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November, 2010 - Cap-and-Trade and the US Midterm Elections

 

Cap-and-Trade and the US Midterm Elections  

Tom Markowitz - Saturday, November 06, 2010

Welcome to Enerhope
 

Cap-and-Trade and the US Mid-Term Elections

 

© Enerhope.com, 2010

On November 2nd, President Barack Obama’s Democratic Party suffered a major setback in the United States Mid-Term Elections, as the Republican Party took away the Democrats’ majority in the US House of Representatives. The Democrats lost some key seats in the US Senate, but still managed to maintain a majority. Over two dozen senators and congressional representatives who had promoted a US cap-and-trade system for greenhouse gases were voted out of office. What effect will the election results have on President Obama’s plan for a US cap-and-trade system? What is the relationship between cap-and-trade and the results of the election?

Situation Before the Election

It is important to remember that both Democrats and Republicans during the 2008 US Presidential Election campaign promised a cap-and-trade system, to reduce the USA’s greenhouse gas emissions.

After the November, 2008 victory, the new Obama administration proceeded to draft a large, complex cap-and-trade bill for the US House of Representatives. This “Waxman-Markey” Bill was passed by the House in June, 2009, after serious compromises which added to its complexity.

The Obama administration presented a similar bill for the US Senate, but failed to obtain the informal support of 60% of the senators, necessary to pass the proposed bill without filibuster. The “Kerry-Lieberman” draft Bill, the “American Power Act,” never appeared on the floor of the Senate. The draft bill was opposed by Republican senators, and also by Democratic “Blue Dog” senators from the fossil-fuel states.

While the US government was deliberating over cap-and-trade, the USA was in a recession. The public was preoccupied with economic problems, and had no patience for cap-and-trade, a complex subject that few people understood.

Public disappointment with governments led to a major shift toward conservative public attitudes, away from large, new government programs. Charles M. Blow reported in the New York Times (November 5th), “this is the first time in the history of exit polling that moderates were not the largest ideological voting block. They were trumped by conservatives."
http://www.nytimes.com/2010/11/06/opinion/06blow.html?nl=todaysheadlines&emc=tha211

Republican leaders, and some Democrats, former staunch supporters of cap-and-trade, now labeled the proposed bill as a “cap and tax.” The term “cap-and-trade” became a flash point for conservative anger, along with other inflammatory words such as “health care,” “immigration,” and “gun control.”

Results of the Election

The Democratic Party lost its majority in the House of Representatives, and narrowly avoided losing its majority in the Senate. In both chambers, the Obama administration will not be able to promote its own agenda without the agreement of the Republicans.
According to the web site www.politico.com , “Over two dozen lawmakers (Congressional Representatives) who favored efforts to clamp down on heat-trapping emissions were swept away on Tuesday's (November 2nd) anti-incumbent wave, ushering in a new class of Republicans who doubt global warming science and want to upend President Barack Obama's environmental and energy policies.”
http://www.politico.com/news/stories/1110/44617.html

In a press conference on November 3rd, President Obama announced that his administration would be looking at means other than cap-and-trade to address the problem of global warning. He hinted at the power of the Environmental Protection Agency to regulate greenhouse gases, but he stressed the importance of finding ways to solve environmental problems that do not hurt the economy.
http://latimesblogs.latimes.com/greenspace/2010/11/obama-revisits-energy-policy-cap-and-trade-epa-regulation.html

International reaction to the US mid-terms was swift. Lord John Prescott, the Council of Europe rapporteur on climate change issues, said that a binding international climate change deal at the Cancun Conference (November 29th – December 10th) is impossible after the US Mid-Term Elections.
http://www.telegraph.co.uk/earth/environment/climatechange/8109388/Binding-climate-change-deal-is-impossible-after-Barack-Obamas-election-defeat-says-John-Prescott.html

The Sydney Morning Herald (November 5th) reported that President Obama’s statement has cast some uncertainty over Australia’s attempt to establish a price on carbon. “Australian Chamber of Commerce and Industry chief executive Peter Anderson said the President's statement after the mid-term election rebuff ‘heralds a new marker in how Australia should respond’ on climate change. ‘A carbon price should remain on the table in the Australian debate but now be joined by a range of alternative approaches’, he said.”
http://www.smh.com.au/business/obama-blow-to-carbon-price-20101105-17hmf.html

Reasons for the Defeat of Cap-and-trade

1.
The cap-and-trade bills were introduced at a time when the public was more worried about the economy than the environment, although the cap-and-trade bills attempted to combine emission reductions with economic renewal.

2.
Very few people understood the concept of cap-and-trade, or the complexities of the congressional bills.

3.
The over-ambitious, over-sized congressional cap-and-trade bills contained serious flaws, which were targeted by opponents as “cap and tax.”

Enerhope’s own commentary on the Waxman-Markey Bill,
http://www.enerhope.com/ForumRetrieve.aspx?ForumID=317&TopicID=7130&NoTemplate=False

and the Kerry-Lieberman (draft) Bill,
http://www.enerhope.com/ForumRetrieve.aspx?ForumID=317&TopicID=7454&NoTemplate=False

4.
The cap-and-trade bill never arrived on the floor of the Senate. Although the Democrats (before November 2nd) held a majority of the seats in the US Senate, they did not hold the 60% majority necessary to avoid a filibuster of the proposed Senate cap-and-trade bill. Furthermore, some of the “Blue Dog” Democratic senators, from fossil fuel states, were opposed to the concept of cap-and-trade for greenhouse gases.

5.
According to Ryan Lizza of The New Yorker (magazine), the Obama team mishandled the negotiations necessary to bring the Kerry-Lieberman Bill through the Senate.
http://bigthink.com/ideas/24340

Effect of Cap-and-trade on the Election

In the days after the election, US media journalists debated whether cap-and-trade had significantly affected the election results.

A November 2nd voter survey by Greenberg Quinlan Rosner Research indicates that cap-and-trade and energy were not big factors in the Republican victories on November 2nd.
http://www.reuters.com/article/idUS253311316220101105

A November 3rd blog by Bryan Walsh of Time Magazine’s The Ecocentric maintains that cap-and-trade was not a big factor on election night. “It's worth noting that no Republican who voted in favor of cap-and-trade lost his or her re-election battle last night.”
http://ecocentric.blogs.time.com/2010/11/03/politics-how-much-did-cap-and-trade-hurt-the-democrats-not-as-much-as-you-think/

In contrast, a November 4th blog by Kiran Stacey in the Financial Times looks at both sides of the debate, but concludes, “Green campaigners shouldn’t kid themselves: Waxman-Markey did play a role in Tuesday night’s Democratic shellacking.”
http://blogs.ft.com/energy-source/2010/11/04/did-cap-and-trade-really-cost-the-democrats-votes/

At least one Democratic candidate won election after publicly repudiating his own party’s cap-and-trade policy. In a TV political campaign advertisement, West Virginia Governor and US Senate candidate Joe Manchin, a Democrat, fired a shotgun at a “Cap-and-trade” sign. "We're not talking about the President; we are talking about cap-and-trade. Cap-and-trade should be dead on arrival." After airing the campaign advertisement, Manchin pulled even from behind his Republican opponent, and won the Senate seat by a narrow margin.
http://www.cbsnews.com/8301-503544_162-20019390-503544.html

Effect of the Election on Cap-and-trade: The Future

The United States will not have a cap-and-trade program for greenhouse gas abatement in the foreseeable future, Business Week reported on November 4th, “President Barack Obama distanced himself from the ‘cap-and-trade’ program he once backed as the best tool to limit global warming, saying he wants to work with Republicans to find other ways to curb carbon emissions. ‘Cap-and-trade was just one way of skinning the cat,’ Obama said at a White House news conference yesterday, referring to a system in which companies buy and sell a declining number of pollution allowances. ‘It was a means, not an end,’ he said. ‘I’m going to be looking for other means to address this problem.’”
http://www.businessweek.com/news/2010-11-04/obama-moves-away-from-cap-and-trade-northeast-market-falls.html

However, the US Administration could impose greenhouse gas emission standards on goods and commodities imported from outside the USA, satisfying both Democratic environmentalists and Republican anti-free-traders at the same time. Such greenhouse gas standards could force countries exporting to the USA to implement rigorous emission reduction programs, including cap-and-trade.

National Geographic News reported on November 3rd, “The Chicago Climate Exchange (CCX), the eight-year-old platform where power companies, manufacturers, and others agreed to reduce their greenhouse gas emissions and traded the credits they earned for their success, will shut down that program at the end of this year.”
http://news.nationalgeographic.com/news/news/energy/2010/11/101103-chicago-climate-exchange-cap-and-trade-election/

The United States Government may attempt to attack climate change through other programs, e.g. technology development, project grants, information and advocacy. However, any measures which require massive government spending or new taxes will probably meet opposition from the new Republican majority in the House of Representatives.

The President has the power to enact cap-and-trade by regulation. A US Supreme Court decision in 2007 (Massachusetts vs EPA) held that the Environmental Protection Administation already has statutory power to regulate greenhouse gas emissions under the Clean Air Acts. Reacting to the Supreme Court ruling, in March, 2009, the EPA cleared the way for a possible regulation by publishing a finding that greenhouse emissions endanger human health by causing climate change. However, implementing a cap-and-trade system by regulation instead of legislation may still be challenged in the US courts, and could be a political liability for the Obama administration.

A binding international agreement, to reduce greenhouse gas emissions, at the UNFCCC Cancun Conference (November 29th – December 10th), is highly unlikely.

America’s Best Hope

One bright spot for cap-and-trade on November 2nd was that the voters of California rejected Proposition 23, which would have suspended California’s 2006 climate law, Assembly Bill 32, until unemployment dropped below 5.5 percent for 12 months.

California’s rejection of Proposition 23 (and the election of Democratic Governor Jerry Brown) mean that the biggest US State will proceed with AB32, an ambitious attack on greenhouse gas emissions, through cap-and-trade (starting in 2012), a renewable electricity standard, a clean car standard, a low-carbon fuel standard, and other measures.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/11/02/MNGN1G2HVN.DTL

On November 2nd, Californians also voted for Proposition 26, which will reclassify "fees" the state assesses on various industries as "taxes," requiring the state legislature to pass them by a (difficult) two-thirds majority. These “taxes” could include sales of cap-and-trade allowances by the State to capped facilities. The passage of Proposition 26 may force California to implement free allocation of allowances to capped facilities in its cap-and-trade system.
http://www.theatlantic.com/politics/archive/2010/11/the-sneaky-threat-that-could-cripple-californias-climate-law/66137/

The survival of California’s AB32, and the defeat of the Obama Administration’s cap-and-trade program, will give renewed impetus to the Western Climate Initiative, a greenhouse gas partnership of seven US states and four Canadian provinces, which plans to implement a multi-state greenhouse gas cap-and-trade system.


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