In the News

The Obama administration has made very clear that they want Congress, rather than EPA, to take the lead in creating a national response to climate change. Despite their oft-repeated preference for congressional action, recently, EPA head Lisa Jackson had to once again reiterate that the agency had no plans to do a carbon cap.

Though lawmakers are contemplating scrapping cap-and-trade on carbon as “political poison” its flexible market-based structure makes it the most efficient and business-friendly way to reduce pollution. That is why Republicans proposed the idea in the 1980s.

An important addition to any new climate bill is a refund mechanism to protect lower and middle class families from increased energy prices. No matter what road Congress takes to control our greenhouse emissions, energy prices will rise to some extent. The costs businesses incur in their compliance of any new rules will be passed on to consumers.

“For all regulations that have an impact on the climate, either good or bad, they’re going to use these numbers to value those effects,” said Michael Livermore, executive director of New York University’s Institute for Policy Integrity, a nonpartisan advocacy organization and think tank. The work group notes, however, that most federal regulatory actions would only marginally affect the cumulative global output of warming gases.

Since the EPA has no choice but to regulate greenhouse gases, and could come under serious legal fire if it does not, it is a good idea for EPA to act. The Supreme Court decided in Massachusetts v. EPA that the agency had two options: either determine that greenhouse gases are not a danger to human safety, or do something about them. So what is the best way for Administrator Lisa Jackson to proceed?

Clean energy standards will not go far enough to rein in our carbon emissions and will cost more—pound for pound—than putting a price on carbon. Granted, it is better to take some action than it is to take none, but this is a small, expensive band-aid on a planet-sized problem.

A sleeper bill by Senators Cantwell and Collins that places a cap on carbon, auctions permits, and put a check into every American’s pocket has been picking up steam (see positive editorials in the Economist, Washington Post, and Denver Post). It might just strike the right balance of job creation, simplicity, and populism to take off.

Fogarty pointed to a paper by Michael Livermore, executive director of the Institute for Policy Integrity at the New York University School of Law, which argues for charging companies that emit carbon dioxide. Livermore claims laws making greenhouse emissions more expensive are the best tools for spurring innovation in renewable energy. “When prices of a commodity are low, there is less incentive to invest in innovation to reduce use of that commodity,” Livermore states.

The majority of 144 economists polled by New York University’s Institute for Policy Integrity, or 84 percent, agree that global warming’s effects “create significant risks” to the economy, and 94 percent agree that the United States should join climate agreements to limit global warming. The Securities Exchange Commission said for the first time that companies should disclose to investors the risks that climate change poses to their businesses. The Institute for Policy Integrity at the New York University School of Law found that failing to deal with climate change will cost our economy an average of $27 million to $375 million every day from now until 2050. This does not include environmental costs or costs to public health.

While government subsidies for “green technology” may be a piece of the total picture, the only way to efficiently generate the levels of investment needed to wean the economy from carbon-heavy sources of power is a price signal which could be generated as a tax or, more likely, as a cap-and-trade.