US cap-and-trade bill looks even further away

The election last night of Republican Scott Brown to the late Edward Kennedy’s Massachusetts Senate seat is a blow for the Democrats, who will lose their fillibuster-proof majority in the upper house.

Most of the commentariat are so far focusing on what it means for the healthcare bill, but the election is not much better for the chances of climate change legislation, either. Support in the Senate for a House cap-and-trade was already rather dicey. A Senate bill, supported by Republican Lindsey Graham and independent Joe Lieberman, doesn’t necessarily look much more secure as criticism of cap-and-trade grows, and some have suggested a climate bill needn’t put a price on carbon at all, but could merely create more renewable energy (which would be quite a blow to emissions reductions efforts, as we pointed out at the previous link).

As the 2010 mid-term elections draw nearer, support from the southern Democrats up for re-election might become even more elusive, and likewise those Republicans who had once signalled support for such a move might feel they have little to lose from changing their mind, especially if the threat of a preselection challenge from a more right-wing contender is looming.

John Kemp at Reuters mentions that Senate majority leader Harry Reid is one of those Democrats facing a tough re-election, and might therefore not even put the bill to a vote. Kemp says there are three options for the administration, in the medium-term:

(1) It could strip cap-and-trade proposals out of the bill and pass a non-contentious measure containing a few subsidies for green technology, while promising to return to emissions control after the election. But if legislators try to revisit cap-and-trade in the next Congress, there is no reason to expect it will be any more successful.

(2) The administration could “go nuclear” and try to impose something similar to cap-and-trade using the Environmental Protection Agency (EPA)’s existing regulatory authority under the Clean Air Act (CAA).
EPA has already published a finding that greenhouse gas emissions “cause or contribute” to air pollution under Title II of the CAA, allowing it to regulate emissions from new motor vehicles sold in the United States. It could set up a control system for vehicles, and trigger a separate rule-making process under Title I to establish similar controls for stationary sources such as power plants.
While the administration has been using the threat of unilateral EPA regulation to push Congress into passing cap-and-trade by legislation instead, and reassure its international partners that America is serious about cutting emissions, the bluff is probably an empty one.
Circumventing Congress would carry enormous political risks. For a popular and powerful administration it would be hard. For an unpopular and weakened one, it is probably impossible.
Legislators will excoriate EPA if it tries to impose rules putting their seats at risk. Congress can prohibit EPA from taking any action by ordinary legislation; there might even be enough votes from fearful Democrats and those mindful of congressional prerogatives to over-ride a threatened presidential veto. At the same time, the courts are likely to become more sceptical about attempts to introduce bold, economy-wide regulations by an agency when Congress lacks a majority to enact laws itself.

(3) The administration could dump the complicated emissions trading system in favour of a simpler and more transparent carbon tax once the elections are out of the way. There is no guarantee a tax would pass either. But the excessive complexity of the climate change bill (over 1,000 pages of complex and often deliberately opaque drafting) has made it almost impossible to understand or defend.

As Kemp points out some recent surveys (we know of one in December from the US Climate Task Force and Future 500; another by the  Association for Psychological Science this month) have suggested that Americans might be much more amenable to a carbon tax than is commonly thought.

However the latter study points out that calling it a tax makes it much, much less likely that voters will respond positively, even when they are positive about the underlying concept. And the cap-and-trade bills have already suffered when critics have pointed out, not entirely incorrectly, that it is basically a tax. How much more difficult would it be for a direct tax on emissions to escape the label?

Related links:

Carbon reductions without cap and trade? (FT Energy Source, 14/01/10)
Uncool carbon markets (FT Energy Source, 22/12/09)

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