Assume, for the moment, that you want Congress to pass strong and effective legislation to regulate greenhouse gases ASAP. Any climate change bill will need the approval of the powerful House Energy and Commerce Committee, now chaired by John Dingell, the veteran Michigan lawmaker, who is being challenged for the job by Rep. Henry Waxman of California, a longtime rival. Dingell is a moderate Democrat, perhaps best known as the auto industry’s most important ally in Washington. (His wife has worked for General Motors for years.) Waxman is an outspoken liberal who last year introduced one of the most aggressive climate change bills before the Congress. (Dingell blasted him the other day as “anti-manufacturing left-wing Democrat.”) Easy call, right? Enviros may be inclined to back Waxman.
Not so fast. There are two reasons to hope that Dingell holds onto the job. The first is that he is a masterful legislator with the skills needed to get a complex, controversial bill through the Congress. The second is that a climate change bill that mandates that reductions in carbon emissions that are too steep and too rapid, even if enacted, could generate a political backlash.
So, at least, argues Bill Bumpers, a smart, thoughtful and personable Washington environmental lawyer (and a neighbor of mine in Bethesda) who I met over lunch the other day. Bill has a unique perspective on the climate-change policy debate. He’s trained as an economist. He understands politics, as the son of former Arkansas Gov. and U.S. Sen. Dale Bumpers. Most important, he’s been a Clean Air Act lawyer for 15 years—he’s currently a partner at Baker Botts–so he knows how cap-and-trade regulatory schemes work. The cap-and-trade approach now backed by most Democrats in Congress, as well as much of corporate America, including the U.S. Climate Action Partnership, was inspired by a similar program that effectively and economically cut SOX and NOX pollution from power plants under the 1990 Clean Air Act amendments. While Bill represents utility companies, who have a big stake in the outcome, his views on climate change are his own; trust me when I tell you that they are shaped by his desire that the government do the right thing to curb global warming.
The argument on behalf of Dingell is that he has shepherded big bills through Congress—the Clean Air Act amendments, the 1996 Telecommunications Act, last year’s sweeping energy bill. “The guy knows how to get things done,” Bill says. What’s more, Dingell has been willing (and able) to push the automakers to places they don’t necessarily want to go. Witness the higher CAFÉ (auto-efficiency) standards in the energy bill.
The argument against Waxman is more subtle. Essentially, the worry is that an aggressive climate-change law (with a rapid dial-down in the emissions cap and 100% auction of permits to emit) will rapidly drive up the price of electricity and gasoline, sparking a political backlash. What’s more, there’s no guarantee that higher energy prices at retail would drive major gains from efficiency. The trouble is that while we would hope that higher prices would lead people to trade in gas guzzlers for efficient cars, insulate their homes, buy more efficient appliances and turn down their thermostats, and while some of that will surely happen—look what high gas prices did to SUV sales this summer—many people simply can’t afford to go out and buy a hybrid car or new washing machine. It would be far better, Bill argues, to drive efficiency through tougher building and appliance standards as well as high MPG standards for cars. But we can be almost certain that voters will blame environmentalists and Democrats for rising prices, even if the high prices are accompanied by tax rebates or per-capita dividends paid from the proceeds of auctioning emissions. (Sorry, but this is inevitably complicated stuff.) The key point is that “if you raise prices too quickly, people will get angry,” Bill says. Any rollback of climate-change legislation three, five or seven years from now would be a disaster.
Put another way, climate-change legislation will need to be politically sustainable at the same time as it leads us towards environmental sustainability. You can read an AP story about the Dingell-Waxman contest and the climate change debate here.
On a related matter, Bill has been doing lots of work in carbon finance, including a pro bono project that I was eager to hear about because of my interest in Rwanda. He and an associate at Baker Botts are trying to generate carbon credits for a small hydroelectric project in Shyira, a hilltown in northwestern Rwanda. The hydro project is being organized by Dr. Caleb King and his wife, Louise, two U.S.-trained doctors (Dr. King at Harvard Med School) who have been living and working in Rwanda since 2003. (Here’s their blog.) The project exemplifies the way in which carbon finance can be used to alleviate poverty: If the Kings can generate carbon credits, which could be sold on the European regulated market, the revenues from the credits can be used to help finance the hydro project and thereby provide reliable electricity to Shyira. Similarly, carbon finance can be used to help bring distributed, renewable energy (wind, solar or hydro) or efficiency gains (CFLs, modern wood-burning stoves) to other poor communities in Africa and Asia.
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I have to disagree with Bill here. I think a compelling case could be made that Dingell’s approach to defending the auto industry — aggressively blocking and delaying reforms in safety, pollution, and efficiency (air bags, seat belts, rollover tendencies, fuel economy, etc.) — have stifled the domestic manufacturers’ competitiveness. It’s an unfortunate irony, but in attempting to help Detroit Dingell may go down in history as the man who killed it.
It’s funny — some economic conservatives recoil at fuel economy standards and call for a gas tax, Bumpers recoils at a cap and trade system (even though that would have a de minimis impact on automobiles) and calls for higher standards.
In reality these have a first-order equivalent economic effect. If the programs are well designed, they will have a positive impact; if they are poorly designed, they will have a negative impact. This is true whether the financial instrument is a cap and trade system, a carbon tax, efficiency standards, or a combined portfolio.
The stark science of manmade global warming is that the US needs to figure out how to reduce its net emissions by 1/3 to 1/2 from current levels by 2020 if we want to prevent unimaginably catastrophic consequences.
We’re going to need all hands on deck, from third-world carbon micro-finance, to major R&D investments, to serious carbon pricing.
The politics will be difficult, but we need to start from reality.
Thanks, Brad. You make a good case about Dingell being bad for autos over time. But I need to clarify Bill’s position (since I apparently didn’t do so in the post). He is strongly in favor of cap-and-trade, as well as efficiency standards. He argues that cap-and-trade will send the right signals to utilities about new investments in clean energy, and that efficiency standards are need to require conservation.