Politics & Policy

The Senate’s Cap-and-Trade Subterfuge

In the wake of the BP spill, Democrats face what might appear to be an intractable political dilemma. They are under enormous pressure to pass some kind of energy bill, yet the energy bill they want to pass — one that places onerous restrictions on the use of fossil fuels — lacks the requisite support in the Senate. Fortunately for them, and unfortunately for the nation, the Democrats don’t need to pass a cap-and-trade bill in order to implement cap-and-trade. Obama’s EPA can do the unpopular work of rationing energy consumption while Congress can do the popular work of handing out big bags of money to the green lobby and spanking the oil companies with a handful of tax hikes.

Sen. Chuck Schumer (D., N.Y.) tipped the Democrats’ hand yesterday. Speaking on MSNBC, Schumer noted that Sen. Jeff Bingaman (D., N.M.) passed a bill through the Energy and Natural Resources Committee last year that included massive expansions in subsidies for renewable-energy companies but did not include a cap-and-trade component. Bingaman’s bill would serve as the “base” for the Senate’s energy bill, Schumer said, while the cap-and-trade bill drawn up by Sens. John Kerry (D., Mass.) and Joe Lieberman (I., Conn.) would be offered “in the form of an amendment.” If the Kerry-Lieberman cap-and-trade amendment is voted down, the Democrats will still be able to take credit for passing a subsidy-rich energy bill without requiring their more vulnerable members to vote for higher energy costs in the midst of a recession.

The Democrats probably don’t have any choice but to handle it this way. Sen. Lindsey Graham (R., S.C.) — the only Republican who had been willing to work with Democrats on a cap-and-trade bill — has pulled his support. Nor is it clear that the Maine ladies, Republicans Susan Collins and Olympia Snowe, could bail the Democrats out this time: Sen. Ben Nelson (D., Neb.) has predicted that no cap-and-trade bill can get 60 votes in the Senate right now, signaling that he and other moderate Democrats would oppose any bill that made energy more expensive, particularly if forced to vote on such a bill right before an election.

Make no mistake: Even without cap-and-trade, the Bingaman bill would cost taxpayers and ratepayers plenty. We could ill afford the increase in green-energy subsidies even if our deficits weren’t setting new records each month. And the bill includes a requirement that utility companies sharply increase the percentage of their electricity that they generate from renewable sources, which will result in higher energy bills.

The original Bingaman bill at least offered to reduce some of the red tape associated with domestic fossil-fuel production: It included provisions that would have encouraged coastal drilling and greater exploration of domestic sources of natural gas and oil shale. But these provisions aren’t likely to survive in a post–Deepwater Horizon legislative environment. They are likely to be replaced by tax increases on oil companies. In a speech at Carnegie Mellon University last week, President Obama called for repealing “billions of dollars in tax breaks” on oil companies. The tax breaks in question include deductions on costs incurred exploring for domestic sources of oil that are similar to tax deductions other industries enjoy. On the issue of encouraging commercially competitive domestic sources of energy, the new Senate legislation will be 180 degrees from the original Bingaman bill.

Meanwhile, Obama’s Environmental Protection Agency is poised to take unilateral action to regulate greenhouse-gas emissions, having declared atmospheric carbon dioxide a threat to human health (a finding, it bears repeating, that was based on a U.N. report whose scientific probity has been called into question). EPA administrator Lisa Jackson has taken to the digital pages of the Huffington Post to argue against a pending Senate measure, sponsored by Alaska Republican Lisa Murkowski, that would prevent the EPA from so grossly overstepping its bounds. Absent such a measure, there is nothing standing in the way of new EPA restrictions on the use of fossil fuels. The agency has already announced new regulations on power plants and factories that emit at least 100,000 tons of greenhouse gases a year.

Some fear that the BP spill will give proponents of new energy restrictions the political power they need to pass such restrictions through a recalcitrant Congress. Indeed, this is what President Obama is hoping for. But the second-best outcome for Democrats — a pork-loaded energy bill, new taxes on oil companies, and an EPA empowered to go ahead with its own version of cap-and-trade — is nearly identical to their ideal outcome. In fact, it would be a better outcome from the point of view of some hard-core environmentalists, who think the EPA’s version of cap-and-trade would be preferable to (meaning more restrictive than) anything Congress could produce. Conservatives should not let up in their opposition to the Kerry-Lieberman cap-and-trade bill, but they should be ready to attack the Democrats’ fallback position as well.


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