Diverting the Climate-Regulation Train Wreck

As a follow-up to MaxedOutMama's post two months ago on the consequences of EPA regulation of Greenhouse Gas (GHG) emissions, see this excellent article on National Review by Jonathan Alder. In particular, Alder focuses on practical options for opponents of direct GHG regulation:

[R]etaining the status quo means suffering costly regulation. Some action is required. What are conservatives willing to offer (or agree to) in return for derailing the EPA regulatory train? Even the most die-hard climate alarmists would prefer a comprehensive legislative alternative to setting the EPA loose on greenhouse gases under current law, so there is a near-universal desire for legislative action of some sort.

Which brings us back to cap-and-trade. If administrative fiat won't bring such a system into existence, an agreement in Congress might. Much of the business community has settled on this view, as did both major presidential candidates during the campaign. Cap-and-trade systems have some theoretical appeal, since they work the way markets do, but it would be sheer folly to impose one for greenhouse gases. For such a scheme to be effective, it would need a massive regulatory regime to ensure compliance. It would also unleash a flurry of rent-seeking as various interest groups and industries pursued advantage in the trading and allocation rules. Administered politically—as any such regime would be—it would also be likely to serve special interests over the purported goal of reducing climate-changing emissions. Insofar as cap-and-trade operates as an indirect tax (in capping emissions it will increase prices), it will be hidden from public view and undermine political accountability. (Perhaps this is why so many politicians prefer it.) Underneath its market-oriented veneer, climate cap-and-trade would be a regulatory monstrosity.

One promising alternative is climate-oriented, revenue-neutral tax reform. Congress would replace a wide range of existing federal taxes with a consumption tax based on the carbon content of fuels. Such a tax would create incentives for more efficient energy use, and thus serve the environmentalist goal of discouraging greenhouse-gas emissions—without delegating massive new regulatory authority to the EPA. A direct tax would be more transparent and more subject to democratic control than the cap-and-trade alternative. It would also serve the longstanding conservative goal of replacing taxes on income with a tax on consumption, a policy move that would make sense even if climate change were not a concern.

Some will no doubt object (indeed, my friend Chris Horner already has) that contemplating a carbon-tax deal of the sort I propose amounts to "anticipatory capitulation" designed to "buy peace" with the opposition. Not so. Barring the miraculous enactment of the Blackburn bill to overturn Massachusetts, control of greenhouse gases is inevitable. This is not a prediction about what Congress or the EPA will choose to do, but an assessment of what current law requires.

It’s an old saw that you can’t beat something with nothing. In this case, the need for a "Plan B" is especially urgent, because the train has already left the station. If stopping that train, and preventing the otherwise inevitable wreck, is important, conservatives need a climate strategy beyond opposition to existing regulations and the imposition of cap-and-trade. On this basis, and because the threat of climate change merits a serious response, conservatives should support policies to encourage and unleash innovation—as well as tax reform replacing corporate and income taxes with a carbon tax that could prevent more onerous regulation.

See also Jacob Sullum on "Green snake oil" in Friday's Washington Times.

I, too, would prefer the "Blackburn" solution. And Chris Horner thinks we still can "haggle." But with only 41 Senators--two of whom are Olympia Snowe and Susan Collins, Maine's RINOs extrodinaire--Republicans have little voice. Give the Dems circuses--before they take all the bread.