In just the past week, three events in our nation’s capitol have provided further evidence that cap-and-trade is more of a political issue than an environmental one. Here’s the run down:
Forecasted Price Tag:
The first item to consider is the newly-released Congressional Budget Office report on Waxman-Markey. The analysis found that over the next 10 years the federal cap-and-trade system outlined in the bill would directly increase federal spending by more than $820 billion, in addition to another $50 billion in discretionary spending. Since the measure is, at best, projected to raise $846 billion, this carbon trading plan would quite possibly end up adding to the $1.85 trillion deficit.
Of the total tab, $693 billion stems from politicians who have given away the system’s valuable CO2 permits at no cost to special interest groups. It’s that kind of overwhelming price tag that led Obama budget director Peter Orszag to recently comment: “If you didn’t auction the permits, [cap-and-trade] would represent the largest corporate welfare program that has ever been enacted in the history of the United States.” That concern prompted the House Energy and Commerce committee to hold a special hearing this week on the questionable allocation of emission permits in Waxman-Markey.
Though it’s right on track to create a new congressional pork program, Waxman-Markey is moving increasingly further from its purported objective: putting a price on emissions, thereby creating an incentive to move to less carbon intensive fuels and technologies. President Obama echoed this sentiment while speaking at the Business Roundtable in March, “If you’re giving away carbon permits for free, then basically you’re not really pricing the thing and it doesn’t work.”
That means rather than price CO2 at $50 per-ton -- the rate that climate scientists figure is necessary to discourage people from using carbon-intensive fuels and encourage businesses to develop and adopt more climate-friendly energy and technologies -- the House cap-and-trade bill would end up pricing carbon dioxide at less than $20 per-ton, less than half the level needed to spur the green changes necessary to protect the climate.
As the environmental and economic problems with Waxman-Markey become increasingly apparent to lawmakers and the voting public, the political support for the bill strains. That’s why cap-and-trade advocates are experiencing a sudden need for speed. Just last week, House speaker Nancy Pelosi announced that she wants committees to finish all work on the bill by June 19.
This break-neck deadline gives lawmakers little time to consider the CBO’s staggering estimates, much less to accurately assess the potential costs not covered by federal researchers.
Former Clinton undersecretary of commerce and cofounder of the U.S. Climate Task Force Dr. Robert Shapiro highlighted one of those additional costs in Mother Jones earlier this week: “We are on the verge of creating a new trillion-dollar market in financial assets that will be securitized, derivatized, and speculated by Wall Street like the mortgage-backed securities market.” So despite its advocates’ good intentions, cap-and-trade could put America at risk of another meltdown -- one created and financed by the government itself.
But this doesn’t have to be the case.
Many economists support the notion that economic and environmental progress isn’t always mutually exclusive. And the intersection of those two goals lies in an alternative policy option: a carbon tax-shift.
This measure would all but guarantee a steady price CO2 that encourages U.S. companies to invest in more efficient energy sources and technologies. Plus, its revenue could be given back to the American people and invested in low-carbon technology.
Even without a CBO analysis, it’s easy to see that this alternative emissions policy is a deal Congress cannot afford to pass up.