Cap & Trade – Obama’s Win Is the States’ Loss

Much of the debate over the formation of a cap & trade system under the Waxman-Markey bill focused on whether initial allowances should be auctioned off or merely given away and how the system would act. There was little discussion about the impact a federal cap & trade system would have on states, which have already established or at the very least have set the wheels in motion regarding a state or regional cap and trade system. Most notably, this refers to the Regional Greenhouse Gas Initiative, Western Climate Initiative, and California.

Under the Waxman-Markey Bill, holders of allowances from these state and regional programs will have to exchange their allowances (issued before December 31, 2011) for federal allowances. Essentially, all state and regional programs will be suspended. While this may provide for one national standard and an efficient mechanism (in theory), the proposed suspension of state and regional programs fails to recognize that states and regions may desire to have higher reductions of greenhouse gases and different time-frames when compared to a federal program.

When the Waxman-Markey Bill receives debate and consideration in the Senate later this summer and early fall, the Senate should consider the option for states and regions, which have as of the date of implementation of the federal program, a higher standard for the reduction of greenhouse gases, to opt out of the federal program. If such standard, whatever that may be, has not been established, then such programs must give way to the federal program. The Senate should view the federal program not as an opt-in, but rather as an opt-out if state and regional standards exceed federal standards.

While an opt-out clause may seem like it would make the national cap and trade system inefficient, consider the CAFE standard. Although California and other states must petition the EPA for a waiver, states are nevertheless permitted to establish a higher standard. Why not let a similar waiver provision apply to cap & trade for greenhouse gases?

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3 comments on “Cap & Trade – Obama’s Win Is the States’ Loss

Edward V.

This is insane. The article is written with the perspective that the cap & trade system is a good thing. The author is advocating that a state may want to use a more restrictive cap & trade system. The whole concept of cap & trade is lunacy and illogical. Under such a system, the US of A will devolve economically and will weaken our standing as an international power.

John Bodine

Without Cap & Trade the US will be caught with its pants down when fossil fuels begin to become scarce and prices sky rocket. It’s too late then to begin to build infrastructure. This is absolutely a case of a role for government to provide market incentives for this key strategic issue – Energy. We’re already late to the game…

I agree that some states like California should be allowed to reduce below the cap, without it simply creating more space for Wyoming and Alabama to pollute more. You could allow states to implement their own tighter caps or allow progressive states to restrict the number of allowances used in their state.

Regarding the comment about “insane, lunacy, and illogical,” it’s interesting that cap and trade was first proposed by free market Repubs to circumvent regulation. Now the Palin-drill-baby-drillers want to pretend climate change isn’t happening, while Alaska, ironically, melts first. C’mon folks, it’s time to take your fingers out of your ears and join the rest of the world. By the way, Jesus would have probably supported universal health care too.

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