The flawed logic of the cap-and-trade debate

Meanwhile, soaring rhetoric from greens and Democrats about the importance of bold public investments to build a clean energy economy has proven empty. The Waxman-Markey bill would, under the rosiest of scenarios, invest just $9 billion annually in technology innovation, defined broadly, compared to a whopping $41 billion to buy off utilities and heavy industries and $19 billion for offsets. If the price of carbon dioxide is $5 to $10 per ton (before rising to no more than $15 a ton in 2020) - a level Waxman-Markey supporters like the Center for American Progress's Joe Romm acknowledge it could be in the early years of the program - there would initially be just $3 billion to $6 billion for energy technology and just $250 million to $500 million for R&D. Those levels are only a 5-10 per cent increase over current energy R&D spending, and one-thirtieth or one-sixtieth of the $15 billion annually in new clean energy R&D investment President Obama has consistently promised. In the end, greens supporting this bill have chosen weak caps, riddled with loopholes and giveaways, over serious investment in clean energy technologies.

For the rest of us, including the many greens who now see the writing on the wall in Congress, the time has come to question whether the long effort to establish high carbon prices and strict carbon caps has finally run its course. It is time that we get serious about how to achieve deep reductions in emissions with the low carbon price we will get rather than the high carbon price we may wish for.

This may not be the choice that many greens would like, but the alternative is another decade of attempting to implement policy predicated on high carbon prices without the necessary price signal for those policies to have any chance of succeeding. If this choice were not clear already, the impending cap-and-trade legislation likely to pass the US House this summer should leave no further doubt.

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