After much self-congratulation over passing a massive financial regulatory bill, the U.S. Senate has punted on pricing carbon. That decision is likely to have a bigger long-term impact on the U.S. economy, and not in a good way.
Senate leaders yesterday conceded they don’t have the votes to put a price on carbon. Instead, they’ll try to pass a pallid energy bill that raises liability caps on oil companies and makes modest gestures toward energy efficiency. Even the catastrophic BP oil spill, it seems, was not enough to overcome lawmakers’ fear of being accused of raising taxes on energy as the economy struggles, even though a carbon price wouldn’t have gone into effect for several years.
Well, there’s always next year — except that the midterm election will likely bring in more Republicans wedded to climate denial and cheap fossil fuels. So the Senate’s failure to act is a costly setback from an economic, security and environmental perspective. It will prolong America’s dependence on oil and fossil fuels, worsen our trade deficit, retard investment in clean technology and low-carbon fuels, and forfeit leadership in energy innovation to other countries. And it means the United States won’t do its part to lower carbon emissions and thereby stop overheating the planet.
All this suggests progressives will have to rethink their approach to achieving a low-carbon economy. Not only is “cap and trade” dead, Majority Leader Sen. Harry Reid (D-NV) said those words are no longer in his vocabulary.
PPI has long considered pricing carbon the sine qua non of progressive energy policy, although we have been agnostic as to how. We helped to design the cap and trade architecture in several pathbreaking legislative proposals (the Lieberman-McCain and Lieberman-Warner bills, as well as Senator Tom Carper’s “4P” bill), and proposed a “tailpipe trading” system to cover auto emissions. We continue to believe that cap and trade offers the twin advantages of environmental certainty — a quantifiable limit on the amount of carbon Americans emit – and strong incentives for companies to invest in energy efficiency and innovation.
At the same time, however, we’ve endorsed a straight up carbon tax, as well as setting a “floor” under oil prices to prevent their volatility from inhibiting investments in clean fuels. The key is to price carbon realistically, by taking into account the “externalities” not included in the price of gas at the pump (or coal for that matter): the hundreds of billions we spend each year to assure access to fossil fuels, as well as the environmental damage done by concentrating greenhouse gases in the atmosphere.
To free market fundamentalists, ending such implicit subsidies to fossil fuels is tantamount to raising taxes on energy. So be it. We need to raise the cost of burning fossil fuels and lower the cost of low-carbon alternative fuels. This is a matter of urgent national interest, and President Obama will need to propose a new clean energy strategy to the next Congress.
Photo Credit: Americaspower’s Photostream