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Brooks Wilson's Economics Blog: Cap-and-Trade Advocates Who Oppose Waxman-Markey

Monday, June 29, 2009

Cap-and-Trade Advocates Who Oppose Waxman-Markey

I have selected three articles that point to a rift between environmental groups and the Obama administration over the Waxman-Markey cap-and-trade legislation. The writers do not oppose cap-and-trade legislation in general, but his version of it. Josh Harkinson of Mother Jones gives a good summary of the debate within and between environmental groups about the Waxman-Markey legislation in "The War Over Waxman-Markey," dated June 22, 2009.
A long-awaited vote on the Waxman-Markey climate bill, expected this week or early next month, has environmentalists teetering at the edge of existential crisis. Some believe the bill is so deeply flawed it might actually make matters worse...

The split encompasses more than predictable ideological divides. Debate over the relative merits of a carbon tax versus this bill's cap-and-trade model has mostly given way to concerns about whether the legislation, sponsored by representatives Henry Waxman (D-Calif.) and Edward Markey (D-Mass.), lines the pockets of polluters with little to show for it. The most it would cut carbon emissions by 2020 is 17 percent below 1990 levels, nowhere near the 25 to 40 percent reduction sought by scientists and international climate negotiators. The Sierra Club has withheld its endorsement in hopes of improving the bill before a final vote—it wants to prevent polluters from receiving tradable emissions permits for free, preserve the EPA’s authority to independently regulate carbon, and better fund energy efficiency and clean energy—but Fahn and other environmentalists are skeptical that lawmakers will listen. “From my perspective,” he says, “the prospects of strengthening it to where we’d want to support the ultimate version are growing slim.”
Greenpeace's USA Deputy Campaigns Director, Carroll Muffett issued the following statement in "Greenpeace Opposes Waxman-Markey," dated June 25, 2009.
"Since the Waxman-Markey bill left the Energy and Commerce committee, yet another fleet of industry lobbysists has weakened the bill even more, and further widened the gap between what Waxman-Markey does and what science demands. As a result, Greenpeace opposes this bill in its current form. We are calling upon Congress to vote against this bill unless substantial measures are taken to strengthen it. Despite President Obama’s assurance that he would enact strong, science-based legislation, we are now watching him put his full support behind a bill that chooses politics over science, elevates industry interests over national interest, and shows the significant limitations of what this Congress believes is possible.

“As it comes to the floor, the Waxman-Markey bill sets emission reduction targets far lower than science demands, then undermines even those targets with massive offsets. The giveaways and preferences in the bill will actually spur a new generation of nuclear and coal-fired power plants to the detriment of real energy solutions. To support such a bill is to abandon the real leadership that is called for at this pivotal moment in history. We simply no longer have the time for legislation this weak.

“With many others in the environmental, faith and consumer rights communities, Greenpeace has expressed tremendous concern about the role of offsets in this legislation. Unless strictly controlled, the abuse of offsets could prevent real emission reductions for more than a decade. The decision to move authority over offsets from EPA to the Department of Agriculture further reduces the likelihood that such controls will be maintained and increases the likelihood they will undermine real reductions.
Clive Cook, writing for the Financial Times in "Obama is choosing to be weak," dated June 28, 2009 states that,
The cap-and-trade bill is a travesty. Its net effect on short- to medium-term carbon emissions will be small to none. This is by design: a law that really made a difference would make energy dearer, hurt consumers and force an economic restructuring that would be painful for many industries and their workers. Congress cannot contemplate those effects. So the Waxman-Markey bill, while going through the complex motions of creating a carbon abatement regime, takes care to neutralise itself.

It proposes safety valves that will ease the cap if it threatens to have a noticeable effect on energy prices. It relies heavily on offsets – theoretical carbon reductions bought from other countries or other industries – so that big US emitters will not need to try so hard. It gives emission permits away, and tells utilities to rebate the windfall to consumers, so their electricity bills do not go up. It creates a vastly complicated apparatus, a playground for special interests and rent-seekers, a minefield of unintended consequences – and the bottom line for all that is business as usual.


  1. Jason Haddock29/6/09 2:14 PM

    Aside from the limited effect the bill will have on carbon emissions (in the overall scope of emissions as a whole for both the US and the world) this bill is going to cripple our economy. It won't create jobs, as Obama claims, but will increase the jobless rate. It will force those in industry to pay more to become compliante and, by Obama's own admission, those costs will pass on to consumers. In addition to increased cost, the bill looks to potentially tax employer provided benefits. If this happens employers will decrease or stop providing benefits to employees, who will then have to pay out of pocket for their benefits. With an increase in price for consumers in products, and an increase in the workplace as well, there will be little left for consumers to use in the market.

  2. Michael Overcash30/6/09 11:13 PM

    It appears that the current administration is having problems with the concept and existence of Global Warming, excuse me, i mean Climate Change now. Trying to force more tax is proving difficult, especially at the level the environmentalists are calling for. This will only prove to heigten the wedge between producer and consumer causing greater ineffeciencies.

  3. Cap and trade simply translates to consumers' out of pocket expenses increasing. Manufacturers who are forced to pay these additional taxes for what this administration feels is excessive, will just pass the costs on to us---the end consumer. If we are considered polluters because we exhale carbon dioxide which plant life needs to prduce oxygen, what's next?