Sen. Lindsey Graham’s Me-Too Kyotoism (will he snatch defeat from the jaws of victory?)

By Marlo Lewis -- October 15, 2009

Last weekend, Sens. John Kerry (D-MA) and Lindsey Graham (R-SC) co-authored an op-ed in the New York Times titled, “Yes We Can (Pass Climate Change Legislation).”

Kerry and Graham want to pass a Senate companion bill to H.R. 2454, the American Clean Energy and Security Act (ACES), also known as Waxman-Markey, for its chief sponsors, Reps. Henry Waxman (D-CA) and Ed Markey (D-MA). Waxman-Markey narrowly passed in the House by a vote of 219 to 212. Only eight Republicans — under 5% of those voting — supported the bill.

Republican Opportunity

The overtly partisan character of Waxman-Markey is one of the reasons some observers conclude that Congress will not pass a cap-and-trade bill this year. Cap-and-trade “works” by raising consumer energy prices, and Democrats are loathe to increase household utility bills and pain at the pump unless they can snooker Republicans into giving them bipartisan cover.

Republicans can pry Blue Dogs apart from their more “progressive” brethren and protect the economy from Kyotoism by simply refusing to jump on the cap-and-trade bandwagon.

Republicans, however, are continually tempted to “Me-Too” it, because breaking a legislative stalemate can win ephemeral plaudits from Democrat colleagues and the liberal media.

Case in Point #1: When President George H.W. Bush accepted the Rostenkowski plan to balance the budget by raising taxes, his stock soared in Washington, D.C. But by agreeing to raise taxes, Mr. “Read-my-lips: No New Taxes!” betrayed the people who elected him and pushed the economy into a recession. That sealed his fate as a one-term president.

Case in Point #2: Republican Sen. John McCain of Arizona made a national name for himself, first, by co-sponsoring the McCain-Feingold campaign finance “reform” law, and, later, by co-sponsoring the McCain-Lieberman cap-and-trade bill.

These actions — especially McCain-Feingold, which would have revived the power of major broadcasting corporations and newspapers to act as information gatekeepers during federal elections — made McCain the establishment media’s favorite Republican in Congress. But these high-profile acts of Me-Tooism did not win McCain the White House. Many voters wondered: Why elect an imitation Democrat when we can have the real thing?

Me-Tooing is easier than articulating and advancing an alternative agenda. But it is the opposite of real leadership and in the end leads to defeat, because a Me-Too party has no reason for being.

Getting Strange in the Name of Climate

Kerry and Graham propose several “bipartisan” fixes to the cap-and-trade legislation drafted by Sens. Kerry and Barbara Boxer (D-CA) — changes they claim will be enough to win it 60 votes.

One is actually not a fix but a new emphasis on national security as a rationale for cap-and-trade. “First, we agree that climate change is real and threatens our economy and national security.” The alleged peril is vastly overblown, as I explain here and here. Regulatory climate policies pose  bigger threats to the economy and national security, as I explain here.

Second, they propose to enhance the nuclear title in the Kerry-Boxer draft bill, asserting that nuclear power “needs to be a core component” of any realistic solution to global warming. But as my colleague Myron Ebell points out, they duck the core issue — nuclear waste disposal:

No new nuclear power plants will be built unless there is somewhere to store the waste.  Here’s what Kerry and Graham say about that: “We must also do more to encourage serious investment in research and development to find solutions to our nuclear waste problem.”  In other words, not finish the Yucca Mountain site in Nevada that the federal government has already spent billions on, but which Majority Leader Harry Reid (D-Nev.) and President Obama oppose.

Third, Kerry and Graham say, “climate change legislation is an opportunity to get serious about breaking our dependence on foreign oil.” In this connection, they claim to be “committed to seeking compromise on additional onshore and offshore oil and gas exploration — work that was started by a bipartisan group in the Senate last Congress.”

But, as Kerry and Graham must know, America will depend on foreign oil as long we depend on oil, period. Cap-and-trade aims to jump-start the transition to a “beyond petroleum” economy.  The objective is to decrease demand for fossil fuels by making those fuels more costly. Why should anyone invest billions of dollars to develop new oil and gas infrastructure under a policy regime designed to restrict and, ultimately, eliminate production of oil and gas? A policy that puts one foot on the accelerator and the other on the brake is an incoherent muddle, not a compromise.

Kerry and Graham say they want America to “become the Saudi Arabia of clean coal,” and to that end they propose “new financial incentives for companies that develop carbon capture and sequestration technology.” However, the costs imposed on coal-based power under cap-and-trade are immediate, whereas the payoffs from “incentives” for “clean coal” R&D are speculative. 

Also, what good will it do to reduce the costs of carbon capture and storage technology if eco-litigation groups are free to block investment in “clean coal” infrastructure? Consider that the pipeline system required to transport liquefied CO2 from coal plants to underground storage sites would rival the current natural gas and oil pipeline systems in size. Environmental and NIMBY groups have blocked dozens of wind farms, solar generators, and other “green” energy projects that arguably pose less risk to public health, safety, and the environment than would billions of tons of pressurized CO2 stored in underground formations. 

Kerry and Graham do not even acknowledge the NIMBY problem, as Myron notes:

Carbon capture and storage technology is more than a decade away from being commercially available.  Even if it works and is affordable, environmental pressure groups will sue to block permits for the pipelines and underground storage sites necessary to transport and store the pressurized carbon dioxide.  Here’s what Kerry and Graham say: “…we need to provide new financial incentives for companies to develop carbon capture and sequestration technology. “  Not a word about limiting lawsuits that would block projects.

“Fourth,” write Kerry and Graham, “we cannot sacrifice another job to competitors overseas. China and India are among the many countries investing heavily in clean-energy technologies that will produce millions of jobs. There is no reason we should surrender our marketplace to countries that do not accept environmental standards. For this reason, we should consider a border tax on items produced in countries that avoid these standards.”

More incoherence. They suggest that we need cap-and-trade to keep up with China and India, which supposedly are creating “millions” of green jobs. But wait a minute — China and India do not have cap-and-trade. If China and India can “invest heavily” in clean tech and create “millions” of green jobs without capping their emissions, why can’t we?

Compounding the confusion, Kerry and Graham say next that we need carbon tariffs (border taxes) because China and India “do not accept environmental standards.” What? Are they saying that countries lacking environmental standards are leaders in green job creation? 

This much is clear: By calling for carbon tariffs, Kerry and Graham tacitly admit that cap-and-trade will make U.S. companies less competitive in global trade.

“Finally,” Kerry and Graham write, “we will develop a mechanism to protect businesses — and ultimately consumers — from increases in energy prices. The central element is the establishment of a floor and a ceiling for the cost of emission allowances. This will also safeguard important industries while they make the investments necessary to join the clean-energy era.”

Price Collar Economics

This much-touted “price collar” is also a muddle. To the extent that it actually protects consumers by limiting increases in energy prices, it also limits incentives to increase energy efficiency and switch from higher- to lower-carbon fuels. But creating those incentives is ostensibly the reason for establishing a cap-and-trade program in the first place. 

A price collar is a mishmash between a straight up cap-and-trade program, in which government determines the quantity of emissions to be reduced (the cap), and the “market” (trading) determines the price of emission allowances, and an out-and-out carbon tax, in which government determines the price per ton of emitting carbon, and the market determines the quantity of emissions reduced.

Placing a ceiling on the price of emission allowances turns the emission reduction target of a cap-and-trade program into an aspiration rather than a legally binding requirement. Is that what Al Gore, the EU, and the IPCC advocate? Not the last time I checked.

In addition, by precluding the possibility that permit prices will exceed a predetermined level, the price ceiling limits the profit potential of emission-reducing technologies. Consequently, it reduces the incentive of inventors and entrepreneurs to develop new technology — again undercutting one of the main alleged benefits of cap-and-trade.

A price floor, on the other hand, could deepen and entrench a recession. In a recession, production and economic activity decline; hence energy demand and energy-related emissions decline;  hence the demand for and price of emission allowances decline. Lower emission prices mean lower business costs, which would help a distressed economy recover. The price floor advocated by Kerry and Graham would impose additional costs on businesses during a downturn, impeding recovery.

There is no environmental justification for a price floor. Whether the economy is booming or crashing, under a cap-and-trade program businesses are not allowed to emit in excess of the cap. A recession does not loosen the cap; rather, it contributes to compliance by reducing output and energy demand. Therefore, a drop in allowance prices during a recession would not affect compliance with the cap. All the price floor would accomplish would be to kick businesses when they are down.

Too Clever By Half

Kerry and Graham conclude by warning that if “Congress does not pass legislation dealing with climate change, the administration will use the Environmental Protection Agency to impose new regulations.”

Here Kerry and Graham come across like heavies in a 1940s mobster movie. “Pretty nice economy you got deah (or used to have). Shame if somethin’ bad were to happen to it. Everybody needs protection. You need protection. It’s called Kerry-Boxer.”

Kerry and Boxer may believe that the prospect of litigation-driven CO2 regulation under the Clean Air Act gives them the whip hand — a legislative hammer to beat cap-and-trade opponents into submission. But, as I discuss in a previous post, this ‘come along quietly or we’ll let EPA muss ya up’ talk is too clever by half.

To begin with, opponents of cap-and-trade are not stuck between a rock and a hard place. They can support legislation, like H.R. 391, introduced by Rep. Marsha Blackburn (R-TN), that would prohibit EPA from regulating CO2 under the Clean Air Act.

Moreover, if Republicans just say no to cap-and-trade, then the Obama administration must take sole ownership of the rising energy costs, job losses, and factory closures that EPA inflicts on the economy under the Clean Air Act. The much vaunted legislative hammer is, in reality, a political suicide note. As Roger Pielke, Jr. astutely observes:

 Republicans must be drooling over the possibility that EPA will take extensive regulatory action on climate change. Why? Because the resulting political fallout associated with any actual or perceived downsides (e.g., higher energy prices) will fall entirely on Democrats and the Obama Administration. Far from being an incentive for Congress to act on its own, the looming possibility that EPA will take regulatory action is a strong incentive for Republicans to stalemate Congressional action and a nightmare scenario for Democrats.

Michael Schellinberger of the Breakthrough Institute agrees:

In other words, the White House “threat” to Republicans and moderate Democrats to regulate carbon is the equivalent of threatening your enemy with suicide. (“Don’t make me raise energy prices! You’ll really be in trouble with your voters when I raise their energy prices!”)

The prospect of an EPA-triggered regulatory morass, with all the blame heaped on Obama, is the real legislative hammer. Or at any rate, it should be. If Republicans keep their wits and their nerve, they could leverage the Democrats’ predicament to build bipartisan support for legislation like the Blackburn bill.

That’s no small “if,” of course. Graham illustrates how easily some Republicans succumb to the Me-Too urge to snatch defeat from the jaws of victory.

What Sen. Graham Should Be Doing

Instead of carrying water for the Kerry-Boxer cap-and-trade bill, Sen. Graham ought to be asking his Democrat colleagues these questions:

1. Do you believe that EPA and the litigation fraternity should determine energy prices and dictate climate policy to Congress and the people? If not, then why aren’t you supporting the Blackburn bill?
2. Do you think an era of litigation-driven CO2 regulation under the Clean Air Act would help the U.S. economy recover from the worst financial crisis since the Great Depression? If not, then why aren’t you supporting the Blackburn bill?
3. Do you believe that cap-and-trade legislation should be voted up or down on the merits? Or do you think Kerry-Boxer is unsellable apart from the false advertisement that it’s the only alternative to regulatory chaos? If the former, then stop waiving around that phony legislative hammer, and work with us protect the U.S. economy from the regulatory fallout of Massachusetts v. EPA. We’ll see to it that voters hold you responsible if you don’t.

Let’s hope that cooler heads prevail and a mid-course correction can be made by the “Me-Too” wing of the Republican Party.