Better World Club

Monday, August 2, 2010

“Cap and Trade?"

Is That the Best Framing Environmentalists Can Come Up With?

How Much Does it Cost to Hire Conservative Word Guru Frank Luntz?

In late July, Democratic leadership in the Senate deferred the “cap and trade” provisions of its energy bill. (Perhaps quotation marks should also be placed around “deferred” as it’s not clear if this proposal will be considered again.)

“Cap and trade” is environmental language that would finally enable a price to be established for carbon. Progressives and environmentalists need to examine this setback, which is teetering on becoming a failure, even though these provisions had already been weakened significantly. (The program was already limited to the utility industry in the Kerry-Lieberman bill before the Senate.)

Now let’s be clear: the Democrats actually have a clear majority for passing this legislation. Part of the problem is nothing more than the Senate rules that permit small minorities to dominate the majority of the country. Health care would not have passed if Ted Kennedy had died a few months earlier. And Wall Street reform was only enacted only through the support of three New England Republicans.

So the Senate rules are a key part of the problem, but still just a part. A larger concern involves the framing of this issue (and the inability of Democrats to frame issues in general).

“Cap and trade.” The Democrats selected this wording, which the Republicans have reframed into “cap and tax.” Guess what: the former trumps the latter.

A flaw in the marketplace allows companies to externalize their costs onto third parties, i.e. consumers. “Cap and trade” is an attempt to force fossil fuel companies, some of the most profitable companies in history, to internalize these costs. That would lead to a more “market-oriented” result: less use of fossil fuels and less pollution (and a bonus: decreased dependence on other oil-producing countries).

Don’t think these externalities are expensive? Then look at the BP oil spill, which is a tiny piece of the overall external costs being imposed on the American people by the fossil fuel industry, even with the $20 billion BP compensation fund negotiated by the Obama Administration.

The Democrats have done a weak job of explaining how putting a price on these externalities will ultimately permit the marketplace to reduce them -- both the externalities and the cost -- through competition and a shift away from fossil fuels. They have failed to articulate how higher costs can ultimately lead to greater benefit.

And they have failed to acknowledge that when public assets are used (i.e. the sky) the public should be compensated. The Alaska Oil Fund could be a model for liberalism (although a trust fund for each American might be preferable to an immediate check). Then, “cap and tax” might not stick; maybe “cap and dividend” would. (And it could go well beyond the sky: waterways, public land, the broadcast spectrum are all public assets for which there should be market compensation that could build financial assets for all Americans.)

Or to put it another way: substantial revenues would be derived, revenues that should go back to reducing costs, i.e. for environmental cleanup, the medical costs incurred by those made ill by pollution, etc. These funds should not be used to cover ordinary government expenses. They should go directly to American consumers.

If the program was structured this way, then our hope would be for “cap and trade dividend” to be as prized as the BP Compensation Fund, so if a Republican criticized it, he would be forced to apologize.

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