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Cape Wind a Win for the Clean Energy Economy

Posted on by The Progressive Policy Institute

In recent months, we at PPI have been doing our level best to call the nation’s attention to a bright green section of the map in the northeast, where Massachusetts is leading the way on virtually every front of environmental regulation and the building of a clean economy. Yesterday, Massachusetts found itself leading the way yet again, as the Obama administration announced the approval of the Cape Wind project, an offshore wind farm off the coast of Cape Cod.

We at PPI weren’t surprised. We had heard the inside word on the progress of the Cape Wind project in a meeting we held several weeks ago with several dozen New England business leaders, energy entrepreneurs and activists, featuring Ian Bowles, Massachuetts’ pathbreaking secretary of energy and environment. As Bowles told the crowd in early March, Cape Wind had passed most of its regulatory and litigation hurdles, and the administration was likely to support it.

Bowles was an unqualified supporter of the project, which promises — over a quixotic range of objections from various local NIMBY opponents — to provide a highly promising clean source of energy for Massachusetts. Cape Wind is rated to produce up to 468 megawatts of wind power, with average production of be 170 megawatts — almost 75 percent of the 230 megawatt average demand for Cape Cod and the Islands of Martha’s Vineyard and Nantucket.

Now that it’s a go, Cape Wind will become a pilot project for the nation and for President Obama’s push for a clean energy economy, a broad, innovative agenda that encompasses (among others) wind power, nuclear energy and myriad efficiency projects that will gain us millions of “negawatts.” Interior Secretary Ken Salazar’s announcement of the administration’s support for Cape Wind is another chapter in this still-being-written book about the nation’s future — whose pages open, fittingly, where our history begins, in Massachusetts.

Clinton Talks Deficits and Debt at Fiscal Summit

Posted on by The Progressive Policy Institute

Politicians, especially at the national level, have little credibility on matters of fiscal discipline. Bill Clinton is an exception.

As president, Clinton inherited fast-rising budget deficits that threatened to capsize an economy emerging from recession. He made deficit reduction a top priority, incurring the wrath of liberals who accused him of governing like an Eisenhower Republican. Such complaints evaporated as jobs and economic growth surged in the late 1990s, and Clinton handed his successor budget surpluses.

In an act of monumental political irresponsibility, George W. Bush promptly squandered the surplus on big tax cuts and a $1 trillion-plus Medicare prescription drug entitlement that Republicans simply added to the nation’s charge account.

So it was worth listening to Clinton speak about the fiscal challenge facing President Obama, as he did today at a big “fiscal summit” in Washington sponsored by the Peter G. Peterson Foundation.

“I think this is a national sovereignty issue,” said Clinton, noting that foreign creditors hold 48 percent of America’s debt. As that debt grows –- Clinton’s treasury secretary, Bob Rubin, cited projections that it could reach 130 percent of GDP by 2030 –- so will the influence over U.S. policy of foreign bondholders.

As America grows older, Clinton said, “delivery systems” like health care and education become rigid and society in general tends to put a premium on security. It’s no accident that the government’s biggest programs are defense, Medicare, Medicaid and Social Security. By letting this programs continue to eat up a greater share of national output, politicians put a severe squeeze on discretionary programs that invest in the well-being of children and families.

“The future always has a smaller constituency than the present,” the former president said. “We’ve got to be a tomorrow country. We can’t do it if we mortgage our future to people in other countries.”

Clinton also noted that Congress is not organized to deal with America’s fiscal crisis. Congressional committees expand programs and mint new ones; none is charged with putting America back on a sustainable fiscal course.

Since Congress also punted on forming a deficit reduction commission, President Obama has been forced to empanel his own. As it met yesterday at the White House for the first time, Obama vowed that “everything will be on the table.”

Thanks to the cost of bailing out the financial sector and mitigating a severe recession, Obama faces a bigger fiscal challenge than Clinton’s. Budget deficits are now running at about $1.3 trillion a year, a whopping nine percent of GDP. The president’s commission needs to come up with a plan for whittling deficits down to size. But it’s even more important, as Clinton argued, to attack the structural roots of exploding debts, lest America lose control of its own economic destiny.

Photo credit: https://www.flickr.com/photos/bestrated1/ / CC BY-NC-ND 2.0

Health Care Lies Are Powerful

Posted on by The Progressive Policy Institute

One of the most unnerving aspects of the recent health reform debate was the extent to which opponents of various Democratic plans (usually lumped together as “ObamaCare”) embraced and promoted outright falsehoods, most famously the idea that the legislation would encourage euthanasia-by-rationing.

Brendan Nyhan now has an important article at The Forum that not only looks at the role of deliberate misinformation in the “ObamaCare” debate, but compares it to a similar Big Lie that “stuck” during the earlier debate over the Clinton administration’s health reform proposal (i.e., the claim that the proposal would eliminate the ability of Americans to choose doctors). He notes the seminal role of pseudo-wonk Betsy McCaughey in both episodes of disinformation, and the importance of partisan conservative media in reinforcing fabricated claims.

Nyhan’s conclusion is sobering:

The evidence presented in this article suggests that misinformation played an important role in the two most recent debates over health care reform. While some critics have faulted the response of the Clinton and Obama administrations to these charges… the argument presented in this article suggests that political myths are extremely difficult to counter. For instance, proponents of reform might attempt to address concerns in the bill-writing process, but Betsy McCaughey’s 1994 article suggests that such disclaimers can be distorted or ignored. And false claims with no actual basis in legislation such as the “death panel” myth are especially insidious precisely because they cannot be addressed in the bill itself. As a result, until the media stops giving so much attention to misinformers, elites on both sides will often succeed in creating misperceptions, especially among sympathetic partisans. And once such beliefs take hold, few good options exist to counter them—correcting misperceptions is simply too difficult.

A particularly depressing finding of Nyhan’s is that belief in Big Lies about health reform actually increased among those Republicans who thought of themselves as well-informed on the subject. This reflects the experience many have had with conservative talk radio or Fox News fans who feel “empowered” by the “truth” about liberal policy ideas or politicians, and are exceptionally resistant to contrary facts or “objective” referees of the facts. Any progressive who’s done conservative call-in shows (or had extended discussions with conservative-activists friends or family) and dealt with inquisitors who perpetually suggest they are “on to you” and have divined your secret plans and motives knows exactly what I am talking about.

It’s almost certainly unfair and counterproductive, and in any event a waste of time, to criticize consumers of deliberate misinformation as ignorant. When it comes to complex topics like health care, even extremely well-informed people filter information — or misinformation — via ideological presumptions, partisanship, and the “trust factor” of where they turn to become informed.

The better course, as Nyhan argues, is to focus on the elites who invent and disseminate misinformation, and relentlessly undermine their bogus credibility. Serial offenders like McCaughey should be hooted off the public stage when they pop up again (as did, to some extent, happen during the ObamaCare debate). And politicians who retail misinformation should be held accountable just as much. Personally, I wish that much of the vast progressive sea of contempt for Sarah Palin’s rhetoric and mannerisms would instead be channeled into a relentless focus on her huge and unrepentent role — via a Facebook post, no less — in turning the lie about government-encouraged euthanasia into the Big Lie of “Obama death panels.” This despicable act, aimed at terrifying seniors and the families of those with disabilities, not her general lack of intellectual curiosity or her inexperience in governing, is what should disqualify her from any elected office at least until she confesses and seeks absolution.

This item is cross-posted at The Democratic Strategist.

Photo credit: https://www.flickr.com/photos/andrewaliferis/ / CC BY-ND 2.0

Confronting Iran: The Case for Targeted Sanctions

Posted on by The Progressive Policy Institute

The following is a guest column from Pirooz Hamvatan, a pseudonym for a Washington, D.C.-based analyst focusing on Iranian domestic and security issues, and Ali K., currently a business student in the U.S. and a supporter of Iran’s Green Movement who was severely beaten by the Basij militia during a peaceful demonstration in Tehran last year.

Congress is on the verge of sending a petroleum sanctions bill to President Obama that has wide bipartisan support in Congress. But far from posing a serious challenge to the regime, the bill could in fact inadvertently undermine long-term U.S. interests by weakening the Iranian civil rights movement and strengthening President Ahmadinejad and his cronies.

The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2009, currently in conference committee, will direct the president to impose sanctions on any entity providing Iran with “refined petroleum products” worth $200,000 or more per transaction, or $1 million per year. The bill defines refined petroleum products to include diesel, gasoline, jet fuel and aviation gasoline.

The new bill aims to cripple Iran’s economy in response to Iran’s refusal to halt its nuclear program. But the sanctions being proposed are not the right answer. Such a sweeping measure would end up only hurting ordinary Iranians, especially the middle class that the U.S. must shore up to improve Iran’s chances for reform.

Instead, our top priority should be helping to increase the space for the Iranian civil rights movement. That means moving beyond the limited focus on “solving” the nuclear issue. An Iranian government that is more accountable to — and representative of — its moderate majority would not pose a security threat to the U.S. and its allies. Rather than heavy-handed sanctions, the Obama administration should consider restrictions that are more targeted, which would hit the ruling regime where it hurts, and increase the possibility of change from within.

The Wrong Path

Introduced in the House by Rep. Howard Berman (D-CA) and in the Senate by Sen. Chris Dodd (D-CT), the sanctions bill currently in conference aims to limit Iran’s access to gasoline in the hopes that the suffering population will pressure the regime to give in to Western demands. But if the end goal is to induce Iran to be a more responsible regional actor that doesn’t threaten U.S. security interests, then petroleum sanctions are likely to achieve the opposite effect.

Just look at the experience of the last couple of decades. In 1995, in response to Iranian pursuit of nuclear technology and support of terrorism, President Clinton issued two executive orders prohibiting American investment in Iran’s energy sector and banning U.S. imports of most Iranian goods. The following year, Congress passed the Iran-Libya Sanctions Act (PDF), calling for sanctions on foreign firms investing more than $20 million per year in Iran’s energy sector. Although such measures have impeded the development of Iran’s economy, they have not caused the Islamic Republic to change course on its nuclear program or its funding of groups like Hamas and Hezbollah. In fact, in order to achieve their foreign policy and domestic goals, Iran’s leaders have repeatedly demonstrated their willingness to let the Iranian people suffer.

Just as important, history has shown that crippling sanctions undermine the middle class — the very people who are the backbone of civil society and the voices of moderation. International sanctions on Iraq weakened its population, making them more reliant on, and more vulnerable to, Saddam Hussein’s regime. Gasoline sanctions on Iran could have a similar effect, exacerbating inflation, lowering the quality of life for the middle class and pushing more people below the poverty line.

Gasoline sanctions would also distract Iranians from President Mahmoud Ahmadinejad’s own mismanagement of the economy — an important issue mobilizing people around the Green Movement — and divert blame to the U.S. Iran is already facing a 20-percent inflation rate, a crippled domestic industry, unemployment of over 11 percent (with 24 percent of 15-to-24 year-olds unemployed), and one of the worst rates of brain drain in the world. Many Iranians are still seething over the fact that, since becoming president in 2005, Ahmadinejad squandered unprecedented oil revenues that the Islamic Republic accrued as a result of high world oil prices. Amid all of this, Ahmadinejad has backed a controversial measure that would phase out government subsidies on gasoline and is likely to increase inflation. The Iranian people are already facing enough hardship without the U.S. adding to their woes and diminishing the pro-American sentiments of a wide array of Iranians.

Nor will the sanctions loosen the regime’s grip on power. Ahmadinejad’s faction would, in fact, fare better than the majority of the populace. Masters of smuggling, Iranian Revolutionary Guards Corps members would still be able to bring in gasoline through Iran’s porous borders, perversely enriching themselves even more.

The Right Path

But if broad sanctions are a heavy-handed tool that could only risk the development of Iran’s civil rights movement, what options do U.S. policy makers have to challenge the regime?

A preferred approach would be something more targeted against those responsible for Iran’s actions: the members of the ruling regime. Congress should consider the following:

  • Pass a bill calling on the U.S. State Department to identify Iranian human rights abusers (primarily from within the Revolutionary Guards; the Basij, the regime’s volunteer militia; and the judiciary) and impose travel bans on them. The bill should also seek the cooperation of our allies in enforcing the ban as widely as possible and place pressure on key countries like Dubai to block entry to these individuals. The list of targeted offenders should be made public in order to show the Iranian people that the U.S. is on their side.
  • Pass a measure calling for human rights abusers’ assets to be frozen. Because Iranian officials have gone to great lengths to distance themselves from the U.S. financial system, the U.S. Treasury may not have much of a role to play here. Rather, such a measure would simply be a first step in convincing banks in Europe and the United Arab Emirates — where many regime insiders’ assets are squirreled away — to enforce restrictions.

What specific effect will travel bans have on hardline officials and their mid-ranking employees? Besides being a major inconvenience, it would hurt their pocketbooks. This is because a large number of these individuals have side-businesses in which they smuggle goods from places like Dubai, Thailand, Indonesia and Syria — buying, for example, electronic goods and bringing them back to Iran through Revolutionary Guard-controlled customs stations without having to pay import duties. They then sell these goods at highly marked-up prices in the isolated Iranian market. A strictly enforced travel ban — including on individuals working for these human rights abusers’ front companies — would close off a lucrative source of income.

To be clear, the overall intent of this plan is not necessarily to deal a significant economic blow to the entire hardline establishment — that would be next to impossible. Neither will it convince, in the short term, current Iranian leaders to change course on the nuclear program — no outside pressure will. Rather the strategy is to increase the disincentives for individuals to participate in or condone oppressive behavior, with the goal of helping the Green Movement flourish.

At the same time, it is important not to target certain high level officials who may have the capacity to play a role in moving Iran toward reform. For instance, while it may be justified to sanction Judiciary Chief Sadegh Larijani for allowing hardliners to abuse Iran’s legal system to persecute reformers, his brother Ali Larijani — the pragmatic conservative Speaker of Parliament and bitter Ahmadinejad rival — has not been complicit in human rights abuses, and thus should not be snared by the sanctions net. This nuanced targeting will send a signal to the regime’s officials that they will be left alone if they refrain from abusing their fellow citizens.

Moreover, certain Iranian leaders are sensitive to international accusations of human rights abuses. This is not for altruistic reasons, but because they want the Islamic Republic to be seen as a role model to the Islamic world, and not simply another run-of-the-mill Middle Eastern dictatorship.

To be sure, human rights sanctions alone may not alleviate the pressure currently being placed on Iran’s Green Movement. Regime hardliners could blame the U.S. for fomenting post-election unrest and paint Iran’s dissidents as Western spies. Republican Guard members and Basijis could continue their human rights abuses regardless of travel bans and asset freezes. But that is the status quo in Iran. There is little cost to the U.S. if human rights sanctions don’t work — and much to gain if they do.

A Broader, Pro-Reform Agenda

Human rights sanctions are not a silver bullet. They will not bring the regime to its knees. But neither will gasoline sanctions. Fortunately, it appears that the Obama administration is asking Congress to slow down its push for unilateral gasoline sanctions as the U.N. Security Council deliberates over its own sanctions during the next few months. Meanwhile, targeted sanctions against human rights abusers is being pushed by Sen. John McCain, though not as stand-alone legislation but as an amendment to the flawed gas sanctions bill.

A human rights sanctions package can be an effective part of a broader effort to help Iran’s Green Movement chart its own course toward a better future for Iranians. Other essential pieces to this strategy would include:

  • Rep. Jim Moran’s (D-VA) Iranian Digital Empowerment Act, which seeks to help get information-sharing software and filter-breaking technology into the hands of Iranian reformers.
  • Rep. Keith Ellison’s (D-MN) Stand With the Iranian People Act, which (in addition to calling for human rights abusers to be sanctioned) calls for suspension of U.S. government funding to entities that sell censorship and surveillance equipment to the regime, and seeks to ease restrictions on American charities that want to work in Iran.

Bills focusing on the Islamic Republic’s human rights abuses have an excellent chance of passing in Congress because they are politically appealing — they help legislators look tough on national security while promoting American values of freedom and democracy. Moreover, they avoid the danger that is inherent with sweeping economic sanctions: that of harming the people they were intended to help.

Moreover, U.S. passage of human rights sanctions could lead allies in Europe to follow suit. Although the U.N. Security Council is unlikely to do so — China and Russia are adamantly opposed to interfering in others’ domestic affairs — if the U.S. and European allies banded together to pressure countries like Dubai to enforce travel bans, sanctions would have a greater chance of success.

In the end, it is important to remember that the members of the Green Movement are fighting for reform within the Islamic Republic system. Their demands include an independent electoral commission, the release of all political prisoners and freedom of speech. Acknowledging that it is up to the Iranian people to chart their own course, the U.S. can best protect its own security interests by helping to level the playing field in Iran, allowing the moderate, peace-loving majority of Iranians to continue their journey toward a better future for their country and the broader Middle East.

 

The views expressed here do not necessarily reflect those of the Progressive Policy Institute.

The Bennett “Purge” Succeeding

Posted on by The Progressive Policy Institute

This won’t come as a big shock to those who have been watching events in Utah, but a new survey of delegates to that state’s Republican Convention on May 8 shows GOP Sen. Bob Bennett on the brink of being denied renomination. Under Utah’s system, only the top two contestants at the state convention can proceed to a primary. Bennett’s running third, behind movement-conservative favorite Mike Lee and businessman Tim Bridgewater, both of whom are blasting the incumbent for insufficient conservatism.

According to the Mason-Dixon survey of state delegates, Bennett’s favorable/unfavorable ratio among these partisans who will determine his fate is an abominable 28/61. The survey’s second-choice analysis also indicates that if Bennett manages to get into second place ahead of Bridgewater, Lee might then get enough support to pass the 60% threshold that would give him the nomination without the trouble of a primary.

“Bob Bennett is toast,” concludes RedState proprietor Erick Erickson, who’s been conducting an Ahab-level obsessive campaign against Bennett for months.

The message to other Republican candidates down the road is No Enemies to the Right! No Friends to the Left!

Bennett’s primary sin to conservatives was his cosponsorship (with Ron Wyden) of a bipartisan universal health care proposal. This should be a particular lesson to Mitt Romney, whose endorsement of Bennett in his semi-home-state did neither man a bit of good.

Meanwhile, having left Bennett for dead, the purgemasters of the Right like Erickson have moved on to new tasks, such as the destruction of former Sen. Dan Coats of IN, who faces a primary on May 4.

Update: Nate Silver has more on the byzantine nominating process used by Utah Republicans, and suggests Bennett may still have a slight chance of surviving — but only a slight chance.

This item is cross-posted at The Democratic Strategist.

Taking Liberties

Posted on by The Progressive Policy Institute

The following is an excerpt from Will Marshall’s essay in today’s Democratic Strategist. The piece is part of a Democratic Strategist/Demos online forum on “Progressive Politics and the Meaning of American Freedom.”

Freedom, says John Schwarz, is too important to be left to conservatives. No argument there. For too long, liberals have been flummoxed by conservatives’ success in posing as defenders of liberty against government encroachment. This stance has given the conservative cause a simple, reductive logic and ideological coherence that liberals lack – and often envy. It has enabled the right to tap the deep strain of anti-statism that really does make American politics exceptional.

Modern liberals have chafed at the constraint that this classically liberal understanding of freedom imposes on their social vision. For decades, they’ve struggled to articulate a countervailing principle that can trump the power of what Louis Hartz called America’s underlying “Lockian” consensus.

Arriving in Washington just after Ronald Reagan’s election, I’d often ask shell-shocked liberals to define their first principle. The invariable, deflating answer: “affirming a positive role for government.” This trope reflected a confusion of means with ends – and it goes a long way toward explaining why only about a fifth of Americans have been willing to call themselves liberals since the early 1970s.

The story of how liberalism came to be linked with social engineering and redistribution, with tax and spend, and with rights and entitlements to favored groups is too familiar to need rehashing here. Suffice it to say that liberal efforts to expand government’s role to advance worthy social goals have often crossed lines that are important to many if not most voters. These lines mark the boundaries between individual and collective responsibility, and between government’s legitimate efforts to assure equal opportunity as opposed to equal outcomes.

So Schwarz’s diagnoses is right: the public’s abiding suspicion that expansive government means contracting freedom tends to stack the political deck in conservatives’ favor and keep liberals on the defensive. His ideas for reversing the presumption in liberals’ favor, however, fall short.

When it comes to freedom, liberals face an inescapable dilemma. They can never be as simple-minded as conservatives. They can’t simply counter conservatives’ classic-liberal conception of freedom with a social liberalism that aspires to greater equality and social justice. Mid-century liberals succeeded by keeping these often antagonist approaches in equipoise. Modern liberals have lost the balance, and with it, the ability to persuade a majority of Americans to their point of view.

Read the rest at The Democratic Strategist.

The New Prop 187?

Posted on by The Progressive Policy Institute

It’s increasingly clear that Arizona’s new immigration law, signed by Republican governor Jan Brewer last Friday, is going to be a galvinizing force in national, not just state, politics. This will be true whether or not Congress gets serious on comprehensive immigration reform legislation, this year or next.

While conservatives will predictably object that support for draconian measures to reduce illegal immigration — and I’d say instructing police officers to regularly roust anyone deemed “suspicious” for proof of citizenship is pretty draconian — does not indicate hostility to legal immigrants, it is not seen that way by most Hispanic citizens. And you’d think Republicans might have learned their lesson in 1994, when California’s Prop 187 — which like Arizona’s bill, purported to affect no one other than undocumented workers — triggered a major backlash against the GOP among Hispanic voters, especially but not just in the Golden State.

The timing of the Arizona action seems almost providential for Democrats, who can now benefit from a similar backlash without taking the lead on controversial national legislation (though they may choose to promote such legislation anyway). And the more Republicans continue to dutifully obey the Almighty Conservative Base on this subject, the more the prospect of a Republican-controlled Congress will begin to seem dangerous to Hispanic voters. Indeed, armed round-ups of brown-skinned Arizonans, to the cheers of Tea Party activists, could be a more potent GOTV force than anything Democrats could themselves devise.

This item is cross-posted at The Democratic Strategist.

Photo credit: https://www.flickr.com/photos/jackazphotography/ / CC BY-NC-SA 2.0

Is a GOP Senate Takeover Realistic?

Posted on by The Progressive Policy Institute

After some developments on the candidate recruitment front, it’s probably a good time to take a fresh look at the U.S. Senate battleground for November, and on Republican dreams of actually retaking control of the chamber.

As always, that dream remains a bit of a fantasy, requiring as it would that Republicans win 28 of 36 senatorial contests, including takeovers of 10 Democratic seats without a single loss of one of their own. (Some would argue that Republicans only need 49 or 50 seats for control, since they’d be able to pull Joe Lieberman and/or Ben Nelson into a party-switch, but that’s very speculative). With viable GOP candidates recently choosing not to run in WI and NY, and with time soon to run out on a viable candidate in WA, even a sweep of winnable races wouldn’t quite get Republicans across the line.

More realistic projections suggest major but not apocalyptic Republican gains (the GOP has all but banked a seat in ND, and both AR and DE look very tough for Democrats to hold onto). Nate Silver’s statistical model currently projects a four-seat Republican gain, though he concedes that GOPers would win three more seats if the election were held today. And he shows the probability of a Republican takeover of the Senate as no higher than the probability that Democrats will actually gain seats (six percent versus seven percent, respectively, to be exact).

Chris Bowers’ latest projections suggest a Republican pickup of seven seats (ND, AR, DE, IN, PA, NV, CO). Being more cautious, and focusing on narrowing the field of competitive races rather than making predictions, Cook Report’s Jennifer Duffy shows nine races—five over Democratic held-seats, and four over Republican-held seats—as toss-ups.

Not that I put myself in the company of these campaign analysts, but I suspect that the contests in CO and PA will wind up being barnburners, not the relatively easy Republican wins some expect, and it’s also likely that some Republican seats, most notably OH, will remain winnable for Democrats. And there have been positive developments for Democrats even in some of the toughest races. There’s Nevada, where Harry Reid has to be happy about the widespread mockery of his strongest GOP challenger, Sue Lowden, for comments suggesting that Americans should barter for health services instead of relying on insurance (now being known as the “Chickens for Check-Ups” proposal). Meanwhile, Charlie Crist’s probable indie run in FL cannot help but complicate GOP efforts to hold onto that Senate seat. And it’s important to remember that Republican primaries still ahead could change a lot of calculations, particularly if far-right candidates like J.D. Hayworth of AZ or Marlin Stutzman of IN or Ken Buck of CO win nominations, or if vicious warfare between candidates repels voters generally, as could happen in CA.

In polling news, Rasmussen shows a very close gubernatorial race in WI, and also places new Democratic Senate candidate Michael Thurmond of GA within shouting distance of incumbent Republican Johnny Isakson. And PPP establishes that Democratic NH Gov. John Lynch probably isn’t going to top 70 percent of the vote as he has in the last two cycles, though he remains a strong favorite for re-election. Meanwhile, Survey USA shows WA Sen. Patty Murray (D) in a tight race for re-election even if the GOP’s proto-savior, Dino Rossi, doesn’t run.

Ed Kilgore’s PPI Political Memo runs every Monday and Friday.

The News That Wasn’t: The Senate Climate Bill

Posted on by The Progressive Policy Institute

This morning’s biggest story is about what’s not happening. This weekend, Sen. Lindsey Graham (R-S.C.) announced that he could not support the tripartisan climate bill in the Senate that he is co-sponsoring in the wake of reports that Democrats will be prioritizing immigration reform. Graham’s surprise move led to the scuttling of the bill’s long-anticipated rollout today — and grim predictions that the legislation may have breathed its last.

What ticked Graham off? Graham called the decision to move immigration to the top of the legislative agenda “nothing more than a cynical political ploy.” He expressed his belief that with immigration taking up badly needed bandwidth in the Senate, the chances for climate policy’s passage would be slim. “I’ve got some political courage, but I’m not stupid,” he said.

For their part, Democrats are continuing to push forward with both priorities. Senate Majority Leader Harry Reid underscored his commitment to passing climate legislation this session, saying that “energy could be next if it’s ready.”

Iffy though its chances of passage may be, it would be a real shame if the climate bill were to not get a chance at all. For weeks, Graham, Sen. John Kerry (D-MA) and Sen. Joe Lieberman (I-CT) have been working to put together a workable compromise that could get 60 votes. The bill they were to present today seemed promising, their efforts winning the support not just of progressives but of energy companies like Exelon, ConocoPhillips and Duke Energy. It’s a wobbly coalition that may not be easily put back together, especially if the Republicans reduce the Democrats’ margins in Congress (or take it back altogether) this November. If climate change legislation doesn’t move this year, it will be a while — a long while if Obama loses in 2012 — before it gets revisited.

As others have pointed out, Graham’s hissy fit over immigration seems mighty hypocritical given that he wrote about the urgency of passing immigration reform just over a month ago in the Washington Post. But that doesn’t make his criticism incorrect. He’s right that the decision to devote Senate attention to another, no less divisive priority is going to dim the prospects for the climate bill.

While the political calculus of fast-tracking immigration makes sense — it’s clearly intended to fire up the Hispanic base, which has felt neglected under Obama — it’s also a shortsighted decision. Both issues are important, of course, but momentum was already behind climate legislation. The House had already passed it, Kerry, Graham and Lieberman had lined up crucial industry support, and an environmental community that was growing disillusioned with the administration could at least rally behind a bill that would put a cap on carbon. If the administration fails to throw its full weight behind getting climate over this one last hump, then the disappointment of the environmental community will have been earned.

A Larger Failing

But the death of climate policy — and, yes, we shouldn’t shovel dirt on it quite yet — speaks to a larger failing. Sen. Sherrod Brown (D-OH), who considers the issue one of his top five priorities, told the Washington Post that when he’s back home talking to constituents, “nobody talks about this. I never hear about it.” His experience is borne out by polls, which show increasing public apathy about solving our energy and climate problems.

It’s understandable that an abstract threat like climate change would give way to more narrow concerns in a time of economic crisis. And to be sure, the media and our leadership — particularly on the right — bear some of the blame for the public disinterest. For their part, progressives perhaps haven’t done the best job of framing the issue and selling it to a skeptical public.

But the pattern of the past year has been worrisome. Despite the scale of our public problems, we shown little appetite for bold, collective action. We’ve seen it in our quivering in the face of health reform’s passage, in our refusal to accept the connection between taxation and benefits, in our willingness to be gulled by cynical entertainers.

When he came into office, President Obama promised to bring an end to the “smallness of our politics.” Despite some signal accomplishments, he hasn’t succeeded in reforming the mindset of our political class. But Washington isn’t the only problem. To overcome the smallness of our politics, it’s not just our politicians who need to think big — the American people do, too.

Cheat Sheet for Climate Policy: Part II – What’s Important for a Good Climate Bill

Posted on by The Progressive Policy Institute

How to tell a good climate bill from a bad one? This series will guide you through the main issues that are likely to arise in the coming weeks as the Senate takes on climate change. In this post we highlight issues that are very important — but not quite essential — in climate policy. These ideas will likely play a key role in the eventual passage of legislation from the Senate. (To read the other posts in the series, click here.)

In our last post we identified the two absolutely critical issues for any climate policy: putting a price on carbon and targeting meaningful emissions reductions. Pricing carbon imposes costs on emitters, thereby changing behavior and encouraging innovation, but it will also generate revenues. Once they are generated, who receives them and how they are spent are important elements of climate policy.

Category II Issues: Key Elements of Climate Policy

#1: Public revenue or private giveaways?

If carbon is priced with a tax, it will generate new government revenues. If, as seems likely, carbon is priced with some form of cap-and-trade, things get a little more complicated. For cap-and-trade to work, emissions allowances must be allocated in some way. The two simplest ways to allocate allowances are to give them away for free, or to auction them to the highest bidder. Only the latter would generate any new public revenues. Allowances are assets with real value, so giving them away is no different from a government subsidy to the recipient.

Auctioning allowances is generally more efficient than giving them away — society as a whole is better off the more allowances are auctioned. Nevertheless, many groups of emitters or industries have made arguments (and will continue to do so) that they should be given free allowances. They argue the impact of climate policy on their industries will be too onerous or that they represent the interests of their consumers. Generally speaking, these claims are old-fashioned Washington handout-seeking behavior.

Fights over allowance allocation were predictably rampant when the House considered its bill, Waxman-Markey, last year. Comparatively few allowances would be auctioned under Waxman-Markey, especially before 2020, and substantial allowance handouts (35 percent of allowances) would be given to local gas and electricity distribution companies, ostensibly to protect consumers from increases in electricity prices. It is very likely that allocation will again be a central (possibly the central) political issue in the Senate debate.

A carbon price won’t affect every person, firm, or industry equally. In particular, low-income households will feel the effects of a carbon price far more than wealthy households, and an equitable climate policy should compensate the losers to offset that disparity. The best way to do so would be to compensate them with cash (through direct rebates or tax cuts) raised from auctions – yet another factor in their favor. Under a giveaway scenario, the government could hand out free allowances to utilities, hoping that they pass along savings in the form of lower energy prices. That may help consumers, but they would still be better off if they receive the savings directly out of auction or tax revenues and can make their own choices about how to spend that compensation—more on how these revenues could be spent in the next section. Besides, lower consumer energy prices can blunt the price signal a cap sends, leading to increased energy usage.

However attractive auctioning all allowances is, it’s probably not politically realistic. Handouts will probably have to be made to some industries to get votes for the bill (though there’s still hope, on both the right and left, that the general welfare can prevail over handouts to special interests ) In any case, auctions are the most desirable distribution mechanism, and should be a major component of any climate legislation.

#2: What do we do with the money?

Assuming you’ve auctioned at least some allowances (or have revenues from a carbon tax), what should the government do with the money? There is no easy answer here, but in general we have three options:

a) Reduce existing taxes

If the government receives revenues from a carbon price, one response is to cut the taxes already on the books. Reducing other taxes shifts the U.S. tax burden from those who currently bear it (primarily income earners) to carbon emitters and, indirectly, to consumers of carbon-intensive goods and services. In general, this is a good thing, for the simple reason that you are lowering taxes on something you generally want people to do (work) and raising them on something you don’t want them to do (emit carbon). In economic terms, you move from taxing something we generally think has positive externalities to something we know has negative externalities. And politically, who doesn’t like lower taxes? One drawback is on that you may end up reducing progressive income taxes in favor of carbon pricing, whose costs might be harder to bear for those who can least afford it.

b) Dividends to consumers

If you’re troubled by the possibly regressive character of tax cuts, but think returning carbon price revenues to the people ultimately affected by increased prices is a good idea, then a good alternative is direct payments to consumers. This is the “cap-and-dividend” approach taken by the Cantwell-Collins bill in the Senate that Danny wrote about recently. Under cap-and-dividend, revenues generated by an allowance auction (or a carbon tax) are used to make payments directly to consumers. In other words, every household would get a check. Because all households would get equal payments, the plan turns a somewhat regressive carbon price scheme on its head by transferring money from those with a large carbon footprint (often the wealthy) to those with a smaller one (often the poor). Politically, it’s broadly appealing—even conservatives that tend to oppose redistribution of wealth find a lot to like, in large part because dividends “cut government out of the picture.”

Instead of sending everyone the same amount, it’s also possible to try to identify specific losers from climate policy and compensate them directly. One example of such relative losers might be trade-exposed industries, who would stand to lose competitive ground against foreign firms not subject to a carbon price (more on this issue later in the series). Making payments to industries instead of households isn’t usually characterized as cap-and-dividend, but the difference is only distributional—who gets the money. One disadvantage is that direct dividends pose a bureaucratic challenge — there is no clear mechanism for distributing them.

c) Public goods

Alternatively, the government could spend the revenues from an auction. In some cases, the government can create greater benefits by spending revenues than by giving them back. Restricting ourselves to climate-related spending, good examples might be energy R&D, investments in adaptation to climate change, or efforts to reduce emissions internationally or verify international emissions offsets. Indeed, the federal government will need to spend money in some of these areas regardless because the private sector may underinvest in energy R&D, and will almost certainly underinvest in climate change adaptation and international mitigation efforts. The Waxman-Markey bill devotes auction revenues to many of these areas, and a Senate bill probably will (and, in large part, should) do the same.

Of course, carbon price revenues could also be used for any other government expenditure, from education to infrastructure or defense. Revenues could also be used to pay down the debt. Any of these might be worthwhile expenditures, but it’s important to remember that any revenues that are not returned through dividends or lowering other taxes represent a tax increase on anyone who uses carbon—that is, everyone. Opponents of action on climate often characterize it as a major tax increase. To the extent that revenues from a carbon price are dedicated to unrelated government expenditures, this criticism isn’t dirty politics, it’s a fact. Taxing and spending on a given project may or may not be a good idea, but bringing carbon into the picture doesn’t change the fact that it’s taxing and spending.

#3: Market design: banking and borrowing

A major policy and political priority for climate legislation is to reduce emissions as effectively and cheaply as possible. Whether this goal proves to be attainable or not depends greatly on how cap-and-trade markets are designed. While these issues tend to fly under the radar of the political debate — partially because they are complex and partially because they are not very sexy — they have major implications not only for how firms will behave under a cap-and-trade system, but the timing of actual emissions reductions.

There are multiple options for controlling the costs of climate legislation compliance (most of which will covered in our next post), but the key aspects are the closely related concepts of banking and borrowing of allowances. The general concept of banking isn’t terribly complicated: firms ‘bank’ allowances by overcomplying with the cap (they reduce their emissions more than is required) throughout the program, thus building a surplus of allowances that they can use at a future date. Similarly, firms may choose to ‘borrow’ allowances, by using an allowance from a future year, then repaying that allowance with future reductions (possibly with interest).

Polluting firms have two reasons why they want to be able to bank and borrow. First, the path of the lowering cap (established by legislation) will likely not be set in a way that is optimal for regulated parties. Banking and borrowing credits gives them the flexibility to take an emissions-reduction path that is most cost effective, either by filling their bank with credits through overcompliance in the early years of the market or by borrowing in later years if they expect some kind of efficiency increase to come through at a certain future time. Second, banking and borrowing can protect firms against unforeseen shocks to their compliance paths. For instance, a company may have unanticipated problems that force it to use a more carbon-intensive energy source, increasing its emissions above the number of allowances it possesses. Borrowing allows the firm to get more allowances now in exchange for stronger future reductions.

While some may claim that banking and borrowing look like a way to game the system, they are simply mechanisms to help firms control costs and reduce their emissions as efficiently as possible. A strict cap-and-trade system where firms can only trade amongst each other would be more expensive. Banking and borrowing helps reduce costs while still achieving the cumulative emissions reductions desired. A study by Resources for the Future scholars Harrison Fell and Dick Morgenstern contends that borrowing generates significant cost savings, especially when the cap is being lowered at some rate (which is the case in all serious climate proposals). If borrowing is restricted, costs go up.

Allowance banking and borrowing are key issues for climate policy because they will not only play a major role in the behavior of firms in the cap-and-trade market, but they will also have a strong influence on the actual path of emissions reduction. This gets back to the point we made in the last post, where we said that specific reduction targets don’t matter as much cumulative emissions reductions. The ability to bank means that carbon polluters may strongly overcomply, meaning that they will reduce far beyond the 17-20 percent reduction goals in 2020. Analyses from the EPA and the EIA back this up. The flipside, however, is reductions in later years may be less than the cap as companies start to cash in their banked allowances. As long as the cumulative emissions over the life of the regulation come in under the cap, it’s fine for the year-to-year levels to be ruled by how regulated parties bank and borrow.

The Bottom Line

In the last post, we presented three issues that we deemed essential to any climate bill. Here we discuss the merely important:

  1. How are emissions allowances allocated—are they auctioned, or given away?
  2. How are the public revenues from climate policy spent?
  3. Is the allowance market designed for economic efficiency—does it allow banking and borrowing?

In our next post, we will travel further down the rabbit hole and address some further issues climate policy that are still relevant and meaningful, but less important than what we’ve talked about so far.

Photo credit: https://www.flickr.com/photos/uwehermann/ / CC BY-SA 2.0

Crist Independent Run Likelier; Brown Takes Lead in California

Posted on by The Progressive Policy Institute

The madness in Florida continued to rivet political junkies this week, as the odds of Gov. Charlie Crist withdrawing from the Republican U.S. Senate field and refilling as an independent continued to rise. A second poll (this one from Rasmussen) shows Crist doing pretty well in a three-way contest with Republican Marco Rubio and Democrat Kendrick Meek. Nate Silver notes, however, that the dynamics of a three-way race are not friendly to the perma-tanned governor:

[If] Crist wants to avoid falling into third place, he probably needs to start appealing to Democrats and Democratic-leaning independents almost immediately. There’s a little bit more breathing room over on that side of the aisle because Kendrick Meek is relatively unknown by the electorate: just 26 percent of the electorate have an opinion of him, according to Quinnipiac, versus 57 percent for Rubio (and 84 percent for Crist)…. But Crist will need a fairly broad amount of support from Democrats and Democratic leaners in order to have a shot in a three-way race in which Rubio will almost certainly finish in at least the mid-high 30s, and his best way to achieve that is to prevent Meek from getting traction in the first place. Having denied Meek viability, he could then tact back toward the center or the center-right come the fall.

But, this isn’t easy: the more Crist thrusts to the left after having being reborn as an independent, the more flip-floppy he’ll look. It’s quite a needle to thread and it’s possible that he’s simply waited too long to make this move.

Crist has until April 30 to make up his mind what he’s doing.

In one of the fast-approaching 2010 primaries, things are heating up in Indiana, where former Rep. John Hostettler and state senator Marlin Stutzman are tacking to the right in the GOP primary in an effort to knock off the early prohibitive front-runner for the Senate, former Sen. Dan Coats. At least one conservative pundit is predicting a Stutzman upset, and he’s gotten support from self-appointed conservative GOP litmus-tester Jim DeMint, American Conservative Union president David Keene and RedState.com’s Erick Erickson.

Meanwhile, down in Georgia, Democrats desperate for a Senate candidate got lucky, as Labor Commissioner Michael Thurmond, an African-American who has won three statewide elections, filed to take on Sen. Johnny Isakson, who’s been having some health problems. Thurmond’s move should help keep Georgia’s Democratic biracial coalition intact if former Gov. Roy Barnes, who is white, beats Attorney General Thurbert Baker, who is African-American, in the gubernatorial primary. Thurmond had been mulling a race for Lieutenant Governor.

As I noted in a separate post this week, the most fascinating polling news was a Rasmussen survey in California that not only showed former Gov. Jerry Brown moving out in front of Republican Meg Whitman in the gubernatorial contest, but also indicated that Whitman’s heavy spending on ubiquitous ads may be backfiring early in the cycle. Rasmussen has also done the first public polling since Bob Ehrlich officially launched a rematch against Maryland Democratic Gov. Martin O’Malley, showing a close race led narrowly by O’Malley.

 

Ed Kilgore’s PPI Political Memo runs on Mondays and Fridays.

Does Charlie Crist Have a Prayer?

Posted on by The Progressive Policy Institute

The following is an excerpt from a column by Ed Kilgore in today’s New Republic Online:

The first thing you need to understand about Florida’s political climate is that its seemingly endless summer of Boom Times seems to be coming to a close. The vast migration to the state that caused its population to increase over 16 percent since the 2000 census seems to be winding down, and last year, shockingly enough, it actually lost population. The state’s economy is suffering from problems that are deeper than any business cycle: Its 2.7 percent drop in per capita personal income has pushed the state near the bottom of rankings by percent change of personal income data. State government and politics have followed suit, inaugurating a period of unhappy partisan and ideological wrangling with no clear outcome in sight.

Many of the troubles resemble the problems of Florida’s distant political cousins, Arizona and Nevada, both Sunbelt areas with significant retiree populations that have also been hit by an economic triple-whammy of rapidly declining housing values, reduced tourism, and eroded retirement savings. Not surprisingly, all three have developed volatile, toxic political climates this election cycle. (In Nevada, the only politician who is perhaps less popular than the Harry Reid is the Republican governor, Jim Gibbons. In Arizona, the 2008 Republican presidential nominee, John McCain, whom you’d expect to be riding high along with the GOP’s national renaissance, is scrambling to the right to survive a primary challenge by a defeated former congressman and radio talk show host, J.D. Hayworth.)

In addition, Florida has certainly suffered from the global economic slump because it is a major magnet for foreign investment. It also shares some of the structural problems of its otherwise very different Southern neighbors, particularly chronic underinvestment in public education. And when it comes to the fiscal and political consequences of a bad economy, Florida is one of just a handful of states with no personal income tax, which has made property-tax rates on steadily decreasing real estate values a red-hot issue (a billion-dollar deal that allowed the Seminole Indian tribe to expand its gambling operations was one of the only things that allowed legislators to balance the latest state budget).

So the question is, what does this mean for Charlie Crist, the erratic and heavily-tanned governor who is throwing the calculations of both major political parties into chaos? And what does it mean for Democrats, whose electoral future continues to depend, in part, on the whims of Florida’s diverse and fickle voters?

Read the rest at the New Republic Online.

Earth Day and Energy Security

Posted on by The Progressive Policy Institute

Throughout the progressive blogosphere, Earth Day generates tons of buzz as like-minded liberals gather in chat rooms and on message boards for an annual rally to protect Mother Earth. Re-energizing (pun intended) focus on the environment in the wake of a so-so Copenhagen Summit is a worthy endeavor, of course, but it can sometimes feel like preaching to the choir.

Meanwhile, the Kerry-Graham-Lieberman bill is languishing in the Senate with little hope of movement before November’s elections. And despite its tri-partisan co-sponsorship, conservatives continue to insist on peddling the notion that climate change and Santa Claus share more than a melting polar ice cap. Meanwhile, their supporters continue to buy it, grasping at incontrovertible “proof” like leaked emails from Cambridge.

While the right is intent on pretending climate change doesn’t exist, there’s one aspect of it that’s getting tougher and tougher to ignore: energy security. Not everyone believes that the earth is warming, but most eagerly accept the idea that America should be buying less gasoline from the Middle East. The most credible messenger is the military — the one organization whose mission demands that it become more energy efficient.

Late last year, my PPI colleague Mike Signer wrote a piece on the topic for U.S. News. Here’s what he said:

[T]he most innovative and effective actors in the carbon-reduction arena bear zero resemblance to this outdated cartoon. No hemp-wearing hippies here: Today, it’s the Army, Air Force, Navy, Marines, and Coast Guard who are aggressively pursuing plans for sustainable energy, reducing carbon, and achieving energy independence.

It’s no mystery why: Our armed men and women are truly the point of the spear. The services aren’t motivated just by the “soft power” of moral authority or the pursuit of idealism for its own sake. It’s in fact “hard power” concerns—the security of our troops, the economic independence of our energy supply, and the long-term need to better control the geopolitical implications of climate change—that have driven the military to take the lead.

Consider the facts. Today, an infantry soldier on a three-day mission in Afghanistan carries over 25 pounds of batteries to charge his equipment, hampering his maneuverability and can even causing muscular-skeletal injuries. In Iraq and Afghanistan, U.S. forces have suffered chilling casualties guarding convoys of trucks carrying oil. Meanwhile, every $10 increase in the price of oil translates into a $1.3 billion increase in the Pentagon’s operating costs.

In all of these cases, clean energy and efficiency programs would not only help reduce our carbon output and achieve energy efficiency; they would directly increase the effectiveness of our military.

Remember in the summer of 2008 when the price of a gallon of gas ran to a shocking $4? Well, multiply that by 100 — literally — to get cost of a gallon every day in Afghanistan. By the time you add the transportation price and supply losses from attacked convoys, the Pentagon estimates that fuel costs the American taxpayer $400 a gallon. And much of that $400/gallon is put in Abrams tanks that get… wait for it… just over a half-mile to the gallon. Ergo, one mile in an Abrams tank costs about $700.

The good news is that organizations like Operation Free — a group of military veterans who recognize the life and death nature of fuel efficiency – are traveling the country to promote the policies that will improve our energy security. So whether or not you “buy” climate change – and frankly, you really should — it’s tough to argue against a military that is trying to cut the tether to carbon-based fuels that hamper mission effectiveness. Focusing on this aspect of the issue may well be the best bipartisan way to move public opinion on reducing the use of carbon-based fuels.

Photo credit: https://www.flickr.com/photos/soldiersmediacenter/ / CC BY 2.0

Rah-Rah for Retrofits

Posted on by The Progressive Policy Institute

We’ve heard a lot of doom and gloom on environmental topics recently, with progressives providing dark statistics about escalating carbon levels and conservative rebutting with stormy predictions of economic eclipse.

But Earth Day is supposed to be a feel-good day. And, as Thomas Friedman argued yesterday, when you start winning, everything becomes easier. That’s why President Obama’s victory on health care helped led National Security Advisor Jim Jones’ to declare that “America is back” on the world stage.

So it’s fitting that Vice President Joe Biden yesterday announced just under a half-billion dollars worth of stimulus monies for efficiency retrofits. In a little over a year, the administration has won a surprising number of victories in the push to mine “negawatts” through efficiency. Where we were slouching toward disaster through the laissez-faire, do-nothing inertia of the prior administration, we are now plowing toward a brighter, cleaner horizon.

Among other highlights, Biden announced that $20 million will be distributed to cities in the southeastern states of Alabama, Florida, Georgia, North Carolina, Louisiana, South Carolina, Tennessee and Virginia to dramatically increase the effectiveness of retrofits across the region. The new programs will use a pay-for-performance approach to finance affordable, accessible programs for both small and large residential, commercial and public buildings. But that’s just one of dozens of programs spread through Boulder to Camden, Cincinnati to Seattle.

What’s not to like? These projects pay for themselves. They work with local and state governments to quickly upgrade buildings. They employ local workers and are the quintessence of “shovel-ready.” And perhaps most importantly, they showcase in very public ways the powerful nexus of public works and progressive policy. These are wins — and, hopefully, preludes to victory this summer, as the administration and Congress turn to the effort to price carbon.

Plan B for Climate Policy?: A PPI Series

Posted on by The Progressive Policy Institute

PPI has long been a proponent of an economy-wide cap-and-trade system to confront the problem of climate change. But as the fortunes of cap-and-trade legislation in the Senate fade, we need to begin looking at other options before Congress. In the first post of this series, we looked at the Cantwell-Collins “cap-and-dividend” bill. This post examines the Carper-Alexander “3P” plan introduced this February, a bill that regulates only non-greenhouse-gas pollutants that some have suggested could be expanded into an electric-sector carbon cap-and-trade plan.

In early February, Sens. Tom Carper (D-DE) and Lamar Alexander (R-TN) introduced what we will call the “3P” (P for pollutant) bill, which tightens emissions of SO2, NOx and mercury from coal and oil-fired power plants through cap-and-trade markets. While the bill covers only non-greenhouse-gas pollutants, it has been discussed as a possible template for a climate bill targeting the electricity sector — or “4P.”

Carper-Alexander is nothing radically new. Considering how knowledgeable the American public is about cap-and-trade in general, it’s a safe bet to say most people don’t know that there is already a cap-and-trade market working to reduce air pollution from fossil fuel-fired power plants in the U.S. as we speak.

If you’ve ever had any discussions about market solutions to pollution problems, then chances are you’ve heard about the 1990 amendments to the Clean Air Act, which established a pollution reduction market to address acid rain in the Northeast. Specifically, it created a cap-and-trade market for sulfur dioxide (SO2: primarily responsible for acid rain, not a greenhouse gas) and nitrogen oxides (NO and NO2, both commonly labeled NOx: harmful to humans, primary precursor to ground-level ozone, which is a greenhouse gas) for the eastern half of the country. Since its inception in 1990, it has impressively reduced acid rain problems at much lower costs than initially predicted. It is the example advocates and economists point to when discussing how cap-and-trade can help control greenhouse gas emissions. This program was further strengthened in 2005 when the Environmental Protection Agency (EPA) issued the Clean Air Interstate Rule (CAIR), which established permanent caps and aggressive reductions for SO2 and NOx emissions beyond the Clean Air Act.

Designed to protect human health, CAIR is in poor health itself. A D.C. Circuit Court in 2008 found it failed to follow Clean Air Act statutory mandates and vacated the rule. The court then reinstated it under the stipulation that the EPA make some significant changes. The EPA is currently retooling CAIR to bring it in line with the court ruling. Just like with carbon emissions, however, it would be nice if Congress stepped up to the plate and made a law that clearly told the EPA how to administer these regulations. Unlike on carbon emissions, there’s a chance Congress can act relatively quickly.

The Basics

The Carper-Alexander bill sets a 3.5 million ton cap for a national market of SO2 emissions in 2012, then ratchets it down to two million tons in 2015 and 1.5 million tons in 2018, an 80 percent reduction of 2008 emissions. This final limit would remain unless after 2021 the EPA finds a lower cap is needed to protect public health.

The NOx market would operate slightly differently, as the country would be split into two zones, with the eastern states and western states each getting their own NOx market. The eastern market will face a cap of 1.39 million tons in 2012, which will tighten to 1.3 million tons by 2020. The western market will be capped at 510,000 tons in 2012, cranking down to 320,000 ton by 2020. When combined, the two markets will reduce NOx emissions from 2008 levels by 53 percent. The bill calls for mercury to be reduced by 90 percent by 2015, but it is not regulated in a market. Rather, the bill sets a cap for mercury (no trading) and leaves it to the EPA to promulgate the program rules.

A 4P bill could be very similar to the 3P proposal. Likely, the bill would establish a single market for CO2 emissions from power plants with reduction goals for future years, likely extending out to 2020. The bill could possibly call for New Source Performance Standards on all four pollutants for new plants. It might also include offset provisions for CO2 production. This legislative approach could be appealing if a more comprehensive proposal fails to gain support in the Senate and legislators begin to look for smaller-scale, more piecemeal approaches to emissions reduction.

The Good

The 3P bill takes aggressive action to reduce harmful air pollutants that derive from the combustion of fossil fuels, namely coal and oil, for electricity generation. Even though it targets only non-greenhouse gas pollutants, 3P could actually lead to indirect climate change benefits. While pollutants capped under the bill can be lowered through the use of filters and other technologies, a 3P scheme could also spur plant upgrades, the retirement of older (and dirtier) plants, and fuel-switching to less carbon-intensive sources, including natural gas, renewables, nuclear and hydropower — all of which would lead to lower carbon emissions. By successfully applying a cap-and-trade system for mitigating environmental damages, 3P also reinforces the notion that these systems can work in the real world without harming the economy.

Furthermore, 3P saves the EPA from legal limbo by clearly establishing the reduction goals for SO2, NOx and mercury emissions over the next 10 years and providing clarity for both firms and regulators. The bill also seems politically innocuous — even infamous climate change denier Sen. Jim Inhofe has said vaguely positive things about it. If the Obama administration goes looking for a bipartisan win on the environmental front, it may look to push the 3P.

The Bad

As already mentioned, 3P is not a climate bill, though it may have some indirect climate benefits. But even a 4P climate bill would be less than ideal. If CO2 were added to the 3P’s list of targeted pollutants, the bill would still fall short as it would regulate only the electricity sector — transportation, manufacturing and other carbon-emitting sectors would evade regulation. Electricity generation accounts for roughly one-third of total greenhouse gas emissions in the U.S., meaning that a 4P bill would still be far less preferable than an economy-wide cap-and-trade system.

Additionally, were a 4P bill to be structured similarly to the current 3P bill, it would give a great deal of authority for market design and administration to the EPA as CO2 would technically be regulated under the Clean Air Act. Regardless of your opinion about the EPA’s ability to properly administer a massive emissions market, it’s a political sticking point, as highlighted by current proposals to strip EPA of its authority to regulate greenhouse gases.

The Upshot

The 3P bill could provide a viable pathway for carbon regulation of the electricity sector. If the highly anticipated tri-partisan climate bill from Sens. John Kerry (D-MA), Joe Lieberman (I-CT) and Lindsey Graham (R-S.C.) does not create the kind of momentum for climate and energy legislation the authors are hoping for (more on that in the next entry), one option could be for the Senate to take a more piecemeal, sector-by-sector approach, in which a 4P bill (SO2, NOx, mercury and CO2) moves forward.

Both Carper and Alexander have sponsored carbon emissions legislation specific to electricity generation in past sessions of Congress. Both those bills called for electricity-specific cap-and-trade markets to reduce carbon emissions. Carper has signaled he’s open to incorporating his bill into a broader climate bill, though it’s unclear if he meant including CO2 in the structure of his bill or working the SO2, NOx and mercury caps into another piece of legislation.

The Carper-Alexander bill provides a simple structure, and clarifies existing regulations within EPA. It would not be an ideal approach to emissions reduction, but if all else fails, it could provide a workable jumpstart. The Clean Act Air showed that cap-and-trade can work once before, and it might have a chance to do it again.

Photo credit: https://www.flickr.com/photos/emmajg/ / CC BY-NC-SA 2.0

Cheat Sheet for Climate Policy: Part I – What’s Essential for a Good Climate Bill

Posted on by The Progressive Policy Institute

How to tell a good climate bill from a bad one? This series will guide you through the main issues that are likely to arise in the coming weeks as the Senate takes on climate change. In this post, we identify the essential ideas that need to be enshrined in any climate bill. These are the provisions that no good climate policy can do without. (To read the other posts in the series, click here.)

With Sens. John Kerry (D-MA), Lindsey Graham (R-S.C.), and Joe Lieberman (I-CT) set to release their climate legislation next week, climate change seems poised to return to the top of the agenda in Washington. One lesson learned from the last big fight on the Hill — health care — is that things can get confusing and ugly quickly for non-expert observers when media attention shines a light on the congressional sausage factory. It becomes hard to keep issues and ideas straight, harder still to understand which are important, and the avalanche of political rhetoric can make it tempting to just tune out.

Our goal for this short series is to help you cut through the noise. These posts are intended to be a climate policy cheat sheet that will help you decode the discussions. The issues we’ll cover are not equally important — some, like a price on carbon, are integral to the success of any climate and energy policy. Others, like expanding oil drilling, are substantially less significant from a climate/emissions perspective, though perhaps more relevant from other angles (energy security, politics, etc.).

To make the relative importance of these issues clear, we’ve divided them into four categories of decreasing significance — the crucial, the merely important, the relatively minor and the distractions. We’ll summarize the issues in each of the four categories in different posts, starting today with the absolutely vital issues. These categories, we hope, will help you figure out whether something is relatively trivial, or if the farm is being given away in the course of the legislative debate.

We want to make it clear that these categories are based only on the policies’ impact on the key issue: reducing emissions as much as possible for the lowest cost. Other policy goals like economic equity, increased domestic energy production, energy security, etc. might all be important, but (at least in the context of climate policy debates) they’re subordinate to the primary aim of emissions reduction. We’ll mention these goals when one of the policies we discuss affects them, but they are not our focus. We also won’t spend much time discussing the relative levels of political support for different policies – we’ll leave the political commentary to others.

We’re sure that not all of you will agree with our judgment of the relative importance of these issues. That’s fine — encouraging and enabling quality debate on climate policy (look elsewhere for a science debate) is the entire point of the list.

Category I Issues: The Sine Qua Non of Climate Policy

#1: A price on carbon

As Nathan’s written here before, a climate policy without a price on carbon isn’t a serious one. Fossil fuels have deep roots in our economy, and only a carbon price can effectively reach all sources of greenhouse gas emissions. Just as important, no other policy can achieve reductions as efficiently as a carbon price can. The price mechanism forces firms to identify inefficiencies that generate excess greenhouse gas emissions, resulting in the cheapest emissions cuts.

A carbon price can come in one of two forms: either tax carbon emissions directly, or cap them and distribute a limited number of emissions allowances. While a carbon price is not the only policy that matters, it is the one that matters most by far. Anyone who tells you a carbon price is not the most important aspect of climate legislation, no matter how well-intentioned, is wrong.

No climate proposal from the Hill, and few media reports, however, will mention a carbon price. Instead, you’ll hear about cap-and-trade or, since that term has become politically unpalatable, any one of a number of rebrandings: “cap and dividend,” “creating a green economy,” “incentives-based mechanisms,” or something altogether new. If there’s one point worth making here, it’s this — none of these names matter very much, at least substantively. They serve a political purpose, not a policy purpose.

By far the most important question to ask is whether a rebranded proposal puts a price on carbon or not. Is there a cap on emissions and allowances or permits that emitters can trade? Is there a single price (whether it’s called a tax or not) on carbon emissions? If there is, the rest of the proposal is secondary (the details of which may or may not be important). If not, it’s not an honest climate policy.

#2: Breadth of coverage—how much carbon gets priced?

A related issue is how much of U.S. carbon emissions a price mechanism covers. A tax or cap-and-trade system could cover the entire economy, or just one or more sectors. Generally speaking, the broader the coverage of a single emissions market, the greater the possible emissions reductions and the lower the cost per unit of emissions reduction. In other words, broader markets are better. There is some indication that the Kerry-Graham-Lieberman proposal will have an energy-sector only cap, with other measures used to reduce emissions elsewhere. This is useful, but not as good as an economy-wide cap.

A useful rough rule of thumb is that electricity-sector emissions are a third of total U.S. emissions, transportation-sector emissions are another third, and everything else (industry, agriculture, etc.) comprises the remaining third. Since it’s hard to measure emissions from some sectors (like agriculture), a program that includes all U.S. emissions isn’t practical. But including electricity, transportation and industry is feasible and can cover approximately 85 percent of all U.S. greenhouse gas emissions. Policies that cover these sectors are better than those that don’t, and policies that have the same price mechanisms for all three are best of all.

#3: Emissions reduction targets — setting the cap

Setting a price on carbon is critical, but it’s only a means to an end. The goal, of course, is to reduce greenhouse gas (primarily CO2) emissions and limit environmental damages. Once you know that a proposal is a serious one (because it includes a price on carbon), your next question should be how much that policy will reduce emissions. In short, what’s the target?

For a cap-and-trade system, knowing the target is easy: it’s the cap. The concept is pretty simple: set a finite number of emissions allowances and distribute them to actors in the economy in the first year of the program. In each succeeding year, lower the number of allowances available until you reach a desired level of emissions.

For a carbon tax, figuring out emissions reductions is a little more complicated. A rising tax produces similar results as a tightening cap, but you trade emissions certainty (you don’t know exactly how much reduction you’ll get, unlike with cap-and-trade) for price certainty (emitters know exactly how much it will cost for them to emit greenhouse gases). With a cap, it’s the opposite – we know exactly how much we’ll get in reductions, but the market for allowances will determine the price.

More often than not, the first thing highlighted about a new climate proposal are the reduction targets, especially the near-term targets. From an environmental perspective, however, the more important issue is cumulative emissions, not emissions at any point in time. That’s because CO2 and other greenhouse gases are stock pollutants — they accumulate over time. It doesn’t necessarily matter if high or low volumes are released at certain times, just what those volumes add up to over the course of the regulation.

The current global benchmark, to which U.S. action will contribute, is to reach an emissions path that keeps average temperature rises to 2 degrees Celsius. For climate legislation, what matters is the general path of emissions, not necessarily the specific reductions in 2020 or 2040. As we’ll explain in our next post, specific market regulations will determine the exact emissions in any given year, but the market needs a path to follow, which is determined by the lowering cap (or increasing tax). There’s no way to guarantee some set percentage reductions in any year without a direct mandate, which would be extremely costly and restrictive. When you hear lawmakers railing about how 20 percent reductions from 2005 levels in 2020 are unreasonable but 14 percent cuts are attainable, know that they are having a political discussion, not a policy one.

In short, the exact percent emissions targets don’t matter too much year to year. Instead of worrying about whether the goal is to reduce greenhouse gas output by 17 percent or 20 percent in 2020, worry about the trajectory of emissions reduction over the lifetime of the regulation. The long-term outlook is much more important than the short-term benchmarks. Unfortunately, finding out what this long-term outlook is can be hard. It’s a failure of policy leaders and the media that short-term single-year targets are widely publicized while the effect of a given policy on the future stock of greenhouse gases in the atmosphere is rarely discussed.

The Bottom Line

These issues — a carbon price, its reach and the emissions target — are by far the most important parts of a climate proposal. The first questions you should ask of any such proposal are:

  1. Does it create a price on carbon?
  2. How much of U.S. emissions are covered by that price?
  3. What is the path of emissions reduction set by the cap?

The answers to these questions are the most critical to designing effective climate policy. Other things are important, too, as we’ll describe in our next post, but don’t let them distract you. If you care about climate change, keep your eyes on these three ideas.

Photo credit: https://www.flickr.com/photos/evenprimes/ / CC BY-NC-ND 2.0

Update: This item has been corrected.