Cross-posted from the Breakthrough Generation blog...

By Jerome E. Roos, Breakthrough Fellow

Cap and trade has died. Last week, Democrats pulled the plug on an ill-fated climate and energy bill. The climate policy paradigm that reigned supreme for over a decade has finally collapsed under its own weight. And - believe it or not - that is a good thing for us all.

Cap and trade was structurally flawed from the outset. From Kyoto to Copenhagen, it left a trail of failed climate conferences, false promises and stillborn bills in its wake. It is time to move on and embrace a bold new approach in our fight against climate change - one revolving around epic government investment aimed at unleashing a clean energy revolution. Rather than trying in vain to make fossil fuels more expensive, we should focus our efforts on making clean energy cheap.

Continue reading "Cap & Fail: The Collapse of our Climate Policy Paradigm" »

[Updated 5/22/09: the ACES bill now includes a $10/ton price floor for auctioned pollution permits. The analysis below has been updated to reflect that change in the legislation]

Today, the House Energy and Commerce Committee began markup of the American Clean Energy and Security Act of 2009 (ACES). The bill promises to cap and reduce carbon pollution, create clean energy jobs, and spur technology innovation. Unfortunately, as our analysis of the use of carbon pollution allowances in the ACES bill revealed, the bill is on course to invest very little of the hundreds of billions of dollars in value created by the bill's cap-and-trade program over the coming years towards those objectives.

Most of the allowance value (74 percent) created by the ACES cap and trade program is dedicated to blunting the impact of the carbon price established by the program on industries and consumers (and securing the critical swing votes on the committee representing these entrenched energy and industry interests). In contrast, just 12 percent of the allowance value is dedicated to clean energy investments, broadly defined.

At an average allowance price of $10 to $20 dollars per ton of CO2 between 2012-2025, that would amount to clean energy investments of just $6-12 billion per year, and just $490-980 million for clean energy R&D (see our full analysis of the allowance allocations in ACES for more).

President Obama has repeatedly promised to, "Invest $150 billion over ten years in energy research and development to transition to a clean energy economy" (from WhiteHouse.gov). The President's 2010 Budget Outline specifically dedicated $15 billion per year in new revenue generated by a cap and trade program to this purpose. Yet the bill before us, depending on the allowance value it establishes, would invest just one-fifteenth to one-thirtieth of the $15 billion President Obama has pledged -- and specifically requested from Congress. Furthermore, this new energy R&D spending may amount to just a ten percent increase in current federal energy R&D budgets.

Likewise, the total investments in a new clean energy economy, more broadly defined, are an order of magnitude smaller than proposals advanced by the Breakthrough Institute, Apollo Alliance and others have deemed necessary to drive clean energy innovation, create millions of new energy jobs, and jump-start a prosperous, clean energy economy.

Below the fold, you can see how the clean energy investments made by the ACES bill compare with what a range of proposals and current R&D funding levels...

Continue reading "Climate Bill Analysis, Part 2: Clean Energy R&D Investment May Be 30 Times Smaller than President Obama's Budget" »

As we predicted back in March, Cap and Trade is going under Down Undah. Several outlets are reporting that Australian Prime Minister Kevin Rudd has promised to shelve the implementation of his proposed cap and trade system until 2011 in an apparent effort to quell concerns that the carbon pricing plan will impact the Aussie economy and shore up support for the controversial proposal in the testy Australian Senate.

To date, Rudd and his center-left Labor Party have already offered numerous industry-friendly concessions, including free allowances for major polluters as part of a so-called "global recession buffer." It wasn't enough to find the necessary votes, so today, Rudd announced even more concessions, including: more polluter giveaways; a delayed start for the program's cap and trade scheme, which won't go into effect until July 2011; and a fixed price for carbon emissions permits of just $10 (AUS) per ton of CO2 for the first full year of the program after that (through July 2012).

Continue reading "Australia Shelves Cap and Trade" »

The 'interwebs' are abuzz today with the surprise announcement that moderate Republican Senator Arlen Specter of Pennsylvania is switching parties and plans to run as a Democrat when he makes his 2010 re-election bid.

The move is clearly a powerful symbol of how far to the right the Republican Party has moved in recent years. What it means for policy is less clear.

Senator Specter's membership in the Democrat ranks would nominally give the party the sixty votes necessary to overcome the near-constant threat of Republican filibuster in the Senate (assuming Democrat Al Franken wins the contested court battle that will decide Minnesota's senate seat). That has prompted a sudden burst of optimism about the prospects of contentious Democratic policy priorities, including health care reform and climate change legislation.

ClimateProgress's Joe Romm blithely asserts, for example, that Senator Specter's new party allegiance will mean he'll change his stance on climate legislation. "One assumes that if he is going to seriously run as a Democrat, he'll support an energy and climate bill," Romm wrote today.

More astute observers, however, quickly recognize that Senator Specter's move changes little in the landscape of climate politics. For serious advocates of urgently needed and effective climate legislation, it's not hard to see why. We simply have to ask ourselves: does the "D" next to this free-thinking Senator's name suddenly change his vote on climate legislation? Of course not.

Continue reading "Senator Specter Changes Parties, Doesn't Change Climate Politics" »

Cross-posted from David Douglas' Near Walden blog

In my role of Chief Sustainability Officer at Sun, I take part in an annual discussion of whether the company should purchase carbon offsets as part of our GHG reduction plan. Since we can buy carbon offsets at a price which is lower than what it costs us to reduce our GHG directly, we have four different approaches available to us:

1. use offsets to report a greater emissions reduction at the same price as if we only did internal projects
2. use offsets to report the same emissions as internal projects, but at a lower price
3. ignore offsets and just do internal projects
4. some mix of offsets and internal projects

So far, each year we have elected to only invest in internal projects. Our rationale is that we can help the company and the environment with that choice -- the company gets more efficient and the we lower our direct GHG emissions. Furthermore we find that this rationale is applicable to each marginal dollar of investment, so that we end up only investing in internal projects as opposed to a mix. This means that the emissions reductions that we report aren't as low as they theoretically could be, but that's a tradeoff that we think makes sense for us, since we keep reducing our own emissions instead of paying others to reduce theirs.

As it thinks about creating a cap and trade system, the US Government faces the same decision: do we allow international offsets in order to keep costs down and/or make the results look better, or do we stick to investing within the country?

Continue reading "International Carbon Offsets: The Next Trillion Dollar Issue" »

For advocates of immediate and strong climate and clean energy legislation, there's one man we should all be paying close attention to: Senator Sherrod Brown (D-OH).

Senator Brown is one of several Democratic Senators from America's 'Heartland' states that form the critical swing block of legislators that will need to support any climate and clean energy bill that hopes to cross the critical 60-vote threshold in the Senate. Along with a small handful of potential Republican swing votes, these Heartland Democrats have to get behind strong climate policy if we want to see it enacted anytime soon.

Senator Brown has spoken eloquently on multiple occasions about the power of clean energy technologies to revitalize the hard-hit industrial communities of Ohio and other Heartland states. Just this week, the Ohio Senator penned an op ed in the Capitol Hill paper Roll Call declaring that the time is now to enact strong climate policy:

"If we care about the world in which we live and the generations that will follow us, then we must no longer dismiss the lethal risks global warming poses to our planet. We must craft an aggressive strategy to combat global warming, and we must do it now. ... Inaction is not an option."

And yet, the Senator has not pledged support for a specific climate policy. He was among 10 Democratic Senators who signed a letter (pdf) last June, saying they couldn't support climate legislation that resembled the Lieberman-Warner Climate Security Act, which had just been defeated on the Senate floor. That group now includes five more Democratic Senators, and other Democrats have joined a group led by Senator Evan Bayh of Indiana to stake their claim on climate policy as well.

Senator Brown is still on the fence, and as the old saying goes, 'the devil is truly in the details:' if the details of climate and clean energy legislation make it something Senator Brown can support and even champion, then there's a decent shot of seeing the remaining swing Senators jump on board, putting 60 votes within reach. On the other hand, if Senator Brown can't support the proposal because he's not convinced it's in the best interests of Ohio or the nation, then kiss hopes of climate action this year good bye.

It's simple: if we want to pass policies that will truly catapult the United States into a clean and prosperous energy economy, slash global warming pollution, and make clean energy cheap and abundant, we need to pass the "Sherrod Brown Test."

Continue reading "The Sherrod Brown Test: Finding Consensus on Climate Policy" »

By Michael Shellenberger and Ted Nordhaus

We have a post up at Salon today that criticizes cap and trade legislation in the House (Waxman-Markey). We argue that it cannot achieve the clean energy revolution we need. Compromises will no doubt be necessary to pass climate legislation in Congress, but as currently drafted, Waxman-Markey looks like it will make all the wrong compromises, allowing firms to buy dubious and sometimes phony carbon offsets rather than invest in clean energy, giving away billions of pollution allocations to incumbent energy interests for free, and committing a fraction of the funds needed for direct public investments in clean energy research, development, and deployment.

We propose an alternative cap and trade, which would explicitly cap the price of carbon dioxide pollution at roughly $10 per ton, rising over time, would auction all pollution allowances with no free giveaways and no offsetting, and would use the vast majority of the revenues, about $60 billion a year, to fund the accelerated development and deployment of clean energy technologies. We believe that such a solution would more rapidly achieve the technological innovations we need at a lower cost. It is also great politics, given strong public support for government investment in clean energy technology. This is the same position we have held since 2007, when we laid out this basic approach in Break Through and other writings.

Continue reading "The Cap and Trade We Need" »

Congressman Henry Waxman says, "by and large," the revenues from climate and clean energy legislation should be reinvested in clean energy technologies, Bloomberg News reported Friday.

The statement is a marked improvement over Congressman Waxman's appearance on PBS' Tavis Smiley show last Monday, when he seemed to indicate that the primary driver of clean energy technology innovation and deployment would be the higher prices on dirty fuels set by proposed cap and trade legislation and made little mention of the critical role public investments in clean energy can and must play in accelerating the birth of a clean, prosperous energy economy.

Like Speaker of the House Nancy Pelosi's prior statements that cap and trade is designed to "pay for some of these investments in energy independence and renewables," Waxman's latest remarks could indicate a growing consensus among House leadership that carbon revenues should be primarily used to spur clean energy technologies and accelerate the transition to a clean, new energy economy.

Congressman Waxman, who chairs the House Energy and Commerce Committee set to draft climate and clean energy legislation over the coming weeks, was also openly critical of President Obama's proposal to send the bulk of revenues raised from a proposed cap and trade system back to taxpayers in the form of middle class tax cuts. Bloomberg quotes the Congressman as saying:

"I don't think that's the best use of it [carbon revenues]," Waxman said. "By and large" it should be spent on green technologies, he said, and part of it could be used to "help consumers with higher energy costs" and hard-hit industries, "especially coal."

The draft climate and clean energy bill circulated three weeks ago by Congressman Waxman and Congressman Edward Markey (D-MA) (who chairs the subcommittee taking the first crack at the bill beginning this week) made little commitment to the public investments necessary to spur clean energy innovation and accelerate the deployment of clean energy technologies. Waxman's statements last week indicate that commitment may be coming soon, as Markey and Waxman begin the real work of drawing up the climate and energy legislation they hope to send to the House floor by Memorial Day.

Continue reading "Waxman: Carbon revenues should "by and large" be invested in clean technology" »

Cross-posted from Prometheus: The Science Policy Blog

Today's ClimateWire has a story about the debate over the costs of cap and trade:

From the halls of Congress to the Massachusetts Institute of Technology, experts and politicians are hoisting conflicting numbers describing the cost of a cap on greenhouse gases, with amounts from $3,100 to $324 to zero being touted as the annual hit on households. As Congress returns this week, it will find a cloud of numerical discrepancies hovering over climate change legislation.

This is a great example of the consequences of how issues are framed in political debate. If the framing is "costs" of cap and trade legislation, the Republicans will win the political debate, regardless of whose numbers turn out to be right. Of course, the reality is that cap and trade can be designed in any way you'd like with high or low (or zero) costs. But remember that the theoretical basis of cap and trade is that energy prices will increase, so low or zero cost increases will have low or zero effect on emisisons.

The political point is that if the debate hinges on costs, Republicans have the upper hand because if Democrats respond with claims of low or zero costs, and if this turns out to be untrue, then such claims will become a political liability. But if the claims of low costs turn out to be true, they will gut the policy from the standpoint of emissions reductions, and thus become a political liability.

Bottom line: Democrats cannot win the cap and trade debate if the issue is framed as costs to American households.

Is the cap and trade system at the core of the draft Waxman-Markey climate and clean energy bill full of hot air? That's what a new report from two environmental organizations warns.

Rainforest Action Network and International Rivers released an initial analysis (pdf) of the Waxman-Markey climate and energy discussion draft yesterday. The two environmental groups conclude that the cap and trade regulations established by the bill would be "blown to pieces" by the up to two billion metric tons of carbon offsets the bill allows polluters to use in lieu of pollution permits.

Despite all of the talk of establishing hard caps on global warming pollution, the use of so many offsets would stuff the cap full of hot air, making it not much of a cap at all. The report concludes:

Unfortunately the "firm" caps exist only on paper. In reality, the caps will be blown to pieces by allowing polluters to meet their emission reduction responsibilities through buying offset credits rather than reducing their emissions.

If the full amount of offsets allowed by the Waxman-Markey draft legislation were utilized by polluters, the report concludes that any actual emissions reductions in capped sectors of the U.S. economy would be delayed until 2026, allowing a full seventeen years of continued business as usual. (See figure below...)

Continue reading "Is Waxman-Markey's "Cap" and Trade System Full of Hot Air?" »

By Teryn Norris & Jesse Jenkins
The Huffington Post
April 7th, 2009

If Democrats want to win on climate policy, they must think fast and move quickly to regain control of the debate. Last week was the opening round of the national climate fight, and the Democratic Congress was nearly knocked out.

It began on Tuesday with the introduction of a major climate bill by Democratic Congressmen Waxman and Markey. The proposal made a fateful choice: it threw out President Obama's "Apollo" plan for investing $150 billion in clean energy and focused instead on meeting the demands of leading environmental organizations, emphasizing cap and trade regulation and a laundry list of electricity and efficiency standards.

Meanwhile, the response to climate legislation in the Senate was swift and harsh, with Republicans deftly maneuvering to secure the political high ground. Senator Thune (R-SD) introduced an amendment to the budget (which as originally proposed had included revenues from carbon cap and trade) declaring that any climate legislation should "not increase electricity or gasoline prices," which quickly passed 89 to 8. Senator Ensign (R-NV) then proposed an amendment stating that climate policy should not result in higher taxes on the middle class, passing unanimously (98-0). These votes effectively put all but a handful of Democratic Senators on the record opposing policies to raise the price of dirty energy -- the central purpose of cap and trade regulation, including the provisions at the heart of the Waxman-Markey bill.

What went wrong? The Democratic Congress made a critical mistake in following the direction of leading green groups like Environmental Defense Fund and the Natural Resources Defense Council. By tossing out Obama's energy investment plan and focusing on carbon pricing and regulation, Democrats allowed Republicans to quickly and easily frame the entire debate around increased energy prices and economic costs. That's a fight Republicans take up with relish -- and one they will surely win.

Continue reading "How Democrats Can Win the Climate Debate" »

A major new climate bill hit the House of Representatives this week and was met with deft political maneuverings from Senate Republicans that could render cap and trade dead on arrival. The Breakthrough Institute team has the angles covered:

Jesse Jenkins says this new climate bill is proof of misplaced priorities as the leading green groups setting the climate agenda walk away from billions of dollars in critical clean energy investments in favor of regulations, standards and carbon pricing. See also "Climate Bill is All About the Coal Hard Cash" at Huffington Post and listen to Jenkins talk about the Markey-Waxmen bill on KPFA radio.

Meanwhile in the Senate, two Republican amendments may leave cap and trade with no where to go. In reaction to the House climate bill, the Senate this week voted 89-8 to preemptively reject any cap and trade bill that increases consumer energy prices and voted 98-0 to ensure that any climate bill protects middle-income taxpayers from any tax increases.

Roger Pielke jr. thinks the Thune Amendment may have preemptively killed cap and trade and says Republicans have outflanked Democrats on climate already with the Ensign Amendment.

Michael Shellenberger sees these votes as the clearest rejection yet of the pollution pricing paradigm and examines the artful political maneuverings at play.

Ted Nordhaus is left worrying that the climate bill is on a crash course for compromise that will leave us stuck with the worst of both worlds: a climate policy lacking both a price signal sufficient to drive private investment anywhere near the scale we need and NO money for public investments in an RD&D strategy sufficient to make clean energy cheap.

Teryn Norris and Jesse Jenkins outline what Democrats can do to regain the political high ground and win the climate debate in this op ed, featured at Huffington Post. If Democrats want to win, they should quickly follow President Obama's lead by shifting the focus of climate legislation from pollution regulation to bold government investment in the clean energy economy.

As Congressional Democrats and DC greens gear up to fight for cap and trade, yet another another public opinion poll shows voters want investments in clean energy, not new taxes or regulations.

While Congressional Democrats and leading green groups insist that what the public wants is cap and trade to deal with climate change, yet another poll was released today showing voters want investments in clean energy, not new taxes or regulations.

If I were a Republican, I'd be relieved to have climate legislation to attack right about now...

Here's a quick look at the highlights from the new Public Agenda/Yankelovich poll...

Continue reading "Congress Debates Pollution Pricing; Public Wants Clean Energy Investment" »

We are now witnessing the inevitable entailment of putting pollution caps and climate at the center of the political proposition.

Everyone is all for capping carbon until it comes time to pay for it. Then it is a consumption tax and few politicians and voters are prepared to support it. It inevitably leads to a debate centered on the costs and regulations, not the social benefits of the policy.

The Apollo approach, which puts the immediate social and economic benefits - a clean energy economy, energy independence, new industries that can create good jobs - at the center of the debate and uses modest carbon price revenues to pay for it has always been vastly more robust to the kinds of political attacks that we are seeing this week. The debate becomes about whether or not we are going to make these investments in America's future - not whether or not we are willing to take our medicine in order to avoid the end of the world. But making this move requires more than simply swapping out the picture of the polar bear on the front page of your newsletter for a picture of a construction worker. It requires taking the investment agenda seriously and making it the central objective of policy.

The choice that greens and sympathetic policy makers will have in the coming months will be whether to move to this kind of plan B or accept a cap and trade bill that is likely to provide neither a very significant price signal nor any serious money for RD&D.

Continue reading "The Worst of Both Worlds: Climate Bill on Crash Course for Compromise" »

Cross posted from Prometheus: The Science Policy Blog

As I mentioned yesterday, some stark political lines are being drawn in the Senate on cap and trade legislation. The Thune Amendment had 89 members of the Senate going on record opposing any increases to electricity or gasoline prices as a result of cap and trade legislation. In the Senate yesterday another important amendment to the Budget Resolution was approved unanimously, 98-0, sponsored by Senator Ensign (R-NV), chair of the Republican Policy Committee. Here is its text:

To protect middle-income taxpayers from tax increases by providing a point of order against legislation that increase taxes on them, including taxes that arise, directly or indirectly, from Federal revenues derived from climate change or similar legislation.

What does this amendment mean?

It means that money raised from cap and trade (or even a carbon tax) cannot lead to a net increase in the overall tax burden on the "middle class." What is "middle class"? According to Senator Ensign in a press release trumpeting the amendment, it includes those households earning less than $250,000 per year. Senator Ensign cites the President on this point, referring back to his campaign promises not to raise taxes on this group.

Politically and practically, this amendment could then mean that proponents of cap and trade will need to pursue an explicit "cap and dividend" approach with any such policy being tax neutral for those earning less than $250,000 per year. In other words, the costs of cap and trade will have to be fully borne by those earning above $250,000 per year. Some of the challenges of the distributional effects of cap and trade are discussed in recent CBO testimony (PDF). Whether or not legislation can be written that allows supporters to claim to have met the spirit of the Ensign Amendment, it is clear that the Amendment makes the political challenge that much more difficult.

Continue reading "Senate Republicans Outflank Dems on Climate" »

Cross posted from Prometheus: The Science Policy Blog

The ability of Congressional legislation on cap and trade to result in actual emissions reductions was dealt a serious blow yesterday. An Amendment was introduced by Senator John Thune (R-SD) on the Budget Resolution and its text is as follows:

To amend the deficit-neutral reserve fund for climate change legislation to require that such legislation does not increase electricity or gasoline prices.

What is this? Climate change legislation cannot increase electricity or gasoline prices? The entire purpose of cap and trade is in fact to increase the costs of carbon-emitting sources of energy, which dominate US energy consumption. The Thune Amendment thus undercuts the entire purpose of cap and trade.

Continue reading "Did the Senate Just Preemptively Kill Cap and Trade?" »

Breakthrough director of energy and climate policy Jesse Jenkins appeared again today on KPFA radio in the Bay Area, talking on The Morning Show about the newly released Markey-Waxman climate bill "discussion draft."

You can listen to the segment below (apologies for the rapid talking!), which begins about 1:34 into the show:

Marking the starting bell in the long-promised fight over the nation's energy future, Congressmen Henry Waxman (D-CA) and Ed Markey (D-MA) introduced a climate and energy legislation "discussion draft" yesterday.

As Beltway insiders have repeatedly "reminded" me, this is "just a discussion draft," and its final form may be much different. But just looking at what's in this bill so far -- and just as important, what's not -- paints a clear picture of misplaced priorities and a bill in critical need of some "course correction."

Even a cursory read of this "American Clean Energy and Security Act" (ACES) -- and I've read far more of this 648 page bill than I'd like! -- speaks volumes to the priorities of the various parties driving this debate so far - namely the green groups and big industry players already cutting deals as part of the U.S. Climate Action Partnership.  This bill should be proof, once and for all, these leading greens will throw clean energy investments overboard to preserve precious regulations and an increasingly compromised "cap" on carbon.

Continue reading "New Climate Bill Proof of Misplaced Priorities" »

Republicans deftly succeeded in calling greens and Democrats on their bluff that cap and trade won't cost anything, winning yesterday an 89 to 8 vote on a resolution stating that any climate legislation must not raise gasoline or electricity prices. The Senate vote is timed to coincide with yesterday's release of a climate bill "discussion draft" in the House (more on that bill from the Breakthrough Blog coming soon).

The implications of this vote are that just eight out of 100 senators believe, and have the courage of their convictions, to openly state that fossil fuel prices should rise to deal with climate change. That is to say, there are only eight senators who agree with Thomas Friedman, EDF, NRDC, David Leonhardt, AEI, and all the others who believe that the most important, and perhaps only thing we should do to combat climate change and drive clean energy innovation is to set a price on carbon.

Continue reading "Senate Says No to Pollution Pricing Paradigm" »