Do Nothing When The Heat is on Washington
Washington has just endured its hottest June since records began in 1872. Yet US senators and their aides seemed to be on the verge of deciding to do approximately nothing, says David Leonhardt. The most efficient way to begin attacking the global swelter is no mystery. It involves raising the price of carbon emissions, which are warming the planet, and then letting the private sector find innovative ways to use less dirty energy.
By David Leonhardt in the International Herald Tribune( 22 July 2010):

Washington – This city just endured its hottest June since records began in 1872, according to the U.S. National Oceanic and Atmospheric Administration. So did Miami. Atlanta suffered its second-hottest June, and Dallas had its third hottest.
In New York, the weather was relatively pleasant: only the fourth-hottest June since 1872. Then again, New York is on pace for its hottest July on record.
Yet U.S. senators and their aides seemed to be on the verge of deciding to do approximately nothing about global warming before they were set to convene for a vote Wednesday on climate legislation. The needed 60 votes did not seem to be there, at least before the main event.
Harry Reid, the Senate majority leader, and President Barack Obama had to find a way to cobble together the votes, as they did on health care and financial regulation, by somehow persuading moderate Republicans to support a market-based limit on power plant emissions or getting Democrats to support a less ambitious set of rules.
Either way, most Senate watchers, inside and out, thought the odds of passing a major climate bill were not great. And if this White House and this Congress, controlled by Democrats, could not pass one, you had to wonder what the future of climate policy looked like.
All the while, the risks and costs of climate change grow. Sea levels are rising faster than scientists predicted just a few years ago. Himalayan glaciers are melting. In the American West, pine beetles (which struggle to survive the cold) are multiplying and killing trees.
According to the National Aeronautics and Space Administration, 2010 is on course to be the planet’s hottest year since records started in 1880. The current top 10, in descending order, are: 2005, 2007, 2009, 1998, 2002, 2003, 2006, 2004, 2001 and 2008.
The most efficient way to begin attacking the global swelter is no mystery. It involves raising the price of carbon emissions, which are warming the planet, and then letting the private sector find innovative ways to use less dirty energy. Conservative economists, like N. Gregory Mankiw of Harvard University in Massachusetts, support this approach. So do liberals, like Joseph E. Stiglitz of Columbia University in New York. But taxing carbon has never had much of a political chance. It is too honest. It acknowledges that the best way to reduce the use of a product is to increase its price. We all prefer a free lunch.
So Congress has been laboring to disguise a price increase in a more palatable package.
In June 2009, the House passed a cap-and-trade bill. It set a national cap on carbon emissions and required companies to have permits for such emissions. To keep emitting as much as they had been, companies would have to buy permits from more efficient companies.
Republican leaders, though, were only too happy to cast cap and trade as ”cap and tax.” In the process, they helped scare away senators who had long supported this very idea, like Lindsey Graham, Republican of South Carolina. The sad paradox is that cap and trade – which trusts in the efficiency of markets – was originally a Republican policy, signed by President George H.W. Bush to reduce acid rain, and disliked at the time by many liberals.
With a comprehensive cap off the table, Senate leaders began talking about a narrower version that would apply only to power plants, not to emissions from vehicles or factories. This utility-only cap has two advantages.
One, it goes after the emissions that energy experts think will be among the cheapest to reduce. Two, it involves another layer of political disguise. The cap would apply to unlovable utilities, not to American families and businesses.
Of course, the cap would ultimately raise utility rates. That is the point. As long as dirty energy remains inexpensive, people are going to use huge amounts of it.
But some policy makers have not been willing to acknowledge this. They continue to look for a solution without downsides. For them, a tempting option is a series of new rules requiring people to use cleaner energy. In a few cases, such rules really are a free lunch, in that they require people to take steps – like home insulation – that save money. But most rules increase costs. They push people away from the energy sources they are now using.
The classic example is the U.S. fuel economy rules from the 1970s that required car companies to make fewer gas guzzlers.
The newly imposed scarcity of guzzlers, in turn, increased their price. But the relationship was not obvious. Americans do not think of fuel economy rules as a tax on large vehicles.
This explains why the rule-based approach seems to be the best bet for winning Republican votes. Senator Richard Lugar, Republican of Indiana, has proposed new rules not only for vehicles but also for appliances, building codes and power plants.
If these regulations were tough enough, they could make a difference, as the fuel economy rules have. So some Democrats and environmentalists see this approach as their best remaining chance.
On the other hand, such rules would require government regulators to make all kinds of decisions – about which dishwashers qualified as efficient, about which alternative energies power plants had to use and the like. Businesses and consumers could not look simply for the cheapest solution, as they could if Congress put a price on carbon. They would have to comply with specific provisions.
The result would almost certainly be higher, albeit better disguised, costs than with a carbon cap or tax. Even many advocates admit that new rules would not do enough, on their own, to reduce emissions and slow warming. Only a cap or a tax can accomplish that at a reasonable cost.
Thus the opposition among other Democrats and environmentalists to accepting the Lugar approach as a compromise.
Whether anything is done will be decided in the next few weeks, before the Senate breaks for its August recess, or in September, before the midterm election campaign takes over. Meanwhile, the temperature in Washington this week is supposed to hit 99 degrees Fahrenheit (37 Celsius).
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