Two years ago today, the Supreme Court ruled that the EPA must regulate greenhouse gases as pollution. It was a decision that should have set off a landslide of action that would begin to rein in carbon emissions in America. But in the nearly 22 months before he left office, President Bush's EPA did virtually nothing to comply.
Yet only two and a half months into the Obama administration, the EPA has begun to stretch its legs. It is gearing up to release a finding at the end of the month that will set the stage for greenhouse gas regulations.
At the same time, Congress is now fully engaged, with two new bills out and several Senators and Congressmen tripping over each other to claim a chunk of the debate. We've gone from zero to 60 in under 100 days.
The "cap-and-cash back" approach, which caps emissions, makes polluters pay for allowances, and refunds most of the money to the American public, is emerging as the lead horse.
President Obama had a very smart version of cap-and-cash back in his budget, with a 100% auction and a big middle-class tax credit. Congressman Van Hollen, one of the most powerful up-and-coming members of the House, dropped a bill yesterday, that is similar to the Obama plan. These cap-and-cash back approaches are winning solutions during this economic crisis. Any carbon cap policy that does not include 100% auctions and close to 100% revenue recycling to the public will be a serious blow to lower and middle income Americans (Waxman's bill is silent on both pieces).
Much has been made of recent polling that show that public support for environmental measures have taken a nose dive during the recession. Van Hollen's bill turns the pocketbook issue on its head by recycling revenue from polluters back to everyone else. Most Americans will come out ahead under Van Hollen's bill as the refund exceeds increased energy prices they'll see. Even people who consume more carbon than average will be largely protected by Van Hollen's cap-and-cash back approach.
The Obama and Van Hollen plans are also built to last: It will take decades to combat climate change, and hopefully we'll emerge from a recession well before then. Under Van Hollen's bill, as the cap comes down over the years, the price of the permits goes up and the monthly refund checks get bigger. It's a way to reduce our global warming emissions while boosting public support. Without the refund, there will be painfully regressive consequences for low and middle income Americans--not a recipe for political success in the long-term.
In a recent opinion piece, Tom Friedman gives us a climate policy menu including building standards, fuel efficiency standards, and renewable energy standards. But these are all appetizers for the main course, which needs to be carbon pricing (a point Friedman recognizes). The problem is, if we spend too much time taking small bites at the climate change problem, we may lose our political appetite for the really big dish.
This is especially true if we adopt a suite of energy policies without protecting consumers. Cap-and-cash back protects consumers while dealing with the climate problem. Other types of energy policy, like renewable energy standards, may help cut emissions, but don't put money back in peoples' pockets. These types of policies, standing alone, place additional burdens on lower income Americans. While we must deal with climate change, it should not come at the expense of equity. In the long-term, they are likely to be counterproductive: If people's energy prices increase and they don't see direct and immediate compensation, political support for further climate policy may evaporate.
On the second anniversary of the Supreme Court's greenhouse gas decision, it is refreshing and exhilarating to see so much movement from Washington towards reducing our carbon emissions. After the endless stalling by the last President, our government officials are right to be rushing to find a solution now. But unless that solution keeps lower and middle class Americans whole, we fear it will be unfair, unpopular and ultimately, short-lived.
Follow Michael A. Livermore and Richard L. Revesz on Twitter: www.twitter.com/policyintegrity