The Big Cap and Trade Flip Flop

Back when I was in grad school getting my MBA, I took an Environmental Law class. At the time, the Clean Air Act Amendments of 1990 were just getting passed in congress. Much of our discussion in class centered around the innovative policies that were being put in place to curb acid rain: cap and trade.

Most of the other students were those interested primarily in environmental issues--pursuing degrees in environmental law or energy or such. I believe I was the only student from the business school in the class.

I clearly recall being virtually the only vocal supporter of the emissions trading concept proposed for the Acid Rain Program and that had been proposed by, yes, the Republican George Bush (senior) administration. This idea of using markets to reduce the costs of curtailing pollution was a conservative idea, and liberals were strongly against it. The other students would claim that it just created a "license to pollute" and that it created some sort of sham system. Those, like myself, that like to see intelligently designed market systems do the work, supported the idea.

Fast forward to now. Virtually every right-wing think tank and pundit is decrying cap and trade for greenhouse gases as a disaster while the environmentalists are strongly supporting it. What happened? I'm no political scientist, so I'm just speculatin'.

First, we environmentalists have noted the enormous success of the acid rain program at even lower compliance costs than the most optimistic predictions at the time. I, for one, believe that creative market forces will make reducing greenhouse gases cheaper than many predictions. I also can forecast with confidence that not one of the predictions that claims even an order of magnitude of accuracy for events 10+ years in the future will be remotely close to the actual costs:
CBO - $175 per household in 2020
Boehner - $3128 per household in 2015. Not $3127.50, by the way. $3128. Gotta love that final 8 bucks!
EPA - $1100 per household in 2050.

I predict that all of these numbers will be wrong. In fact, I suspect we won't even be able to measure what the costs (or benefits) really are, because so many other variables will have made it impossible to figure out.

Second, partisan politics have overtaken good sense. Many Republicans, I believe, oppose cap and trade simply because it's the Democrats proposing it. (In fairness, partisanship in congress these days seems to run equally both ways.)

I know that if we can create a market-based system that rewards success at reducing greenhouse gas emissions, that we will succeed at reducing them. Is Waxman-Markey the answer? Not entirely, it's got a lot of problems, but the concept of cap and trade embedded within the bill is not one of them. The concept of emissions trading (cap and trade) is an idea that should be embraceable by both political parties. After all, it has been.

1 comment:

  1. Congressional Republicans are trying to block this bill not because it's bad policy, but because they think it's good politics to try to deal President Obama a defeat. I hope people like Sen. Warner and Sen. Webb reject those cynical politics and instead get behind solutions to our climate & energy crisis.