Utility companies and their coal-state apologists in Congress are wrecking America's last, best chance to solve global warming.
By insisting on free pollution permits, utilities are creating a climate bill that is complicated, unfair and destined to fail in future years. It's now up to New York Congressman Charles Rangel (see video) and the House Ways and Means Committee to fix the problem.
The much-discussed Waxman-Markey bill on global warming now proposes to give 35 percent of all carbon pollution permits to utilities for free. Another 45 percent will go free-of-charge to other carbon-intensive industries, but utilities are least deserving by far.
Last year, America's 48 largest utilities earned profits of $28 billion. And last month, in a study requested by Rep. Henry Waxman (D-Calif.), the EPA determined that allowing utilities to pollute for free under a global warming bill would drive up the overall cost of the program and would hurt poor people the most.
But this is about more than social justice and corporate welfare. Free permits weaken the most important tool within the Waxman-Markey bill: the carbon cap.
By giving away permits, the bill introduces complexity, potential gaming, and probable delay into a cap system. It thus reduces our ability to save the climate and avoid 20 feet of sea-level rise in places like downtown Washington, D.C.
A strong, workable cap is everything. Imagine a patient who has a curable form of cancer. Should you prescribe pain medication? Yes. A healthy diet and physical therapy? Yes. But the most important thing is treating the actual cancer with surgery or other means. The goal is to cure the disease.
With global warming, we can invest in "green jobs" and a ban on deforestation as well as improved levees for places like New Orleans. But unless we treat the core "disease" that's driving climate change – unbridled fossil fuel use – we will only be putting band-aids on symptoms. Without a strong cap on carbon, none of our other actions will really matter.
Waxman's House committee – Energy and Commerce – has already committed itself to an intricate approach called "cap and trade." This creates a system of tradable carbon permits that might be effective if properly structured. But given Wall Street's recent demise via trading in complex mortgage derivatives, it's no wonder many Americans are wary of talk of a specialized market in tradable carbon.
Now, on top of this, utilities want their tradable pollution permits to be free, at least during the first decade or so. The utilities argue this is the best way to protect consumers from rising electricity prices under a cap. They promise to return the "value" of the pollution permits to ratepayers in the form of rate reductions, efficiency projects, and other "public benefit" programs administered by the electric companies themselves.
Really? Does anyone believe this is the best way to protect consumers?
Why not auction all the pollution permits, cut out the middle man, and transfer the money directly to citizens? No freebies. The sky doesn't belong to Virginia Dominion Power or Pacific Gas and Electric. It belongs to all Americans. If a company wants to pollute our sky, it should pay a fee just like a landfill fee, and that money should go to you.
This was the simple, fair solution President Obama campaigned on last fall: 100 percent carbon auction with most of the money rebated to taxpayers.
Thankfully, the House Ways and Means committee now has jurisdictional power to fix the Waxman-Markey bill. Rangel should strip out all free permits to utilities and rebate the auction money to American citizens in the form of a monthly direct "dividend."
Congressman Chris Van Hollen (D-Md.) has already introduced a "cap and dividend" bill within Ways and Means. That bill should serve as a vital guide to Rangel and colleagues as they go to work in the coming weeks.
Again, the goal is to create the strongest possible carbon cap. To be strong, the cap must be simple and fair. Achieve these two features and voters will support it for the fifty years it takes to squeeze carbon out of our economy. Fail at these two features and the patient will remain tragically sick for many years to come.