Bridges Weekly Trade News Digest • Volume 14 • Number 9 • 10th March 2010

US Senator’s Remarks Cast Doubt on Cap-and-Trade

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The shape of potential US climate and energy legislation remains uncertain, as remarks by influential lawmakers have called into question whether a future Senate bill will include a cap-and-trade system for curbing greenhouse gas emissions.

“Cap-and-trade is dead,” Senator Lindsey Graham told a group of environmental leaders in a private meeting last week, the Washington Post reported Saturday.

Coming as it did from Graham, the South Carolina Republican who has been working across party lines with two colleagues to put together a Senate climate bill, the comment prompted speculation that Congress would abandon requirements for major emitters to buy and sell emissions allowances.

While analysts parse the senator’s words - some suggest that he is in fact not opposed to placing a price on carbon - it is clear that the agonies over cap-and-trade are occurring against the backdrop of declining support among US voters for taking strong action against climate change.

Researchers at Yale and George Mason universities reported in January that only 50 percent of Americans now say they are “somewhat” or “very worried” about global warming, a 13-point decrease since fall 2008. Doubts about the scientific basis of climate change have also deepened: the percentages who think that global warming is mostly attributable to human activities, or even happening at all, have dropped by more than 10 percent over the same period. Surveys by the Pew Research Center have consistently placed climate change at the bottom of a list of Americans’ 20 top priorities for their government, although energy policy ranked significantly higher.

A cap-and-trade approach to curbing the emissions responsible for climate change was at the centre of an energy bill narrowly passed by the House of Representatives in June 2009. The legislation that Graham has been working on with Senators John Kerry, a Democrat from Massachusetts, and Joe Lieberman, an Independent from Connecticut, aims to win the support that a previous Senate bill failed to garner last fall. The provisions of that earlier Senate bill were broadly similar to the House-passed ‘Waxman-Markey’ legislation.

Critics of a cap-and-trade system have dubbed it ‘cap-and-tax’, making its supporters in Congress wary of putting it to recession-weary, tax-averse US voters ahead of Congressional elections in November.

More details about the Graham-Kerry-Lieberman bill are expected to be released in the coming weeks. News reports suggest that the bill may include a more limited cap-and-trade system, one that applies to electricity utilities, and possibly to manufacturers in the future.

A report on The New York Times website suggests that oil refiners might face a ‘carbon fee’ instead of being folded into a broader cap-and-trade system.

An alternative approach, called ‘cap and dividend’, would place a cap on emissions, and return revenues to consumers in the form of cheques that they could put towards higher energy costs.

Public scepticism about the science underlying climate change has increased in recent months, following the high-profile leaks of emails among climate scientists at the University of East Anglia in the UK, and the acknowledgement by the UN Intergovernmental Panel on Climate Change (IPCC) that a handful of findings in its voluminous reports were inaccurate.

ICTSD Reporting; “Senators to propose abandoning cap-and-trade,” THE WASHINGTON POST, 27 February 2010; “Public’s Priorities for 2010: Economy, Jobs, Terrorism: Energy Concerns Fall, Deficit Concerns Rise,” PEW RESEARCH CENTER, 25 January 2010; “US climate change bill options for senators,” REUTERS, 1 March 2010; “Senate Trio Hopes to Hit Pay Dirt With Carbon ‘Fee’ on Fuels,” THE NEW YORK TIMES, 3 March 2010.