Sens. Kerry, Graham, and Lieberman,
Thank you for the work you’re doing to to address America’s climate and energy challenges. As you meet with a broader group of stakeholders and begin to structure a bill, you face an enormous challenge of your own: crafting legislation that can get 60 votes in a fractured and somewhat exhausted Senate. The odds are steep, but I believe there is a strong, bipartisan path forward.
The crucial starting point is this: The American people want clean energy. They want to make more energy in America; they want to use energy more wisely; they want to create jobs and compete in new global industries; they want to leave behind a clean environment and healthy children. These aspirations are shared across the country, across income groups and demographics, and across party lines, as reflected in poll after poll after poll.
What Americans and their political representatives are more ambivalent about is a policy instrument designed to serve those goals: putting a price on greenhouse gas emissions. One form of carbon pricing in particular — cap-and-trade — has become a partisan political football and moved, unfortunately, to the center of the public conversation. Cap-and-trade comprises only about a third of the comprehensive climate and energy bill passed in the House last year, yet in political and media circles it was discussed almost exclusively as a “cap-and-trade bill.”
Cap-and-trade has become the “death panels” of clean energy policy, rendering hyper-partisan what should be a rare area of pragmatic consensus. This is the dynamic you must change if you’re to have any hope of success. The question is: how?
Moving carbon pricing to the background
Past efforts at climate legislation, dating back to Sen. Lieberman’s first effort with Sen. McCain, have tried to secure support for a price on carbon by making concessions to affected industries and legislators from energy-intensive states. Lawmakers have distributed free permits under a cap-and-trade system; promised subsidies and tax breaks; weakened targets and increased the number of carbon offsets. As the Senate’s recent experience with health care shows, Americans do not particularly enjoy the sight of this kind of deal-making. Regardless, it hasn’t worked: no bill has offered enough sweeteners to lure 60 votes for carbon pricing in the Senate.
All of you, notably (and to his credit) Sen. Graham, have resisted the call for an “energy-only” bill. You agree with economists that a price on carbon is necessary for a long-term energy transition. How can you thread this needle?
There is a way. It begins by changing the way we think about carbon pricing. For at least the next five to ten years, no politically palatable price on carbon is going to serve as a primary driver of change. Anything that can pass simply won’t be high enough and its effects will be too diffuse. The main goal with your bill should be to establish a framework whereby a carbon price is implemented and steadily raised. The initial price can be low — low enough to avoid the kind of political backlash that has poisoned previous efforts — and phase in over time so affected industries have time to prepare. At least in the short term, we should think of carbon pricing as a funding mechanism for clean energy policies. It’s a form of responsible budgeting, nothing more, nothing less.
As long as the revenue it raises isn’t being siphoned away for payoffs to nervous voters and energy incumbents, a relatively modest carbon price could produce the revenue needed to fund an ambitious clean energy effort without imposing undue pain on consumers or manufacturers.
This strategy moves carbon pricing where it belongs for the next decade: into the background, as part of a sturdy, multifaceted policy infrastructure. In the post-2020 years, the price will reach a point where it plays a more direct role in driving behavior change. By then, clean energy will have built up enough capacity and market demand to give the public an appetite for increased ambition. In the meantime, clean energy and energy efficiency policies — the job creators and money savers — should move into the foreground.
In exchange for reducing the role of carbon pricing, you should push to strengthen and expand the clean energy and efficiency provisions in your bill. Without a substantial price on carbon those policies will have to be that much more robust if they are to meet the goal President Obama promised in Copenhagen: 17 percent from 2005 levels by 2020.