The End of Cap-and-Trade

The New York Times sounds the death knell on cap-and-trade as a method for regulating carbon emissions:

Mr. Obama dropped all mention of cap and trade from his current budget. And the sponsors of a Senate climate bill likely to be introduced in April, now that Congress is moving past health care, dare not speak its name.

“I don’t know what ‘cap and trade’ means,” Senator John F. Kerry, Democrat of Massachusetts, said last fall in introducing his original climate change plan.

We’ve never had much of a brief on cap-and-trade. It’s one method to do something that should be done, but we’re neutral on what Congress (or the EPA) might eventually settle on to bring about a transition to a carbon free future. Heck, industry has already made some moves on its own, doubtless understanding that government will settle on something and trying to get ahead of the curve.

But cap-and-trade – eh!

---

That doesn’t mean that it died what one might call a honorable death – it simply means that one side characterized it better than another side.

“We turned it into ‘cap and tax,’ and we turned that into an epithet,” said Myron Ebell of the Competitive Enterprise Institute, a free-market research organization supported by conservative individuals and corporations. “We also did a good job of showing that a bunch of big companies — Goldman Sachs, the oil companies, the big utilities — would get windfall profits because they’d been given free ration coupons.”

That’s a lot of supposition there – and since oil companies support CEI, you might wonder a bit why it wouldn’t be interested in windfall profits for them. But that’s not the point – the point is that CEI (and others, too, of course) did a good job defining cap-and-trade in the most negative possible terms.

---

Here’s CEI President Fred Smith (in 2006) on global warming:

Most of the indications right now are it looks pretty good. Warmer winters, warmer nights, no effects during the day because of clouding, sounds to me like we’re moving to a more benign planet, more rain, richer, easier productivity to agriculture … We’re basically to a world now that’s a lot closer to heaven than hell.

So you can scarcely blame CEI for wanting to squelch climate change legislation if only for those warmer winter nights. CEI supports nuclear energy at least in passing, but its attention is mostly elsewhere. Sourcewatch includes some interesting information about CEI.

---

So, onward.

Two senators, Maria Cantwell, Democrat of Washington, and Susan Collins, Republican of Maine, have proposed an alternative that they call cap and dividend, under which licenses to pollute would be auctioned to producers and wholesalers of fossil fuels, with three-quarters of the revenue returned to consumers in monthly checks to cover their higher energy costs.

Let’s see how this goes. We suspect that CEI’s work on cap-and-trade may well lead to some interesting ideas, such as this one, but the bottom line seems to be: carbon emissions will almost certainly be regulated because they must be reduced. That hasn’t changed significantly.

CEI President Fred Smith.