Monday, February 8, 2010

New Climate Bill

Maria Cantwell, a Democratic Senator from Washington, has sponsored a new climate bill which create a cap-and-dividend system, with auctioned credits, more of the revenues from which would be rebated to consumers in monthly checks to defray increasing energy costs. Cantwell's bill is far less byzantine and lengthy than Waxman-Markey and other proposals, in large part because it excludes huge subsidies to farmers and energy companies. In other respects it is a much better climate bill because it would auction all allowances (with both a price floor and a price ceiling), which would raise the price of carbon. But it would make those price increases politically tolerable for consumers by offsetting them with monthly dividend checks.

The bill can be read in its entirety here. It already has received extensive media coverage in (among other outlets) the Wall Street Journal (here), (here), Mother Jones (here), and The Hill (here).

Personally, I like the legislative proposal, which should be popular with the public, if the public believes the government will not, at the first opportunity, renege on its commitment to rebate auction revenues to consumers. On the other hand, the bill is sure to be pilloried by energy companies, including those that support cap-and-trade legislation because they are against auctioning of emissions allowances. The Cantwell bill does remove one oft-articulated reason for their opposition: that auctioning would hurt consumers. But they can be expected to oppose auctioning in any case. Other opponents will include farmers, who stand to benefit from the generous offset provisions in other cap-and-trade proposals, including Waxman-Markey.

In recent months, it has appeared increasingly likely that Congress would drop the climate provisions from Waxman-Markey and simply pass it as an energy bill, creating massive new subsidies for renewable energy resources. That would do nothing to help climate change, and precious little to spur the development of low-carbon energy alternatives, which ultimately require higher energy prices, regardless of government subsidies. Nevertheless, given the trends towards doing nothing on climate and subsidizing energy production, the Cantwell bill seems to be swimming against a strong tide. But maybe it can turn that tide. Already, Susan Collins, Republican from Maine, has become a co-sponsor. The bill has been passed by the Committee on Environment and Public Works, and is now before the Senate Finance Committee.

Despite that momentum, the bill still has a very long way to go, and a long row to hoe. Politically, the easiest way to get any climate bill, however flawed, would be for the House simply to pass the climate bill already approved by the Senate. So, here is the question: is it better to do what is easier, even if it is not nearly as good as doing what is harder? My view is that we need to get the ball rolling on actually reducing carbon emissions, even if we don't reduce them a lot at first. I favor whatever legislation can't actually be enacted that will start moving us in the right direction. Having said that, I would be most happy if the Cantwell bill proved to be that piece of legislation.

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