Common Tragedies

Thoughts on Environmental Economics

Hammer

Posted by Daniel Hall on July 29, 2008

There is a debate going on in the blogosphere about whether some kind of carbon pricing legislation — almost certainly cap-and-trade — will get passed in the next Congress. Matt Yglesias (our favorite Greek philosopher) says that John McCain won’t do it if he becomes President, and Kevin Drum muses that Barack Obama might not either:

“Will McCain Abandon Cap and Trade?” asks Matt Yglesias. The short answer, of course, is yes. The slightly longer answer is that I think the question is ill formed. Cap-and-trade is one those enormous, mega-complex, special-interest magnets that’s almost impossible to pass no matter how committed you are to it. Getting it through Congress will take an enormous amount of political capital, and I wouldn’t even bet on Barack Obama making it a high enough priority to push it through.

Ryan Avent is more optimistic, noting that the alternative to comprehensive carbon pricing is not pretty:

What’s the alternative? Are the Dems really going to adopt the new conservative stance that nothing is the best policy? Or are they instead going to pass nickle and dime regulations by the handful, thus reducing emissions in a costlier, less efficient, and more special-interest friendly manner?

These guys are overlooking one very big fact: the Supreme Court has already ordered the EPA to regulate greenhouse gas emissions. The current administration has chosen not to do so. I would not bet on the next administration making the same choice, at least certainly not an Obama administration.

The choice is not between cap-and-trade or nothing, or even between cap-and-trade and (new) piecemeal legislation from Congress. The choice is between comprehensive carbon pricing through a cap-and-trade program or a site-by-site regulatory permitting process for CO2 emissions that operates under the current Clean Air Act.

Most companies are terrified — probably justifiably — at what such an approach would cost.  This completely changes the political calculation.  When the next administration threatens to drop the regulatory hammer on CO2, the amount of political capital it is going to take to move cap-and-trade legislation is going to fall considerably.

Addendum: Ryan also notes, “If political writers on the left and the right would focus more on the question of how rather than whether, pressure might begin to build to do pricing right.”  I cannot help but point out that this is exactly the question I addressed when I was guest blogging at Free Exchange earlier this month.

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3 Responses to “Hammer”

  1. [...] Hall makes an excellent point: These guys are overlooking one very big fact: the Supreme Court has already [...]

  2. [...] weakness in the other sides energy plans. Will either one do anything for real on cap-and-trade? Common Tragedies explores the debate over the practical difficulties facing the next president. One thing is certainthe easy and cheap [...]

  3. [...] to be the case at Gristmill — think will be a logistical nightmare. The Clean Air Act works as a threat to get Congress moving on national cap-and-trade but isn’t actually going to get employed this [...]

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