Hurray! Cap and Trade RIP!

Sometimes the death of a "good thing" is a good thing. Let's talk about the cap and trade legislation.

Cap and trade sure seemed like a good thing. What's not to like? Cut emissions using a market-based approach that was shown to be effective by a Republican administration over 20 years ago to reduce airborne sulfur dioxide that was destroying forests in the Northeast.

The NY Times reports that cap and trade is now dead, and the climate bill likely to be introduced in April probably won't even mention it. That bill is likely to be an agglomeration of fuel taxes, oil drilling and nuclear plant construction incentives, and some renewable support for wind and solar power. Even Senator John Kerry (D-MA), one of the prime sponsors of the bill, said, "I don't know what cap and trade means."

What happened? In short, the bad economy and Wall Street debacle made people sensitive to arguments from the oil industry and coal-producing states that cap and trade was a tax that would bring the economy to a halt. With that leverage, they forced the bill's sponsors in the House to add so many sweeteners to get the large emissions producers on board, that the bill's complexity became a laughing stock, a "bazaar," as the NYT put it, where those with the most power got the most concessions.

So cap and trade was a good thing. But its death is perhaps a good thing now as well, because instead of bringing it forth as the preferred option, we can move on to other things. And one of those other things is really interesting.

Senator Maria Cantwell (D-WA) and Senator Susan Collins (R-ME) are proposing a plan that they call cap and dividend. Here's how it works: Licenses to pollute are auctioned to producers and wholesalers of fossil fuels. (Note that there are no handouts or reserved allocations here, which is one of the things that got the cap and trade bill so tangled.) Then three-quarters of the revenue from the auction program is delivered to consumers in monthly checks to cover their higher energy costs.

I wrote earlier (Cap and Trade and Populism) about how a touch of populism would bring cap and trade more into alignment with the nation's mood. And be more fair besides. The Cantwell-Collins bill is the perfect embodiment of this approach. On top of that, this plan is almost exactly what President Obama called for during his campaign. Finally, at 39 pages (compared to the 1400 pages of the now defunct cap and trade bill), the Cantwell-Collins bill minimizes chances to game the system, and comes across as a simple and fair solution.

Meanwhile, the three regional cap and trade programs, which are made up of coalitions of the willing and are generally more ambitious than any national program, are moving forward, developing thresholds and processes and setting precedents. The death of the national cap and trade legislation, that was written before the regional programs had produced results, will give us a chance to incorporate some of the lessons learned from the regional programs into the newer bill.

So, as I said, sometimes the death of a "good thing" is a good thing. Let's wipe the graveside dirt from our hands and get to work on a better plan.