Time to Bury Cap and Trade and Plan Anew

by Jesse Jenkins and Devon Swezey | July 26, 2010  | The Breakthrough Institute

Cap and trade is dead. Again. For real this time.

Reports put the time of death at 1 P.M. EST, July 22nd, 2010. That is when Senate Majority Leader Harry Reid emerged from a meeting of the Democratic Caucus without enough support for even a severely weakened and scaled-back emissions cap on the utility sector.

With that, recognition has finally set in everywhere: the United States Senate is not going to enact any form of cap and trade. Not this year. And probably not any time in the foreseeable future.

Worse yet, clean energy progress this year has gone down with the long-sinking cap and trade ship.

Democrats in the Senate have now successfuly wasted what little time they had left on the Congressional calendar wrangling over a utility-only cap--already compromised beyond recognition and destined for political failure--instead of working to advance a package of measures that would have started to make real progress on clean energy.

Reid has made it clear he'll bring only an extremely narrow bill to the floor before the August recess, one pairing measures responding to the Gulf oil spill with some incentives for home efficiency retrofits and natural gas vehicles. That's it. After a full two-year Congressional cycle, Democratic super-majorities, and Barack Obama in the White House: home retrofits and natural gas vehicles are all the Senate will deliver. We should let that sink in for a moment...

Blame Game or Moment of Reflection?

After making his decision to drop cap and trade (and any meaningful clean energy measures with it), Reid wasted no time in pinning the blame on those recalcitrant Republicans, declaring in a statement:

"Many of us want...a comprehensive bill that creates jobs, breaks our addiction to oil and curbs pollution. Unfortunately, at this time not one Republican wants to join us in achieving this goal. That isn't just disappointing. It's dangerous."

Whether it was Republicans, the filibuster, oil and coal industry lobbyists or President Obama himself, blame has already been cast far and wide.

But if anything is deserving of blame, it is the cap and trade strategy itself.

Cap and trade has now died four times in the last seven years (this time, we can hope, for good). There is little evidence that Senate Democrats had substantially more votes for cap and trade this year than they did in 2003 (when it failed with 43 votes), 2005 (failed again with 38 votes) or 2008, when Reid also pulled the bill before it could go down in embarrassing defeat and insiders put the final tally at only 35-40 votes in support of the bill.

At this dark moment, the important question is whether any greens or Democrats in Congress are willing to seriously re-think a policy framework that was structurally flawedfrom the beginning and has consistently failed politically.

(Early indications are that they aren't, with Nancy Pelosi saying of the House-passedWaxman-Markey bill, "we're very proud of it and excited to take it to conference.")

The Serial Failure of Cap and Trade

Cap and trade has repeatedly failed because it doesn't address the main barrier to the widespread deployment of clean energy technologies: the technology-based price gap between new clean energy and mature fossil fuels.

Many renewables, like wind and solar power, are expensive, intermittent, and difficult to scale for example, while nuclear power is extremely capital intensive and faces substantial local opposition.

Because of higher costs and technical barriers to widespread clean energy adoption, efforts to move the U.S. energy system away from fossil fuels towards clean energy alternatives inevitably comes with a significant price tag.

The result: every country in the world has been unwilling to raise the price of fossil fuels--either through a carbon tax or a cap and trade system--high enough to close this gap for the majority of clean energy technologies.

The United States is a clear case in point, where the proposed cap and trade bill was riddled with so many loopholes and cost containment mechanisms--most notably the availability of up to 2 billion dubious carbon offsets--that the effective price on carbon wastoo low to effectively spur clean energy innovation and adoption and the "cap" on carbon was rendered effectively non-binding.

But there's another rub. For all the talk about the urgency of a "cap" on emissions in the United States, China has become the world's largest emitter of greenhouse gases and its voracious appetite for energy threatens to wipe out any gains we achieve here in the United States.

China has moved aggressively in recent years to become a leader in the clean energy industry; with timing so perfectly ironic it seems almost planned, China announced last week that the national government would level a staggering $74 billion in annual investments over the next ten years (5 trillion yuan) to adopt clean fuels and build the nation's clean energy industries. But even while establishing itself as the dominant global clean energy power, China's insatiable energy demand is so large that the nation's demand for fossil fuels continues to rise almost unabated.

In the end, until we make clean energy cheap enough to be widely available and affordable throughout the world, countries like China will continue to satisfy the majority of their increasing energy demand with fossil fuels.

Planning Anew for Clean Energy Progress

Given the stakes for both the global climate and the nation's economic outlook, we can't afford yet another episode in the serial failure of the cap and trade strategy.

This moment demands a fundamentally new strategy designed to overcome the inherent political obstacles to carbon pricing and simultaneously achieve the primary objective upon which our climate future hinges: making clean energy cheap in real, unsubsidized terms.

History shows that such technological transformations do not occur through modest shifts in market price signals. We didn't tax the telegraph to get telephones or put a cap on typewriters to see the birth of the personal computer, as Breakthrough's Michael Shellenberger and Ted Nordhaus often note.

Instead, time-and-time again, the most reliably successful driver of new innovation and transformative technology changes has been an active partnership between private-sector entrepreneurs and innovators and a public sector acting as both an initial funder and demanding customer of new, cutting-edge technologies.

This will demand an unprecedented level of public investment in clean energy innovation and the accelerated adoption, scale-up, and improvement of a full suite of clean energy technologies.

Such a strategy can begin to cut U.S. emissions in the near-term, but most importantly it will be absolutely essential to establish the technological and economic foundations for deep emissions cuts in the long term.

As the International Energy Agency has been clear, a global clean energy technology revolution is urgently required, and we have not a moment left to lose.

Without clean, cheap energy, emissions both at home and abroad will continue their inexorable rise, while China and other economic competitors solidify their dominance of new global clean technology markets. With this latest death of cap and trade, will we finally bury a fundamentally flawed strategy and dare to plan (and act!) anew?

Carbon trading a front for money-laundering?

Agence France-Presse | Singapore, July 17, 2010

Organised crime gangs are using carbon emissions trading schemes as fronts for money-laundering,experts warned on Friday. The experts who attended a meeting of the Asia Pacific Money Laundering Group (APG) said crime syndicates are resorting to new methods to hide their illegal proceeds.

One "issue that we've looked at closely is money laundering associated with carbon emissions trading schemes", APG executive secretary Gordon Hook told a news conference after the five-day meeting.

Hook did not elaborate on how crime syndicates were using carbon emissions trading schemes to launder money.

Emissions trading schemes place a limit on the amount of greenhouse gas pollution which companies can produce, forcing heavy polluters to buy credits from companies that pollute less — thereby creating financial incentives to fight global warming.

John Harrison, a security analyst at Singapore's S. Rajaratnam School of International Studies, said that the carbon emissions trading market is relatively new and crime gangs are taking advantage of loopholes in regulation. "They will use new markets to try and launder their money, and particularly if these new markets are not well regulated yet," he said.

APG is an international organisation that is closely affiliated with the Paris-based Financial Action Task Force.

Hook said the region's money-laundering activities had wider, international connections.

"More and more money laundering and terrorist financing we are seeing are in reality transnational crimes so the web of international connections is extremely important," he said.

APG co-chairman Tony Negus, who is also the commissioner of the Australian Federal Police, said the ease of movement and communications have made the fight against organised crime more difficult.

"These days syndicates move across jurisdictions and across the world with ease with increased travel and increased electronic transfers," he said.

An Inconvenient Fraud

I don't know what I think about the issue of Global Warming/Climate Change. I say "Climate Change" because I think that is a better term than Global Warming, simply because "global warming" implies that the whole planet gets noticeably hotter, and that's not the issue in many areas. It is actually when abnormal weather patterns in a particular region becoming more common. For example, it seldom snows in Dallas Texas, but this past winter 2010 (and the first day of spring), Dallas set a record for snowfall and colder temperatures. It snowed last year, too. If climate change is a real phenomenon, that sort of weather will become more common. Climate change also occurs  as a case of extremes: winters becoming colder with more storms, summers becoming hotter with less rainfall. In Dallas, you can make a case that both those seasons have been extreme recently, even a few years ago when Dallas had its coolest summer ever due to record rainfall (and flooding). Extremes in seasonal  weather, uncommon weather patterns, increased number of extremely severe storms - these are the red flags of climate change, rather than a "noticeable case of global warming." It's a very real possibility that "global warming" can trigger an ice age in the future, too, which REALLY blows the minds of people who deny climate change/global warming outright.

Those who proclaim it's real have taken some hits in credibility lately, and some of them seem to be the potential beneficiaries of climate change legislation, for instance, like Al Gore, who stands to gain billions of dollars in the carbon credit swap/tax legislation being considered by congress. What I've read of that plan, regardless of whether climate change is real or not, is that this is a really bad way to fix the problem while making rich corporations/individuals even richer. How does it help the planet for major polluters to swap carbon credits with low or no polluters when it still results in the same amount of pollution entering the atmosphere? It amounts to a tax which goes into the pockets of private account holders. Screw that.

So while I lean more to the possibility that climate change is real but that no feasible method of preventing it has been proposed, I do cast a skeptical eye at the motivations of those championing climate change legislation. They seem like snake oil salesmen exploiting a real cause for their own benefit. Like television evangelists...

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