Time to Bury Cap and Trade and Plan Anew

By Jesse Jenkins and Devon Swezey

Cap and trade is dead. Again. For real this time.

Reports put the time of death at 1 P.M. EST, July 22nd, 2010. That is when Senate Majority Leader Harry Reid emerged from a meeting of the Democratic Caucus without enough support for even a severely weakened and scaled-back emissions cap on the utility sector.

With that, recognition has finally set in everywhere: the United States Senate is not going to enact any form of cap and trade. Not this year. And probably not any time in the foreseeable future.

Worse yet, clean energy progress this year has gone down with the long-sinking cap and trade ship.

Democrats in the Senate have now successfuly wasted what little time they had left on the Congressional calendar wrangling over a utility-only cap--already compromised beyond recognition and destined for political failure--instead of working to advance a package of measures that would have started to make real progress on clean energy.

Reid has made it clear he'll bring only an extremely narrow bill to the floor before the August recess, one pairing measures responding to the Gulf oil spill with some incentives for home efficiency retrofits and natural gas vehicles. That's it. After a full two-year Congressional cycle, Democratic super-majorities, and Barack Obama in the White House: home retrofits and natural gas vehicles are all the Senate will deliver. We should let that sink in for a moment...

Blame Game or Moment of Reflection?


After making his decision to drop cap and trade (and any meaningful clean energy measures with it), Reid wasted no time in pinning the blame on those recalcitrant Republicans, declaring in a statement:

"Many of us want...a comprehensive bill that creates jobs, breaks our addiction to oil and curbs pollution. Unfortunately, at this time not one Republican wants to join us in achieving this goal. That isn't just disappointing. It's dangerous."

Whether it was Republicans, the filibuster, oil and coal industry lobbyists or President Obama himself, blame has already been cast far and wide.

But if anything is deserving of blame, it is the cap and trade strategy itself.

Cap and trade has now died four times in the last seven years (this time, we can hope, for good). There is little evidence that Senate Democrats had substantially more votes for cap and trade this year than they did in 2003 (when it failed with 43 votes), 2005 (failed again with 38 votes) or 2008, when Reid also pulled the bill before it could go down in embarrassing defeat and insiders put the final tally at only 35-40 votes in support of the bill.

At this dark moment, the important question is whether any greens or Democrats in Congress are willing to seriously re-think a policy framework that was structurally flawed from the beginning and has consistently failed politically.

(Early indications are that they aren't, with Nancy Pelosi saying of the House-passed Waxman-Markey bill, "we're very proud of it and excited to take it to conference.")

The Serial Failure of Cap and Trade

Cap and trade has repeatedly failed because it doesn't address the main barrier to the widespread deployment of clean energy technologies: the technology-based price gap between new clean energy and mature fossil fuels.

Many renewables, like wind and solar power, are expensive, intermittent, and difficult to scale for example, while nuclear power is extremely capital intensive and faces substantial local opposition.

Because of higher costs and technical barriers to widespread clean energy adoption, efforts to move the U.S. energy system away from fossil fuels towards clean energy alternatives inevitably comes with a significant price tag.

The result: every country in the world has been unwilling to raise the price of fossil fuels--either through a carbon tax or a cap and trade system--high enough to close this gap for the majority of clean energy technologies.

The United States is a clear case in point, where the proposed cap and trade bill was riddled with so many loopholes and cost containment mechanisms--most notably the availability of up to 2 billion dubious carbon offsets--that the effective price on carbon was too low to effectively spur clean energy innovation and adoption and the "cap" on carbon was rendered effectively non-binding.

But there's another rub. For all the talk about the urgency of a "cap" on emissions in the United States, China has become the world's largest emitter of greenhouse gases and its voracious appetite for energy threatens to wipe out any gains we achieve here in the United States.

China has moved aggressively in recent years to become a leader in the clean energy industry; with timing so perfectly ironic it seems almost planned, China announced today that the national government would level a staggering $74 billion in annual investments over the next ten years (5 trillion yuan) to adopt clean fuels and build the nation's clean energy industries. But even while establishing itself as the dominant global clean energy power, China's insatiable energy demand is so large that the nation's demand for fossil fuels continues to rise almost unabated.

In the end, until we make clean energy cheap enough to be widely available and affordable throughout the world, countries like China will continue to satisfy the majority of their increasing energy demand with fossil fuels.

Planning Anew for Clean Energy Progress

Given the stakes for both the global climate and the nation's economic outlook, we can't afford yet another episode in the serial failure of the cap and trade strategy.

This moment demands a fundamentally new strategy designed to overcome the inherent political obstacles to carbon pricing and simultaneously achieve the primary objective upon which our climate future hinges: making clean energy cheap in real, unsubsidized terms.

History shows that such technological transformations do not occur through modest shifts in market price signals. We didn't tax the telegraph to get telephones or put a cap on typewriters to see the birth of the personal computer, as Breakthrough's Michael Shellenberger and Ted Nordhaus often note.

Instead, time-and-time again, the most reliably successful driver of new innovation and transformative technology changes has been an active partnership between private-sector entrepreneurs and innovators and a public sector acting as both an initial funder and demanding customer of new, cutting-edge technologies.

This will demand an unprecedented level of public investment in clean energy innovation and the accelerated adoption, scale-up, and improvement of a full suite of clean energy technologies.

Such a strategy can begin to cut U.S. emissions in the near-term, but most importantly it will be absolutely essential to establish the technological and economic foundations for deep emissions cuts in the long term.

As the International Energy Agency has been clear, a global clean energy technology revolution is urgently required, and we have not a moment left to lose.

Without clean, cheap energy, emissions both at home and abroad will continue their inexorable rise, while China and other economic competitors solidify their dominance of new global clean technology markets. With this latest death of cap and trade, will we finally bury a fundamentally flawed strategy and dare to plan (and act!) anew?