[On Thursday, September 24, I had an enjoyable conversation with Matthew McGovern and Rick Hauffe from Repower South Dakota and Matt McLarty from the Environmental Law & Policy Center. This post is Part 1 of a series based on that interview.]
Regular readers know that, after some doubts, I've come down in favor of the American Clean Energy and Security Act (H.R. 2454—ACESA). The bill is frequently referred to, usually by opponents, as the "cap-and-trade" bill. ACESA covers much more than that single issue, such as energy efficiency, alternative energy, and smart grid technology.
But cap and trade is a big part of the bill, and it's worth looking at.
Cap and trade is the creation of a market mechanism to limit carbon emissions and impose a cost to capture the externalities those emissions create. Right now, I can fire up a coal plant and emit all the carbon I want, without paying for the harms that carbon causes (like fewer Pacific island tourist destinations, dead people, and sickly squid and other marine life, not to mention "storms, drought, mass migration, and pandemics" that might trigger terrorism and armed conflict.). Cap and trade creates a system where I either pay for the damage my carbon emissions are doing or invest in better technology that reduces my emissions and maybe even makes me money on the side as I sell my unused quota of carbon allowances to other companies that can't make reductions as easily as I can.
(Nobel laureate Paul Krugman gives an Econ 101 explanation of how cap-and-trade works and how Glenn Beck gets it wrong.)
Cap and trade may sound familiar: as noted here previously, the United States has done it before. Cap and trade is the policy we used to successfully eliminate acid rain. The Clean Air Act of 1990 created a cap and trade system for sulfur dioxide emissions, one of the main causes of acid rain. The program achieved 100% compliance at 20–30% of the projected cost in the 1990s.
The 1990s—you remember that decade, right? Low unemployment, economic boom, a federal budget surplus. What happened to the million of jobs the National Association of Manufacturers said sulfur dioxide cap and trade would kill? The job losses never happened. Industry always cries wolf over enviromental regulations, and time and time again, those self-interested predictions of economic ruin never come true.
As policy gravy, according to Matt McGovern of Repower South Dakota, the EPA calculates that the 1990 Clean Air Act was also a cost-effective public health measure: for every dollar spent, the United States has enjoyed $40 of public health benefits in the form of lower health care costs and fewer missed workdays. I'll leave it to more actuarial heads to calculate the cost-benefit ratio of not having to move a quarter of the world's population to higher ground—think Hurricane Katrina times a thousand.
The United States has used cap and trade before to reduce acid rain and improve public health. We can use it again to reduce carbon emissions and promote innovation in clean energy technology.
[Stay tuned for more on ACESA this week on the Madville Times!]
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