Last week, I participated in an in-district meeting with my Representative while he was home on break with several other activists. Our rep outlined several arguments against instituting a cap and trade system but one caused us to trade quizzical looks around the room. He said that cap and trade wouldn't be worth it if all the revenue had to go to the coal states.
We didn't know what he was talking about, but the conversation turned to another topic so we didn't get to clear up the mystery. All became clear today, when I read Jonathan Alter's latest column in the April 20, 2009 Newsweek.
the White House made a terrible policy blunder when its plan used the profits from the system (in which companies buy and sell carbon emissions permits) to help pay for health care and tax cuts. This is a total nonstarter in Congress because it means that high-carbon (read: coal) states like Indiana and Ohio would essentially be subsidizing low-carbon states like California. To succeed, any cap-and-trade scheme must be "regionally neutral."
Fortunately, Reps. Henry Waxman and Edward Markey have such a plan. Waxman last week called Sen. Evan Bayh, a coal-state senator who voted against the budget (one of only two Senate Democrats) and is against using reconciliation for cap-and-trade. Bayh told me he was impressed and could "live with" some version of the Waxman-Markey idea, which uses the proceeds from cap-and-trade to shield consumers in high-carbon states from big rate increases from the power companies. "Something will happen by Copenhagen"—a critical climate-change conference in December—"that's for sure," Bayh says (in part because the EPA is poised to act against carbon emissions by fiat if Congress doesn't). Emanuel is hopeful some Republicans will also come aboard
This plan, which would use some of the revenue from the emissions auction to subsidize energy costs for consumers in coal states, is counterproductive. Consumers will have no incentive to reduce their usage through conservation and weatherization. This is the kind of program that makes people make fun of government.
But Alter thinks it could make Cap and Trade passable. Instituting a cap, which would limit emissions and guarantee a reduction, would make this provision palatable to me. My rep, however, thinks cap and trade is too complicated (he also brought up the anti-derivatives meme others have cited). He is going to back a Republican-introduced carbon tax proposal. That's right: a Republican carbon tax.