Cap-and-Trade or a Carbon Tax for Greenhouse Reductions?

By Kennedy Maize

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Waxman-Markey: What Does It Mean?

The House Energy and Commerce Committee in mid-May cleared the enormous bill. The legislation embraces a cap-and-trade regime that provides for pollution trading, albeit with many political and special interest nooks and crannies related to allocating the first round of emissions allowances. The committee approved the bill by a partisan vote of 33 Democrats in favor and 25 Republicans opposed. Once the House Agriculture and the Ways and Means Committees approves the bill, which is far from certain, it could come to the House floor for final action, perhaps as soon as next month.

Then it will go the Senate, where the prospects are even less propitious. It’s unlikely that any member of Congress voting on the bill will have actually read it by the time it comes to the floor for final passage, if that happens.

The cap-and-trade provisions in the House bill had strong support from “green” Democrats, such as House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) and Ed Markey (D-Mass.), chairman of a special House committee on climate change and a senior member of Waxman’s committee. They created the bill that the Obama administration supported.

Most national environmental groups, including the Natural Resources Defense Council (NRDC) and the Environmental Defense Fund (EDF), backed Waxman’s committee bill. A coalition of vertically integrated electric utilities with generation and distribution also bought into the bill, in part because the lawmakers agreed to an allocation of initial pollution permits to industries (85% in total) that would dramatically favor the existing utility companies, giving them free “allowances” before the market kicks off. The utilities would get about 35% of the total kick-off allowances.

Ironically, in 1990, the greens (excepting the EDF) were mostly skeptical of the SO₂ cap-and-trade mechanism in the rewrite of the air act. Acid rain emissions trading, largely conceived and advanced by Dan Dudek, an economist with the EDF, with the support of the first Bush administration, relied on a market model that conventional environmental groups mistrusted. I recall David Hawkins of the NRDC—who was EPA clean air chief in the Carter administration—telling me that the pollution market would never work. He was wrong.

Fewer than a dozen folks, and no members of Congress, likely have read the Waxman-Markey bill, The Washington Post noted. That means they have missed myriad provisions in the bill. For example, The Post pointed out, the bill overrides many local building codes in favor of national codes if the local codes don’t meet a federal efficiency standard. That’s pretty autocratic, according to The Post. The provision got no discussion during hearings or markup. It appears to have been inserted in the bill language by stealth—no fingerprints or political DNA signatures remain.