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Cap-and-Trade is Dead; Long Live Cap-and-Trade

I’m fairly pessimistic about the world’s ability to address the global warming issue in a serious way without having first risked catastrophe; the Copenhagen summit, for instance, was a disaster. But I’m less pessimistic about the United States’ ability to pass cap-and-trade legislation at some point in the next 2-6 years — even though Senate Democrats have given up on their legislation this year and even though Democrats will probably not again enjoy the majorities they had this session for the for the foreseeable future.

Part of this is for the reason that Jonathan Bernstein points out: cap-and-trade, although it has been discussed in policy circles for years, is a relatively new part of the Democratic agenda, and major programs don’t usually pass on the first try. Part of it is because it is probably now the major unfinished piece of the Democratic/Obama agenda, with financial reform and health care reform having passed. Part of it is because the issue isn’t actually all that partisan: 8 Republicans voted for cap-and-trade in the House, which is obviously not a lot, but is certainly better than the goose-egg the Democrats got on health care or the stimulus and suggests that there might be less friction in an environment when obstructionism is deemed to be less politically advantageous. (This works both ways, of course: a relatively high number of Democrats in carbon-intensive states are sure to oppose the program.)

But the main reason is simply this: at some point, the country is going to have to raise revenues to fix the deficit. And cap-and-trade, if done the right way — if permits are sold, rather than given away to the industry — can produce quite a lot of revenues: $145 billion per year initially, the CBO estimated in 2008, with the number rising much faster than inflation as emissions targets become continually more stringent.

Most of those costs will be passed onto consumers in the form of higher energy prices — although interestingly, the CBO analysis suggests that the public will bear less of the cost if the permits are indeed sold to produce revenue rather than given away.

But my premise is that tax increases are inevitable: it’s a question of who bears those taxes and how they bear them. And at some point Congress — which is surely headed for some massive showdowns over the budget at some point in the next several years — might conclude that cap-and-trade is a more acceptable way to raise revenues than an omnibus tax increase. In fact, cap-and-trade actually polls rather well. That might change as the public learns more about policy and comes to grips with the fact that they’re going to have to bear some of the costs personally. But other than increased taxes on the very wealthy, and some gimmicky stuff like sin taxes and windfall profits taxes that don’t have all that much revenue-generating potential, it polls a lot better than other types of tax increases, and may be a more politically palatable compromise.

In the meantime, it’s time for the environmental community to heed Clive Crook’s advice and think about its messaging and its science. Yes, most of the attacks on climate science are intellectually dishonest, and the Climategate scandal was much exaggerated. But I’ve come around to the position that it also exposed at least some real misconduct, and it certainly exposed some contempt for the public that is not as evident in most other scientific disciplines. There are real risks to the environmental community in engaging in a rhetorical arms race with the climate change denial crowd, which contains some individuals who are playing a healthy and even benevolent role in the long tradition of scientific skepticism, but is dominated by impetuous contrarians and, more dangerously, partisans who are seeking to exploit society’s cognitive biases. It’s time for them to reclaim the moral highground because the next crack and the cap-and-trade apple might come sooner than you would think.

Nate Silver is the founder and editor in chief of FiveThirtyEight.