Say It Ain’t So, Joe

“It’s no secret that I’m a skeptic. I don’t—I don’t believe that mankind is the primary cause of climate change. I do accept that CO2 levels are rising. I think it’s a debatable proposition whether that’s a good thing or a bad thing. But, in any event, to put some sort of blind faith in a cap and trade system that hasn’t worked anywhere in the world in terms of CO2, won’t work here in the United States—and if we take it to the level that the draft bill that Mr. Waxman and Mr. Markey have put out, it will de-industrialize the United States of America in the next forty years. I’m not going to be a part of that. I’m just not going to do it.” 

—Texas Congressman Joe Barton
April 23, 2009

REMEMBER MAY OF 2001? Dick Cheney was in charge of an energy task force working behind a veil of absolute secrecy, and Henry Waxman was the ranking minority member of the House Committee on Oversight and Government Reform.

Waxman (D-CA) sent Cheney a request for the names of lobbyists meeting with his National Energy Policy Development Group. When Cheney’s legal counsel informed the congressman that the information was protected by executive privilege, Waxman took his case to the comptroller of the United States. And for the first time in its history, the Government Accountability Office sued a vice president. Comptroller David Walker lost the case in district court and didn’t appeal. An adverse ruling at the appellate level would have made it even more difficult for a member of Congress to obtain information from the president or vice president.

A Freedom of Information Act lawsuit that the National Resources Defense Council (NRDC) filed against other executive branch departments working on energy policy confirmed Waxman’s suspicions. Dick Cheney had oil, gas, and mining lobbyists writing national energy policy. Consumer and environmental advocacy groups were shut out.

Flat Earthers in the Republican Congress shared the Republican vice president’s enthusiasm for big oil and gas, and his aversion to environmental regulation. In the House, Texan Joe Barton chaired the Energy and Commerce Committee and dismissed any concerns about the environment. In the Senate, Oklahoman James Inhofe chaired the Environment and Public Works Committee and described global warming as “the greatest hoax ever perpetrated on the American people.”

The military budget is still bloated. We’re still in Iraq. Torturers aren’t being prosecuted. But liberal critics who complain that “nothing has changed” under a Democratic Congress and president overstate their case. Henry Waxman chairs the House committee that just voted out a bill addressing climate change. The bill has President Barack Obama’s backing; in fact, it represents the fulfillment of a promise he made while campaigning.

The American Clean Energy and Security Act (ACES), which reported out of the House Energy and Commerce Committee shortly before the Memorial Day recess, isn’t perfect. Its centerpiece is a complex cap-and-trade system that would impose a national limit on greenhouse gases by distributing or selling permits to pollute—within an established national limit. The fixed number of permits would be fungible, allowing companies to trade them among themselves, through a system that would function like an equities market. Companies that reduced their emissions could sell their excess capacity to other firms. And the number of permits in circulation would gradually decrease.

One Republican, Mary Bono Mack (CA), broke with her party to vote for the bill when the committee approved it by a 32-25 vote. Climate is a hard sell for Republicans, who are largely irrelevant in the House anyway. That the dim and ideologically rigid Barton is the party’s ranking member on Energy and Commerce makes them even less relevant to this legislation.

Of genuine relevance is the criticism of progressives who have a history of commitment to environmental protection, such as James Hansen. The NASA physicist, who has studied climate models for decades, ominously warns that unless the emission of greenhouse gases is reduced the planet will reach a dangerous tipping point by 2016. Environmental groups like Greenpeace and International Rivers have raised serious concerns about the bill.

Hansen argues that a carbon tax is a more efficient mechanism to control greenhouse gases and that emissions must be reduced immediately. (He refers to coal-fired utilities as “death factories” and considers cap-and-trade mechanisms too cumbersome and slow to avert environmental catastrophe.)

Greenpeace also argues that Waxman’s bill doesn’t do enough to keep us from the tipping point. International Rivers and the Rainforest Action Network argue that the cap will be “blown to pieces” by offsets that polluters will be allowed to purchase.

Dr. Hansen directs NASA’s Goddard Institute for Space Studies and teaches environmental sciences at Columbia University. He was such an effective advocate for policies to control greenhouse gases that the Bush administration assigned him a censor to protect the public from his dire warnings.

These are critics we ignore at our peril.
BIG GREEN LOVES IT—If Greenpeace, the Rain Forest Action Network, and International Rivers aren’t supporting the climate bill, most of the big mainstream environmental groups are.

The Audubon Society, the Sierra Club, the Natural Resources Defense Council, The Wilderness Society, and the Environmental Defense Fund enthusiastically support ACES, frequently referred to as Waxman-Markey. (Massachusetts Democrat Ed Markey chairs an Energy and Commerce subcommittee.) In fact, five mainstream environmental organizations have joined the U.S. Climate Action Partnership, a business-environmental alliance that drafted the blueprint consulted by Energy and Commerce staffers writing the climate bill.

At 932 pages, the climate bill is a big, ambitious piece of legislation. Most ambitious is the attempt to lower greenhouse gas emissions (“to 97 percent of 2005 levels by 2012, 80 percent by 2020, 58 percent by 2030, and 17 percent by 2050”).

The year 2050 is critical. The Intergovernmental Panel on Climate Change (IPCC)—an international team of climate scientists who shared the 2007 Nobel Peace Prize with Al Gore—warns that if global warming is not reduced by at least 80 percent by 2050, the temperature of the planet could increase by two degrees Celsius above pre-industrial levels, triggering a series of catastrophic environmental events.

If Waxman-Markey passes both houses of Congress, hits its marks and lowers greenhouse gases to 17 percent of 2005 levels, it beats IPCC’s target by 3 percentage points. The World Resources Institute (Al Gore sits on its board of directors) predicts that the caps in the bill will reduce greenhouse gases by 73 percent of 2005 levels by 2050. Add in other emissions reductions spread around the bill and greenhouse gases could be cut by 81 percent by 2050.

There’s one caveat in the World Resources Institute analysis: “The actual amount of reductions will depend on the quantity of international offsets used for compliance.”
A POTENTIAL SPOILER—Ask a proponent of cap-and-trade about its virtues and you will hear about the “cap”—the fixed limit—on the volume of greenhouse gases a nation can emit. Under Waxman-Markey, volume is capped and polluters are required to purchase emission permits. Yet polluters can avoid mandates to reduce greenhouse gas emissions by buying foreign or domestic offsets.

Offsets are purchased from the EPA. They compensate for the purchaser’s emissions by funding reforestation programs or paying other parties to forgo or scale back projects, either outside the country or in the 15 percent of domestic industries that are not regulated.

As much as 2 billion tons of offsets will be made available each year. If polluters take full advantage of all 2 billion tons, they won’t have to bring emissions back down to 2005 levels until 2027, said Patrick McCully, the executive director of International Rivers.

Greenpeace U.S.A.’s media director, Michael Crocker, also considers offsets an impediment. “The plan has set reductions for 2020 in the U.S. at 4 to 7 percent of 1990 levels, Crocker said. “Not only is it insufficient; it’s insufficient in the early years when we need the most dramatic action.”

What was designed as a hard cap becomes a soft cap if industrial polluters decide that purchasing offsets is cheaper than curtailing emissions.
CORPORATE GIVEAWAY?—Greenpeace also warns that Waxman-Markey “showers industrial polluters with billions of dollars in free allowances.”

“President Obama ran on a campaign that promised 100 percent of the permits would be auctioned off,” Crocker said. “Now 85 percent have been given away, some with more social benefits than others.”

The free allocation of permits is lost revenue. But not all is lost. Dan Lashof, who directs the Climate Center at the NRDC, agrees with Crocker. Up to a point.

“This bill doesn’t get it perfect,” Lashof said. “But it certainly provides the vast majority of emissions allowances for the benefit of consumers and other public purposes.”

Lashof referred me to Harvard professor Robert Stavins, who directs Harvard’s Environmental Economics Program. Stavins concedes that if more permits were auctioned, the revenue generated could be used to reduce taxes or fund other socially useful programs.

But his analysis of the bill—posted on his website athttp://belfercenter.ksg.harvard.edu/analysis/stavins/—finds that 80 percent of the allowances to be distributed at no cost will provide relief for consumers, such as lump-sum rebates on electric bills. This, he writes, is “the opposite of the 80 percent free allowance corporate give-away featured in many press and blogosphere accounts.”

Stavins also addressed the use of offsets. “Legitimate offsets,” he wrote in an e-mail response to a question, “can keep allowance prices (and hence abatement) costs down.”
S’WONDERFUL—Stavins left the Environmental Defense Fund to teach at Harvard. He is the author of a 2007 Brookings Institute report on cap and trade. He writes (without irony) of “the wonderful politics of cap and trade.” In earlier blogposts, he has written about the cap-and-trade system put in place in the 1990s under the Clean Air Act, which reduced sulfur dioxide emissions, and the acid rain they produce, by 50 percent.

The NRDC’s Lashof also refers to the sulfur dioxide program. “That’s the model,” he said. He admits that the scale of the cap-and-trade program that worked on sulfur dioxide is minute compared with a program that would presume to regulate 85 percent of greenhouse gas emissions in the country. “But the model stands up.”

Not even the bill’s opponents actually oppose the bill. “We’re not working against it,” said Greenpeace’s Crocker. “We just are not supporting it.”

Why?

Unenthusiastic supporter Crocker is enthusiastic about charging polluters for the social cost they inflict on the public and the global ecosystem. “For the first time, polluters are being required to pay for their pollution,” he said. “They’ve been polluting for free, and now they are being charged to take out the garbage.”

Beyond its cap-and-trade provisions, the Waxman-Markey bill includes many small measures that will make a large difference in the reduction of greenhouse gases, such as mandatory building code requirements that will lower electricity use, funding for wind and solar power, funding for infrastructure for plug-in cars, plans and money for a “smart grid” that will move electricity more efficiently.

The alternative is more Joe Barton. Barton’s substitute climate bill begins with the deregulation of most greenhouse gases, follows with tax breaks and abatements for the industry, accelerates the permitting of coal-fired electricity plants, and provides incentives for nuclear energy. The bill would also open up more of the Gulf of Mexico and Alaska for offshore oil and gas drilling.

Reading it, there’s a sense that nothing has changed since 2001.
TAX AND TRADE?—We’ve come a long way. And we have to hope that a compromised cap-and-trade bill makes it to the president’s desk. Dan Lashof says he admires Jim Hansen but thinks he’s wrong on cap and trade. We can only hope Lashof is right. I’ll close with Hansen as Jeremiah, testifying before the House Ways and Means Committee in February of this year:

“Evidence from Earth’s history and ongoing climate changes reveal that the dangerous level of atmospheric carbon dioxide is much less than once believed. The safe level is no higher than 350 parts per million (ppm), probably less, and we just passed 385 ppm.

Climate change threatens everyone, especially our children and grandchildren, the young and the unborn, who will bear the full brunt through no fault of their own.

It is clear that we cannot burn all fossil fuels, releasing the waste products into the air, without handing our children a situation in which amplifying feedbacks begin to run out of their control, with severe consequences for nature and humanity….

The root cause is our failure to make polluting fossil fuel energy more expensive than clean. We must put a price, a rising price, on carbon emissions.

There are two competing ways to achieve that price:

One is Tax and 100 Percent Dividend—tax carbon emissions, but give all of the money back to the public on a per capita basis. For example, let’s start with a tax large enough to affect purchasing decisions: a carbon tax that adds $1 to the price of a gallon of gas. That’s a carbon price of about $115 per ton of CO2.

That tax rate yields $670 billion per year. We return 100 percent of that money to the public. Each adult legal resident gets one share, which is $3,000 per year, $250 per month deposited in their bank account. Half shares for each child up to a maximum of two children per family. So a tax rate of $115 per ton yields a dividend of $9,000 per year for a family with two children, $750 per month. The family with a carbon footprint less than average makes money—their dividend exceeds their tax. This tax gives a strong incentive to replace inefficient infrastructure. It spurs the economy. It spurs innovation.

This path can take us to the era beyond fossil fuels, leave most remaining coal in the ground, and avoid the need to go to extreme environments to find every drop of oil. We must move beyond fossil fuels anyhow. Why not do it sooner, for the benefit of our children? Not to do so, knowing the consequences, is immoral. The tax rate likely must increase in time, but when gas hits $4 per gallon again most of that $4 will stay in the United States, as dividends. Our vehicles will not need as many gallons. We will be well on the way to energy independence. The alternative to carbon tax and 100 percent dividend is Tax & Trade, foisted on the public under the pseudonym ‘Cap & Trade’. A ‘cap’ increases the price of energy, as a tax does. It is wrong and disingenuous to try to hide the fact that Cap is a tax.”

ner, for the benefit of our children? Not to do so, knowing the consequences, is immoral. The tax rate likely must increase in time, but when gas hits $4 per gallon again most of that $4 will stay in the United States, as dividends. Our vehicles will not need as many gallons. We will be well on the way to energy independence. The alternative to carbon tax and 100 percent dividend is Tax & Trade, foisted on the public under the pseudonym ‘Cap & Trade’. A ‘cap’ increases the price of energy, as a tax does. It is wrong and disingenuous to try to hide the fact that Cap is a tax.”