A low-impact Low-Carbon Economy Act

This is about as depressing a declaration of progress in American legislators’ thinking on climate change as I’ve seen:

“The bills you can’t pass this year are a lot better than the bills you couldn’t pass a year ago.”

It’s from a New York Times story on a Senate bill outlining a cap-and-trade system for dealing with greenhouse-gas emissions, quoting David Doninger of the Natural Resources Defense Council, and it’s particularly depressing because the bill co-sponsored by Sens. Jeff Bingaman and Arlen Specter stinks.

From the Washington Post‘s version of the story:

To secure industry support, the bill’s primary authors — senators Jeff Bingaman, New Mexico Democrat, and Arlen Specter, Pennsylvania Republican — set limits on the price of tradable emissions credits that industry would have to purchase if they overshoot their emission allowances.

That move incurred the ire of environmental groups, who said the “safety valve” provisions in the bill that sets an initial limit of $12 per ton[ne — they specify they’re talking metric] on the price of emission credits will undermine greenhouse gas reductions.

The price of extra credits would go up by the rate of inflation plus five per cent each year, meaning it would be, by my math, about $33 in constant dollars in 2027. That would be the maximum price you could possibly pay to emit a tonne of CO2.

Keep in mind that experts, from Sir Nicholas Stern to Canada’s government-funded economic-environmental think tank to the IPCC, figure the cost of each tonne — not just tonnes beyond a cap, but beginning with ton number one — should be somewhere between $50 and $150 starting pretty much right away. The “safety-valve” element was reportedly included at the insistence of major labour unions in the UAW and AFL-CIO, in case we needed any more evidence of which side they’re on. They favour subsidies for good behaviour, and no costs attached to bad behaviour.

The Bingaman-Specter targets would aim to have the U.S. emitting greenhouse gases at 1990 levels again by 2030. By itself, this is what might kindly be called a good first step. I cannot fathom how such a weak pricing system would achieve that target. Nor, indeed, can the National Commission on Energy Policy, whose analysis (PDF) is presented with the bill at the U.S. Senate’s energy and natural-resources committee website. The commission says oh, yes, this’ll get our emissions down to 1990 levels, assuming we make a host of other changes to policies on, say, fuel economy and subsidizing “clean coal” and giving tax credits for renewable energy and efficiency improvements.

If, in other words, we do so many other things that this bill doesn’t matter very much, then this bill will be excellent.

My thinking right now favours a cap-and-trade system for heavy emitters, probably complemented by a carbon tax on consumer fuels like gasoline, and matching tax cuts in other areas. And if you’re going to do cap-and-trade, you need to (1) auction off the first round of emissions permits, so that those who will make best economic use of them will get them, and (2) be dead serious about enforcing the limits, with a safety-valve price, if you must have one, set so high an emitter would use it only in an emergency.

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One response to “A low-impact Low-Carbon Economy Act

  1. Pingback: Safety valve or escape hatch? « Green Markets

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