 90%. If so, that might just spur them to invest in conservation and efficiency. Why, then, should government bend over backwards — that is, take money from middle-class families — not merely to hold these companies harmless, but to reward them with extra profits?

    By contrast, there’s NO WAY ordinary families can pass through their higher carbon costs — not even 10 percent of them. There’s no one else to pass them TO. Ordinary families are the people higher carbon prices really hurt. That’s why cap-and-dividend protects THEM, rather than polluting companies.

    The reason the CEO of American Electric Power dislikes cap-and-dividend — as I’m sure you know — is not because it sends money to Paris Hilton, but because it provides no free allocations to his company. If you’re going to quote the fellow, at least remind your readers of his economic self-interest.

    [JR: I’ve reposted many leading economists conclusions — and talked to many PUC officials — who explain free allocations to local utilities are going to end up in the hand of businesses and consumers, WITH regional equity.]

    Finally, I find it distressing that you would use this utility propagated-lie to dismiss what may be our last chance to establish an economy-wide price on carbon. If cap-and-trade is politically dead, why not try some version of cap-and-dividend? You might be surprised at the support it would get if you and other enviros stopped echoing powerful polluters and stood up for middle-class families.

    [JR: Gimme a break. Cap-and-dividend is a cap with trading. Great rebranding, but it’s still cap and trade!]

  23. norm says:

    Nice photo of Barry and Terri Dilibero’s flag balloon!

    AKA VOC and Abner of Free Republic fame.

    Expect visitors.

  24. Jerry says:

    Joe,

    Sorry to see you continue to rail against any solution not perfectly in line with your preferred approach. [snip]

    [JR: You are confused, but I can’t let you attack a misstatement of my position. I support any “solution” that is politically feasible and strong enough to enable a global climate deal. Cantwell-Collins is neither. CAD could be the latter, in which case, I wouldn’t “rail against” it, I’d just point out it is not “politically feasible” (until someone tables a very different version). But C-C really is a very poor CAD, since as written, it does very little through 2020 and would most likely kill a global deal.]

  25. Jeff Huggins says:

    Rock-Solid Analysis and Reasoning??

    Before I make the following comment, I must admit that I haven’t done detailed analysis regarding the following point …

    But, intuitively and conceptually speaking, “for the life of me”, I can’t see why an excellently designed cap-and-dividend approach — taking into account all the matters mentioned in the Barnes book — would not make the most sense?

    Here, I’m not talking about any specific cap-and-dividend approach, because I’m not familiar with any specific one, so any “specific” one that someone mentions may not be all that well-designed. BUT, conceptually speaking, it seems to me that a well-designed one could be the best way to go.

    And, I’m “skeptical” about using arguments about what is politically feasible before even figuring out what would work best or wouldn’t work best, aside from assumptions about political feasibility.

    So, without having time to get into the details and do the analyses myself, I do hope that folks who are against even a well-designed cap-and-dividend approach have done genuinely rock-solid analysis, based on rock-solid facts, without making any poor assumptions. The stakes are too high. A mis-assessment regarding policy evaluations and comparisons could be just as harmful as the mis-assessments that denialists make in diminishing the climate change problem in the first place.

    I wish I could spend more time on this particular matter — i.e., evaluating the policy options — but I can’t. Only so much time in the day. But, I’d appeal to those who don’t like a cap-and-dividend approach to consider a genuinely well-designed one, cross-check your past assumptions, don’t believe anything that anyone says, and do a rock-solid assessment of the matter.

    Cheers,

    Jeff

  26. fj2 says:

    Effective action should not be a marketing solution or an attempt at a politically expedient solution.

    It must be a solution to solve the state of emergency caused by climate change.

    This is what any discussions must be about: The horrors that will happen if we do not act immediately with extreme determination. This is a life and death issue on unprecedented scale.

    Anything less diminishes the importance of this truly grave emergency.

    Al Gore is not speaking on this level and it is a big mistake.

  27. William T says:

    To paraphrase a famous saying, “It’s the Overtone Window, stupid”. Don’t chuck the extreme options on the “pro-action” side…

  28. Sam says:

    Joe,

    Which “major players” have you talked to in the House? Anyone willing to go on record? I’d love to know which members are more interested in giving away free allocations to big polluters vs. returning the money to taxpayers. Why offer them anonymity?

    Based on my understanding of the reconciliation process, it seems that a Cap & Dividend or even Carbon Tax could be passed through reconciliation. It’s doubtful that any climate bill can muster 60 votes in this atmosphere–have you looked into what types of policies could be passed through reconciliation?

    [JR: Uhh, they aren’t “more interested” — it ain’t the bill they would write. Seriously people do you think that the two people who have delivered more environmental legislation than just about anybody else in the past quarter-century — Waxman and Markey — really did what they did because that was their preference as opposed to what they knew was needed to (barely) get the bill through the House!]

  29. Sam says:

    You know that the Cap & Trade policy paradigm was set a decade ago. The strategy (quite simply) was to gain the support of the big utilities and industries by buying them off with free allocations & offsets. It’s a system that makes perfect sense when you’re a Congressman negotiating with environmental groups & utilities–and there’s no hope of passing a bill. Everybody in the room likes the idea. It got through the House on momentum, huge Dem majorities and before most of the other interests started paying attention.

    It doesn’t work when everyone else figures out there’s an actual chance of passing a bill. Then what happens is all the other interests start paying attention–big companies leave USCAP, AARP voices misgivings and everyone else tries to get theirs but there’s nothing left to give…

    And that’s when the Senate realizes they can’t pass a bill.

  30. kenshin says:

    i don’t know who commented about Exxon not proposing something just to diss it, but that would be one of the wins in their win-win situation. the idea would be to split up environmentalists on mechanisms to control CO2 emissions, therefore keeping anything from passing. that is what happened in Australia, where Exxon lobbyied for a carbon tax, and managed to split up enough politicians to keep legislation from happening.

    the other possibility is also a win, as the author of this blog is pointing out, and perhaps was missed. they still win by having more of the government subsidize their industry. juuust in case this bill gets support and it does pass, they still win. in other words, the oil industry would be compromising this new bill, the way the coal industry compromised Waxman-Markey’s.

    being the geeky bureaucratic-loving nerd, i’d pay attn to which AGENCY the bill is managed by. our guys in charge of commodities would be pretty good for managing a cap and trade program. on the other hand, other agencies could be too easily compromised, esp by a future administration. a tax on motor fuel? remember that when gasoline was at $4.00 a gallon, the first thing out of everyone’s mouths was to waive their magic wand and abolish the gasoline tax. how easy would it be to do that in a new bill? depends on the agency who has jurisdiction over its implementation.

    i’d also look out for provisions asking for increased money for folks using oil heat in the northeast. also a real cheat for big oil. we should push for incentives for folks to get off of oil heat instead, like cash for clunkers program, cuz that’s what it is.

  31. BT Turner says:

    Wow, this C-C bill is so half-baked. The “CAD State-by-State Analysis” paper is a lot of propaganda, and poorly done at that. Come on people, you do actually have to come up with good answers you know, not just assertion and deflection.
    For instance, their argument against the regional redistribution effect is simply that it is “less than the redistribution among income quintiles or the regional redistribution in the farm program.” That’s supposed to be able to overcome the objection to the regional disparities? Come on! According to Figure A in that “state-by-state” report, the median family in Indiana, Ohio, Wisconsin, etc, will be 3-4 times WORSE OFF than those darn greenies in CA, OR, and WA. How do you overcome that? The map in Figure A clearly shows “winners” all along the West Coast, southwest, and Northeast, and relative “losers” throughout the Midwest, Appalachia, and Southeast. And that’s even before figuring in the regional employment impact disparities (e.g. coal mining and industry will probably be hit worse than say agriculture, tourism, finance and knowledge industries). Sounds like a little political problem there.
    Then there’s the defense of the trading prohibitions in C-C. This report explains them away like this, “With 100% auction, there is no need for permit trading. Auctions can be held monthly or quarterly, with the number of permits on offer being reduced gradually as the carbon cap tightens over time. The permit allows its holder to bring a
    fixed quantity of fossil carbon into the economy in a certain time frame, say over a two-year period from the date of purchase. Firms simply buy the number of permits they want at the auction.
    Most permits in our society are not tradable. Driving permits, gun permits, parking permits, landfill disposal permits, and building permits cannot be traded in markets. There is no reason why carbon permits should be different.”
    Really? Parking permits aren’t tradeable so why should carbon permits? Setting aside that almost any economist would point out that actually we’d all be better off if parking permits were tradeable, this “argument” is ridiculous. There are very good reasons why we need carbon trading and making the false allusion to other permits doesn’t make them go away. Perhaps the authors haven’t heard that big energy and industrial firms like to manage their price risks over time? Or that a deeper and more liquid market is likely to result in lower costs? That allowing entrepreneurs to bet that they’ve invented a better way to reduce emissions is a very effective way to accelerate new technology? In fact, without trading, you are more likely to create a system with a) more volatile prices, b) less transparency, c) more opportunity for market manipulation, d) less innovation. It would be nice if the C-C proponents actually addressed these issues.
    Finally, one more howler. Under the “Mechanics of Cap-and-Dividend” the paper offers this very well-thought out mechanism: “One way to disburse dividends is via ATM cards, similar to those used today by many Americans to access Social Security payments. At the ATM, individuals can check on the auction revenue deposited into their accounts and withdraw funds at their convenience.” Has anybody even given this any thought? Turns out, distributing these payments to 307 million individuals might be just a little more complicated than this would suggest. In fact, it might involve a level of bureaucracy and loss of privacy that Americans might not be comfortable with. At any rate, it would be expensive and complex, and the advocates are not doing anyone any favors by pretending otherwise.
    Kind of like the whole cap-and-dividend debate.

  32. drt says:

    Does there exist somewhere a side by side, point by point, feature by feature comparison of Cap&Trade, CC, cap and dividend, fee and dividend, whatever other schemes there are…? It would sure be useful to have a chart-like presentation to help illuminate the pros and cons of the various proposals.