Carbon Challenge

Monday, August 13, 2007

HOUSE ENERGY Committee Chairman John D. Dingell (D-Mich.) has taken a lot of heat from us. After all, he body-blocked efforts to include an increase in the corporate average fuel economy (CAFE) standards that would have made the huge House energy bill something to be proud of. But the fierce defender of Detroit automakers deserves a tip of our hat for demanding that the nation have a serious debate about a carbon tax or a cap-and-trade system to curb greenhouse gas emissions.

Mr. Dingell has been talking up the need to slap a price on carbon since the beginning of the year. Yet his comments during a C-SPAN interview aired July 8 got the most attention. "I sincerely doubt that the American people are willing to pay what this is really going to cost them," he said. "I will be introducing in the next little bit a carbon tax bill, just to sort of see how people really feel about this." He knows that the reaction will be negative, which is fueling speculation that this is part of a cynical gambit by Mr. Dingell to kill cap-and-trade and carbon-tax proposals before they can get a fair hearing.

Whatever his motives, Mr. Dingell has positioned the climate-change conversation on Capitol Hill where it needs to be. A price per ton of carbon emitted must be imposed in the United States if America is to help slow the advance of global warming. And Mr. Dingell is not alone. In addition to his impending legislation, there are six proposals in the Senate that are a variation on the cap-and-trade theme in which government sets a cap on the amount of carbon dioxide emissions and issues to businesses allowances per ton of carbon emitted. Companies that don't have enough allowances either become more efficient to meet the cap or buy them from firms with allowances to spare.

Congress is mindful of the mistakes that have made Europe's two-year-old cap-and-trade system a mess. Too many allowances were given away when the program began. This led to a glut that collapsed the price of allowances and gave companies no incentive to stop polluting. The decision to give the permits away rather than auctioning them off helped companies, particularly utilities, make billions in windfall profits by using the carbon trading plan as an excuse to pass on the ostensible expense to consumers.

Two prominent Senate proposals -- from Joseph I. Lieberman (I-Conn.) and Jeff Bingaman (D-N.M.) -- are economy-wide mixtures of allowance giveaways and auctions that would begin in 2012, with the number of allowances to be auctioned rising each year. Each would require periodic review to ensure that the program is operating properly and as equitably as possible, since the impact will be felt in pocketbooks from the boardroom table to the kitchen table.

As the respective programs progressed, the number of allowances given away would be reduced. The billions earned from the auction would be used to fund incentives to help industry and consumers adjust to the short-term volatility and the new, expensive reality that a cap-and-trade system would mean. Under any plan adopted by Washington, mitigating the inevitable pain that will be felt by low-income Americans must be a priority.

© 2007 The Washington Post Company