Economics, Energy and the Environment, Pethokoukis

So, yeah, it looks like cap and trade is back

Image Credit: shutterstock

Image Credit: shutterstock

In a plan to be unveiled next week, according to The New York Times, “President Obama will use his executive authority to cut carbon emissions from the nation’s coal-fired power plants by up to 20 percent ….”

This rule, written by the EPA, will “set a national limit on carbon pollution from coal plants [and] allow each state to come up with its own plan to cut emissions based on a menu of options that include adding wind and solar power, energy-efficiency technology and creating or joining state cap-and-trade program.”

Right, there’s a menu of options but it is clear from the story that the easiest path for states likely is the cap-and-trade route where carbon emission permits would be auctioned:

Many states are already researching how to join or replicate the nation’s two existing state-level cap-and-trade plans, both of which bear the signatures of prominent Republicans: Mitt Romney, the 2012 presidential nominee and former Massachusetts governor, and Arnold Schwarzenegger, the former California governor. As governor of Massachusetts, Mr. Romney was a key architect of a cap-and-trade program in nine northeastern states, the Regional Greenhouse Gas Initiative.

So the 2010 battle that national Republicans thought they won looks now looks like an Obama victory at the state level, at least as presented by the newspaper. I would assume, though, that litigation will ensure. Would the rationing scheme raise energy costs in the short-term? That’s the point. The US Chamber of Commerce speculates that the EPA plan “will cost America’s economy over $50 billion a year between now and 2030.” Does it potentially provide ample opportunity for cronyist favoritism? The original Obama plan sure did. On the plus side, higher fossil fuel costs might make nuclear energy–the most viable clean energy source out there–more economically competitive.That was certainly the theory with the Obama plan back in 2009. And US leadership on the issue could cause other nations, particularly China, to follow.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

One thought on “So, yeah, it looks like cap and trade is back

  1. “I would assume, though, that litigation will ensure.”

    As it well should. We should probably write to Republican Governors like Perry and see what can be done as this seems like an overreach by the EPA. This business of the Feds putting through regs to accomplish what they can’t do legislatively needs to stop, not only for the EPA but also through the IRS.

    Oh, and if the GOP wants to play it smart, they need to highlight this regulatory overreach and show people how it affects their finances. Maybe defunding the EPA should be on the table if they can’t stop doing things like this.

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