March 22, 2009 in Business

Bert Caldwell: Good intentions likely won’t save cap-and-trade plan

By The Spokesman-Review
 

Gov. Chris Gregoire’s proposed cap-and-trade plan to limit carbon dioxide emissions was gasping for breath at week’s end, with the House Committee on Ecology & Parks trying to apply oxygen.

Despite the governor’s good intentions, this is a measure that should not be resuscitated.

Cap-and-trade does two things; it limits, or caps, pollution; and it disguises the costs of doing so.

The first is a noble, necessary undertaking. The second is politics.

Under a cap-and-trade system, government sets a ceiling on the amount of pollutants industry and utilities can emit. The main target here is carbon dioxide, or CO2, the gas that is a principal cause of global warming. Until the gravity of a hotter atmosphere became apparent to all but those who will not see, CO2 was not even considered a pollutant.

Once a cap has been established, businesses get permits to pollute, and this is where it starts to get tricky. The permits could be free, they could be sold at a fixed price, or they could be auctioned in whole or part to establish a value. Once issued, businesses would buy and sell — trade — their permits according to how their emissions might increase or decrease.

If the cost of cutting pollutants exceeds the cost of buying more permits, a business would buy more permits. If it installs new pollution control equipment or changes manufacturing processes, it would sell its permits.

Pollution would be reduced over time by ratcheting down the cap.

The Europeans launched a cap-and-trade program four years ago. President Barack Obama included a plan in his budget, and plugged $650 billion in revenues from the sale of permits into his 10-year budget forecast. And Gregoire is pushing her legislation in conjunction with a Western Climate Initiative (WCI) built around a regional plan supported — in theory — by seven Western states and four Canadian provinces.

Strongly supported by environmentalists, WCI has been abused by business for its complexities and its costs although, to be fair, there are studies that rightly note there are also costs to doing nothing; more forest fires, for example.

But in this economic downturn, the potential threat to jobs was all it took to convince Washington legislators this is not the time or place for a sweeping overhaul of environmental law. Gregoire made a rare — for a governor — appearance Tuesday before the House Ecology Committee, pleading for a bill that authorizes more than further study and reports.

Washington must lead in order to have a voice in drafting national cap-and-trade legislation, she argues. And Washington businesses will have a technological advantage if they are early adapters and makers of emissions controls.

Prospects are not good, and her own bill anticipated an economic emergency that might temporarily stay implementation. With the number of unemployed in the state at an all-time high, we are in an emergency today.

The emergency will end, but the mounting damage being done by increasing global temperatures will not. And somebody must act first. Pointing the finger at China, which has overtaken us in CO2 emissions, is not a valid excuse for doing nothing.

It’s going to cost us, but let us clear the air.

Rather than have business pass through its costs for permits, or new controls or processes, and pretend their hands are clean, our leaders in Washington, D.C., need to impose a national carbon tax. You burn X amount of coal, natural gas, what-have-you, you pay Y amount of tax.

Start low, but make it high enough to affect energy consumption. Come up with a plan that offsets the burden on regions, like the South and Midwest, that would be disproportionately affected. Do the same for the poor who spend a larger share of their incomes on energy.

Tax what we burn, not what we earn, former Vice President Al Gore used to say. Political realities have pushed him into the cap-and-trade camp.

Too bad. Someone has to lead.


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