Cap-and-trade is business' best friend.
Though lawmakers are contemplating scrapping cap-and-trade on carbon as "political poison" its flexible market-based structure makes it the most efficient and business-friendly way to reduce pollution.
That is why Republicans proposed the idea in the 1980s.
None of the climate change bills in Congress are perfect--but their problems are not because of too much cap-and-trade, but too much other stuff weighing them down. Instead of bitterly fighting against cap-and-trade, Republicans should be fighting for a simpler cap-and-trade approach.
In the past, there were two schools of thought over how best to achieve environmental protection. In general, Democrats preferred command-and-control approaches that dictate precisely how businesses must comply. Republicans preferred economic tools like cap-and-trade that use price signals to meet environmental standards.
The debate came to a head with the 1990 amendments to the Clean Air Act when President George H.W. Bush and the Democratic Congress reached a compromise. To deal with acid rain they expanded environmental protections using the Republican-favored cap-and-trade approach. Only ten senators (five Democrats and five Republicans) vote against the final bill--as bipartisan as it gets.
The acid rain program achieved major cuts in pollution at minimal costs. Having seen this success story, most Democrats agree that cap-and-trade is the right approach to dealing with climate change.
So why are Republicans now fighting their own idea? Instead of capitalizing on the rare opportunity for a meeting-of-the-minds, we are pedaling backwards into history and away from hard-fought, well-reasoned consensus.
The causes of this impasse are many: a deep economic downturn; the ascendant Tea Party movement; and the continued influence of climate change skeptics in Congress. But neither our economy nor our environment benefit from this stalemate.
Cap-and-trade programs, like the acid rain version, works by setting a limit on the amount of pollution permitted--the cap--but does not prescribe how businesses comply. Each firm is free to comply in the cheapest, easiest way. Smart executives will find ways to increase pollution reduction because they can sell their extra allowances to the market--that's the trade part.
That's it. Much of the stuff that has made "cap-and-trade" a dirty word on the Hill are extras: allowance giveaways instead of auctions; government selection of technological winners and losers; command-and-control regulation that was layered on.
But now, cap-and-trade is becoming a dirty word and a scramble has ensued to replace it. It will be difficult to hastily replicate the decades of careful debate and vetting that has proven the policy to be an efficient, effective compromise.
Instead of digging their heels in and nixing any climate action, the minority in Congress should return to their good idea and push for a pure form of cap-and-trade.
There was a time when environmental issues were bipartisan, and the debate was about how to protect the environment, not whether to protection the environment. Instead of being against cap-and-trade after they were in favor of cap-and-trade, leaders of the GOP should be calling for a purer form of the approach to be integrated into the final compromise--not trying to scuttle progress on this vital issue.
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