Rep. Waxman Responds to Breakthrough Institute, Criticizing Public Investment and Praising Offsets

Earlier today, Congressman Henry Waxman was asked to directly respond to the Breakthrough Institute's analysis of the American Clean Energy & Security Act (ACES) during an interview on the Montel Williams Across America radio show. His segment came after my interview on the same show, where I highlighted Breakthrough's analysis and spoke about some of our concerns with the bill.

Here is a transcript of his response (starting at 8:00 minutes, podcast available here). Rep. Waxman is Chairman of the House Committee on Energy and Commerce and lead author of the ACES climate bill:

Montel Williams: "Teryn Norris from the Breakthrough Institute and several other people say that this [bill] is based on credits that would be given out and traded by companies to meet their carbon footprint - I'm being told that 85% of these are being given away when they could have been auctioned off, which would have been a revenue source that could have been put toward more forms of renewable energy. Why did we decide to give away these credits rather than auction them off?"

Congressman Waxman: "We're giving away the credits to utilities in order to protect ratepayers. The credits they won't have to pay for won't be charged to ratepayers, both individual consumers and businesses... So this is a way to be fair to the consumers.

The essence of the legislation is that we're going to get reductions and we're going to have a limit on carbon emissions and those limits go down. As we try to squeeze down the amount of carbon year after year we want it done in a way that hurts the consumers as little as possible and we think for the most part we've protected most people. And we want it done in a way that can produce the result in the least expensive way, so there are offsets that can be purchased.

It doesn't make a difference that a coal-burning powerplant has to reduce its emissions if they have to do it by reducing their own coal, that could be more costly than just buying an offset and we still get the same environmental result. The environmental result is achieved, we do it in a way that would impact the economy in the easiest manner, and at the same time we're providing renewable fuels and greater efficiency and opportunities to get cars on the road that will pollute less.

It's going to transform our economy and in the whole process it's going to produce I think millions of new jobs, it's going to unleash investments that could be as much of an incentive and stimulus to our economy as anything the government could do, it's going to do more than the stimulus we passed because the investments are going to be made in the private sector."

Stay tuned for an upcoming post where Breakthrough Institute will address Rep. Waxman's points. To begin, however, it is worth noting that Rep. Waxman asserts that freely distributing carbon allowances produces the same environmental result as full auctioning and is specifically designed to protect ratepayers. Why, then, did President Obama and his Budget Director recently state the following about the importance of auctioning allowances?

Peter Orszag: "If you didn't auction the permit, it would represent the largest corporate welfare program that has ever been enacted in the history of the United States. In particular, all of the evidence suggests that what would occur is the corporate profits would increase by approximately the value of the permit."

President Obama: "If you're giving away carbon permits for free, then basically you're not really pricing the thing and it doesn't work -- or people can game the system in so many ways that it's not creating the incentive structures that we're looking for"