Obama's Cap-and-Trade Plan Goes Cold

To many it seems like a risky move in a bad economy.


Obama's cap-and-trade plan may become for Democrats what Social Security reform is for Republicans: a handy policy cudgel for the other side even if it never happens. Even though cap-and-trade is supposed to be a more politically viable method for dealing with carbon emissions than a straight carbon tax (because it's more opaque), it took the GOP about a picosecond to start calling cap-and-trade an "energy tax." And Team Obama seems aware of this problem since it lowballed revenue projections for the plan. Here is how Ed Garlich of  the Washington Research Group at Concept Capital sees things:

It is now likely that the Obama administration’s campaign pledge to reduce greenhouse gas emissions by 14% below 2005 levels by 2020 won’t take legislative form until later this year.  Without significant compromise on a number of aspects the debate could well linger into 2010, an election year, when the political will to resolve controversial issues may fade. The White House was already on alert as bi-partisan opposition to a carbon tax was beginning to build among coal and oil producing state congressional delegations. ... Notwithstanding a proposed $65 billion in tax rebates to low-and middle-income-households, there is enormous uncertainty with respect to the impact an $80-$200 billion per-year energy consumption tax might have on an already fragile economic recovery. Coupled with the effect on the domestic economy is concern that without comparable international policies, U.S. goods would be at a considerable price disadvantage on the global market. Presidential advisors have talked about the possible need for a carbon tariff on imports.

Me: So , in the end, a carbon tax may end up the better route for Democrats, especially if they fully offset it with a cut in payroll taxes or some such. But, of course, Dems want to use those $200 billion in revenues for both energy investment and, perhaps, to fund healthcare reform.