Pushback Against Two Cap & Trade Programs Follows Electoral Rejection Of Carbon Taxes

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Prominent environmental organizations and activists have spent recent months seeking to shoehorn talk of climate change into discussions about current events. The Washington Post, for example, published a June 29 article trying to make a connection between race relations and climate change. On June 30 Al Gore had an op-ed in the Wall Street Journal arguing that the aftermath of the current downturn is an opportune time for environmentalists to advance their agenda. 

Yet all of this talk and rhetoric from activists follows recent action in numerous state capitals featuring bipartisan opposition to progressive proposals to impose Green New Deal-style emissions caps and carbon pricing. The crux of the recent pushback against two regional cap and trade proposals is not due to any bugs, but rather the plans’ feature, which is that they’re designed to inflate the cost of energy in some of the most populous states in the country, and at a time when many households and employers can ill-afford the added cost. 

Right now in the 2020 battleground state of Pennsylvania, Governor Tom Wolf’s (D) attempt to commit the Keystone State to the Regional Greenhouse Gas Initiative (RGGI), a multi-state cap and trade scheme designed to inflate the cost of energy derived from fossil fuels, is running into bipartisan legislative resistance in Pennsylvania’s ornate state capitol in Harrisburg. 

RGGI is a more than decade old cap & trade system whereby 10 member states (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont) limit the amount of CO2 emissions that power plants can release, while making “allowances” available at interstate auctions that can be purchased and traded among companies subject to the caps.

Representatives Pam Snyder (D) and Jim Struzzi (R) have introduced House Bill 2025, which blocks Governor Wolf from entering Pennsylvania into the RGGI agreement without consulting the legislature. This legislative action comes in response to Governor Wolf’s announcement last October that he would seek to implement RGGI in Pennsylvania by executive order, without a vote of the legislature. 

Representatives Snyder & Struzzi’s bill asks Governor Wolf’s Department of Environmental Protection “to conduct a public comment process on and submit to the General Assembly a measure or action intended to abate, control or limit carbon dioxide emissions by imposing a revenue-generating tax or fee on carbon dioxide emissions.”

Representative Struzzi says this bill, which recently passed through the House Environmental Resources and Energy Committee, “basically says that before any attempt to enter into RGGI is undertaken, it needs to go through the legislature first.” 

Pennsylvania Senator Joe Pittman (R) has introduced companion legislation, Senate Bill 950, in the commonwealth’s upper chamber. At a February hearing on Snyder & Struzzi’s bill, energy policy experts argued that RGGI is an economic growth-depressing jobs killer with questionable environmental benefits. Aside from process arguments that any decisions about RGGI in Pennsylvania should come through the legislature, Representatives Snyder & Struzzi also oppose the substance of RGGI and what it would do to employers, jobs, and the Pennsylvania economy. 

“I’ve made no secret about my opposition to the Regional Greenhouse Gas Initiative,” Representative Snyder noted in a statement. “It’s bad news for our region. Locally, we’ve made strides and continue to do so to protect the environment without needing it.”

“The real conundrum here is that there is no evidence RGGI will have even a small impact on the environment,” Representative Struzzi said. “But it is for certain that it will shut down power plants. Just the fact that Pennsylvania officials are talking about RGGI is enough to drive away business.”

“I was proud to support HB 2505, which specifically outlines the process that the General Assembly has before the state could impose a carbon tax on energy suppliers or join any multi-state program, like RGGI,” Snyder added. 

RGGI isn’t the only regional cap and trade plan for which environmental activists are currently seeking additional member states. The Transportation Climate Initiative (TCI) is another regional cap and trade scheme that differs from RGGI in that it strictly targets transportation emissions. Whereas RGGI applies upward pressure on both utility bills and gas prices, TCI only drives up gas prices. 

TCI, whose push has been led by Massachusetts Governor Charlie Baker’s administration, has run into possibly deal-breaking resistance since more details about the plan were released last December. That resistance started with New Hampshire Governor Chris Sununu’s immediate announcement that he would not subject his constituents to TCI and the inflationary impact it would have on gas prices. 

“I will not force Granite Staters to pay more for their gas just to subsidize other states’ crumbling infrastructure,” Governor Sununu told the Boston Herald shortly after TCI was unveiled. “New Hampshire is already taking substantial steps to curb our carbon emissions, and this initiative, if enacted, would institute a new gas tax by up to 17 cents per gallon while only achieving minimal results. This program is a financial boondoggle and the people of New Hampshire will never support it.”

Other blue state governors and lawmakers have since followed Governor Sununu in either rejecting or refusing to support TCI. The cold reception for this new cap and trade scheme has prompted Governor Baker’s team to consider back up plans, such as trying to link up with California or Canada as part of a non-contiguous regional cap & trade scheme. 

“I fail to see how any friend of Labor could stand by such a proposal,” David Van Deusen, president of the Vermont AFL-CIO, wrote about the TCI after the plan’s December introduction by Baker.

“Any scheme which seeks to price working people out of driving a gas powered vehicle (without having a comprehensive public transit system & affordable electric cars readily available first) will not result in workers driving less,” AFL-CIO’s Deusen wrote. “Rather, such moves will do nothing more than take dollars out of the pockets of working people; money which we desperately need while living in a society which does not guarantee livable wages, public healthcare, and affordable housing.”

While even Democrats and progressives in northeastern and New England states are rejecting energy cost-increasing cap and trade schemes and carbon taxes in the middle of a recession, others are instead claiming that low oil prices are an excuse to raise state gas taxes, or to impose a carbon tax that will drive up the price of gas. 

“Imposing a carbon tax that would generate revenue sufficient to pay for the pandemic relief bill while energy prices are historically low would constitute a profound act of governing,” writes Ike Brannon, a senior fellow at the Jack Kemp Foundation. 

“Low global oil prices provide an opportunity to increase carbon taxes without hurting consumers,” the United Kingdom’s state-appointed climate commission wrote in a recent letter to Prime Minister Boris Johnson, echoing Brannon. 

Unfortunately for Brannon, the UK climate commission, and other carbon tax advocates, such regressive proposals have been rejected repeatedly in recent years. Even more deflating for carbon tax proponents is the fact that this rejection has occurred in blue states whose voters should be the most open to such ostensibly green tax hikes. Not only have the more than a dozen carbon tax bills that have been introduced at the state level in recent years all failed to pass, two well-funded ballot measures to impose a statewide carbon tax have both been rejected by voters in blue Washington State over the last four years. 

In the same elections that Washington State voters awarded their electoral votes to Hillary Clinton and voted for Democrats to control Congress, they also resoundingly rejected carbon taxes. Now, two years after the last voter rejection of a carbon tax ballot measure, cap & trade schemes are being rejected on the east coast, while structurally failing on the west coast. The May auction for emissions credits under California’s cap & trade program, enacted in 2006, was a disaster. 

Results from the Air Resources Board’s May 2020 quarterly auction show that just 35% of the climate pollution allowances made available for purchase were sold, raising less than $25 million for the state’s Greenhouse Gas Reduction Fund,” Danny Cullenward, a lecturer at Stanford Law School and a member of the CalEPA Independent Emissions Market Advisory Committee, wrote in a May 29 CalMatters article. 

“Successful auctions normally bring in between $600 million and $800 million per quarter to support a wide variety of air quality, climate and fire protection programs, but now – in the middle a massive budget crisis – those funds are gone,” Cullenward wrote, attributing the shortfall to a failure in the structure of California’s cap and trade system and allowances market. 

“There’s no serious argument that the pandemic is responsible for the auction shortfall,” Cullenward added. “Faulty market design is the real culprit.”

Carbon tax supporters like to talk about building “momentum,” despite a lack of legislative or electoral victories. Meanwhile the cap & trade schemes currently pending on the east coast, which have the same emissions-reducing goals and energy cost-inflating effect as a carbon tax, are running into bipartisan resistance. Amid a recession that has lowered tolerance for tax hikes, particularly regressive levies like a carbon tax, don’t expect carbon tax or cap & trade supporters to get anything passed in 2020.

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