Pivoting from Cap and Trade

Yesterday, Senate Majority Leader Harry Reid announced that he will no longer pursue cap and trade legislation this year.  Since this year was the best shot cap and trade could ever have asked for, it also appears to be dead for the forseeable future.  In many ways the fate of this idea that has captivated environmentalists for almost two decades was sealed last fall in Copenhagen when the US and other industrialized countries failed to come to a meaningful agreement with the newly industrializing giants, China and India.  Adding to the sense of disappointment greeting yesterday's announcement, it also appears that there is no appetite in the Senate for a national renewable electricity standard this year.  A somber and resigned editorial in today's New York Times summed up the feelings of environmentalists who feel exhausted by so much effort for so little and frustrated that the Obama Administration chose not to expend more political capital on a deal. The failure of this policy proposal, however, does not change the fact that a rapidly exploding world needs clean energy and the nations that lead in its development and implementation will reap economic dividends in the 21st Century.  In fact, a carbon regime while helpful in moving Europe toward that clean energy future has not proven decisive and there are many other policy tools available to achieve the same goal.

First, the network at the center of the wide energy system is the electricity network and in the United States the very structure of the network is unfriendly to clean, renewable energy and technology.  Many people have commented on the antiquated state of the US grid.  The real problem, however, is the incentives in the balkanized, industry that gave rise to the grid and will continue to block modernization until they are changed.  The Electricity 2.0 project centered at NDN is designed to design and implement a new, more open, electricity architecture that in opening the system to renewable energy and new technology, can not only create new wealth and jobs but also lower carbon emissions. 

Second, while cap and trade was designed to make fossil fuels more expensive, perhaps the real issue globally is that almost all the nations of the world actually subsidize fossil fuels--far more than a cap and trade regime would have raised their cost.  Thus a direct and efficient way to even the playing field for fossil and non fossil fuels would be to end these subsidies.  In many countries they take the form of direct subsidies of gasoline.  India and China both subsidize gasoline--in contrast to the US which taxes it.  However, the US provides generous subsidies for the carbon based economy that run all the way from a foreign policy that rightly views oil availability as a strategic imperative to incentives for drilling to incentives for coal.  It is not realistic to end these immediately--certainly for as long as we rely primarily on oil to power cars-or even soon but over the long term, lowering subsidies could have a far greater impact on lowering fossil fuel dependency, than putting a price on carbon.

In addition to these ideas, there are numerous other ways to move the world in a clean direction from city initiatives such as those undertaken as part of the Clinton Climate Initiative, to better financing mechanisms for renewable energy project such as a Green bank to the PACE program, pioneered in Berkeley, to fund distributed solar energy through property taxes.

In short, while the defeat of cap and trade this year postpones for some time the longstanding project to put a price on carbon, it should not halt those who care about the environment, energy security and jobs from continuing to work to implement new solutions.  Over the long term, the world needs to move from dirty to clean energy and there are many ways to get there.