Here’s a fact you won’t hear much about in Politico or the Washington Post: good climate policy is responsible fiscal policy.

Earlier this month, Susan Kraemer turned up what should have been a bigger story: while the comprehensive climate/energy bill introduced by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) last year would reduce the deficit by $21 billion a year, the “energy-only” bill being contemplated by some Republicans and conservative Democrats in the Senate would increase the deficit by by $13 billion a year.

Once more for the cheap seats: a comprehensive climate bill reduces the deficit. An energy-only bill increases the deficit. Any senator genuinely concerned about the deficit should be pushing hard for a comprehensive bill.

In fact, the $13 billion annual cost of the energy-only bill is almost certainly an underestimate. The energy bill scored (PDF) by the nonpartisan Congressional Budget Office was the American Clean Energy Leadership Act, passed through Sen. Jeff Bingaman’s Energy and Natural Resources Committee in June 2009. That bill will serve as the foundation of the bill now being contemplated in the Senate, but to attract Republican votes it is expected to include substantially more in subsidies for nuclear power and offshore oil drilling, which would raise its cost.

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That senators are pushing for an energy-only bill in the name of protecting taxpayers reveals how little the economics of climate policy are understood by the “centrists” who stand in its way. Such a bill includes no funding mechanism. It is pure deficit spending, being pushed by senators who are notionally hawkish on the deficit. (CAP calls them “deficit peacocks.”)

There is no clearer sign that what’s behind opposition to cap-and-trade is not fiscal conservatism but just plain conservatism, that is, blanket refusal to raise taxes. These “centrists” don’t want to raise revenue, they just want to spend it. It is the opposite of fiscal responsibility.

One of the benefits of putting a price on carbon via a cap-and-trade system is that it raises revenue. It funds investments in clean energy that lawmakers across the political spectrum agree are needed. It protects consumers from energy price hikes. It pays for the legislation and more, according to CBO scoring (PDF) of the Clean Energy Jobs and American Power Act. Sen. Lindsey Graham (R-S.C.) seems to be getting this; he recently referred to the energy-only bill “half-assed.”

He’s not the only one getting it either. It is slowly dawning on governors involved in regional cap-and-trade systems that carbon pricing represents a steady source of income. States are strapped for cash, caught between economies in downturn and balanced budget amendments that mandate harsh spending cuts. Any new revenue source is a blessing. “Look what [New York Gov. David] Paterson did,” says Terry Tamminen, who advises states on climate policy. “He took $200 million of New York’s [Regional Greenhouse Gas Initiative] receipts and put $100 million into renewable energy and efficiency and the other $100 million into balancing the state budget.” Massachusetts used $50 million in cap-and-trade revenue to help fund its ambitious new clean energy and efficiency initiative. States that secure this new source of income are likely to guard it jealously.

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Similarly, once the American people get used to more ambitious levels of funding for R&D, clean energy deployment, and consumer protection, they are unlikely to give it up without a fight. This is conservatives’ great fear about cap-and-trade: not that it will hurt the economy, but that it won’t. That it will work. As money transfers from carbon polluters to competitors in growing clean energy markets, the economy will flourish and Americans will see the fruits of active government. Heck, they might demand even more ambition. God knows nothing terrifies today’s U.S. Senate more than ambition.

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