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A Good Week for GM?

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Washington, DC -- It certainly looks like it. The settlement of the short-lived strike by the United Auto Workers is seen as having resolved the threat that retiree health care costs posted to General Motors' competitiveness, and the company's stock price soared on the news. Meanwhile, Congressman John Dingell, whose wife Debbie is a GM lobbyist, has embraced GM's long-standing policy preference in dealing with global warming and America's oil dependence; that is, to tax fuel.

Dingell has embraced -- officially, at least -- the idea of a $50 per ton tax on carbon, roughly $15 per ton of carbon dioxide, phased in over five years, and pegged thereafter at the rate of inflation. GM prefers a carbon tax, which puts the burden of emissions cuts on the oil industry (and GM's customers), over tougher federal fuel economy standards for cars, trucks and SUVs. Recently, the company also embraced a cap-and-trade system that would also price carbon, thereby joining USCAP, an alliance of environmental and business groups working for such legislation.

In announcing his proposal Dingell said, "We need to act in order to prevent a serious problem. The world's best scientists agree we need to reduce greenhouse gas emissions by 60-80 percent by 2050 in order to limit the effects of global warming and this legislation will put us on track to do just that. This is a massive undertaking, and it will not be easy to achieve, but we simply must accomplish this goal; our future and our children's futures depend on it."

Dingell also announced that, in addition to his proposed carbon tax, he was considering a cap-and-trade program. In doing so, Dingell, the auto industry's strongest congressional supporter, joined former Vice President Al Gore in advocating a combined carbon tax and carbon cap.

But just as GM officially advocated a gas tax for years without really doing anything about it, there remain questions about Dingell's sincerity. Back in July, when Dingell first talked about the possibility of a carbon tax, he made it clear that his motivation was in part to illustrate how little public support there was for effective action on climate: "I sincerely doubt that the American people are willing to pay what this is really going to cost them." He added that he would introduce legislation, "just to sort of see how people really feel about this."

In fact, as Dingell is no doubt well aware, there is ample research showing that a carbon tax is the LEAST politically palatable mechanism for dealing with global warming. So it's hard to avoid two observations: First, Dingell has seemingly designed his strategy to fail, and admits as much -- which is not something a legislative craftsman as skilled as he would normally do. And, two, he has done so at a time when Congress is debating the most popular mechanism for reducing oil consumption -- tougher fuel economy standards -- which Dingell and GM loathe. In other words, it would seem that Dingell's intention with this maneuver is not to pass a carbon tax, but simply to keep fuel-economy improvements out of a pending Congressional energy bill. If this is true, what seems like a good week for GM will in fact be just another missed opportunity.

For his part, Senator Barack Obama has suggested that in exchange for raising fuel-economy standards, the federal government should help Detroit with its retiree health care crisis -- "Health Care for Hybrids." What's needed now that the retiree health care monkey is off GM's back is a deal that combines tougher fuel-economy standards with a cap-and-auction limit on carbon. A carbon cap ensures that GM's customers will be motivated to buy more fuel-efficient vehicles. Some of the revenues from the auction can be used to retool GM's factories to make these more-efficient vehicles. And the tougher standards guarantee that no auto company can try to start another size-and-horsepower race like the one that squandered the last big set of improvements in engine efficiency. That would be real leadership from both Detroit and Washington -- and a very good week indeed for GM's shareholders, employees, and the communities where they work and live, as well as for the global climate and America's national security.

Which will it be -- real leadership or another cynical ploy? A lot rides on that choice, which now faces GM and Congressman Dingell.