The Cap & Trade Debate

BY busadmin  July 8, 2009 at 9:00 AM EDT

via Flickr

Paul Solman: Sometimes described as a “centrist” Democrat, Congressman Eric Massa, a former Republican, represents a district of New York state that includes Rochester. Recently, this press release of his came our way.

Since part of what we’re trying to do with the Business Desk is make it a place for the wisest economists I know to weigh in on hot issues, I sent Massa’s “Why I Voted ‘No’ on the Cap & Trade Bill” to Harvard environmental economist Rob Stavins, whose commentary on cap & trade I’ve been reading assiduously of late. His comments are in CAPS below, and his recent posts are linked near the end.

Press Release from the office of Rep. Eric Massa:

Subject: Why I Voted “No” on the Cap & Trade Bill

On Friday, June 26th, the 111th Congress voted on, and passed the Cap & Trade Climate Bill (H.R. 2454). I did not vote for it, and as my constituents and supporters, you have the right to know why.

Let me first start off by saying that I believe that global climate change is real, and that man and the industrial activities of man are largely to blame for it. I also believe that as a Congress and as a people it is imperative that we act to address this crisis, and that we act sooner rather than later. That said, I do not believe that this Bill is the right solution to the problems that we are facing. I stood opposed to this Bill for four primary reasons.

1) This plan, as it is designed, presents the potential for new energy costs with unproven positive results. During this recession I cannot support a plan that will raise costs for American families, and I think we should be focusing on investing in the clean technologies of the future that do hold promising outcomes. Hydrogen Fuel Cell technology is one of these solutions, however there is much to do to place this technology in the research and development portfolio. This is a step in the wrong direction.

Robert Stavins: COSTS WILL NOT OCCUR DURING THE RECESSION. THE BILL’S MANDATES WOULD BEGIN IN 2012, AND WOULD NOT BEGIN TO REALLY BITE UNTIL 2016. SO, ANY TALK ABOUT THE RECESSION IS A RED HERRING. IN ANY EVENT, HOWINVESTING IN CLEAN TECHNOLOGIESWOULD BE COSTLESS IS BEYOND ME.

2) I am deeply concerned about the potentially negative impact of the Cap and Trade system on major companies in my district which would likely encounter difficulties acquiring the “carbon credits” necessary to do business. This will force our companies to make investments in foreign offsets like purchasing rainforest lands.

Robert Stavins: ANOTHER RED HERRING. FOR THOSE FEW SECTORS THAT ARE BOTH ENERGYINTENSIVE AND TRADESENSITIVE (CEMENT, ROLLED STEEL, ALUMINUM, BULK GLASS, PAPER, FOSSIL FUELS), THE BILL PROVIDES VERY STRONG SUPPORTS TO ADDRESS CONCERNS ABOUT INTERNATIONAL COMPETITIVENESS: IN THE SHORT TERM, AN OUTPUTBASED UPDATING ALLOWANCE ALLOCATION MECHANISM, AND IN THE LONGTERM A REQUIREMENT THAT IMPORTS OF THESE COMMODITIES FROM COUNTRIES WITHOUT COMPARABLE CLIMATE POLICIES MUST HOLD EQUIVALENT NUMBERS OF ALLOWANCES.

However, much like the banking bailout, I fear there will not be enough oversight into how these funds are spent overseas by foreign governments. I disagree with a plan that puts in place hundreds of billions of dollars of foreign offsets, which will drain American funds to corrupt overseas Governments where there is little or no oversight to ensure that the funds will be used for the actual planting of trees or rebuilding of tropical forests.

Robert Stavins: I REALLY DON’T KNOW WHERE THEHUNDREDS OF BILLIONS OF DOLLARSCOMES FROM. IN FACT, THE BILL ALLOCATES 5 PERCENT OF ALLOWANCES TO PREVENTING TROPICAL DEFORESTATION FROM 2012 THROUGH 2025, FROM 2026 THROUGH 2030 THIS DROPS TO 3 PERCENT, AND IN 2031 AND THEREAFTER THE ALLOCATION IS 2 PERCENT OF ALLOWANCES. RETARDING DEFORESTATION IN TROPICAL AREAS IS AN IMPORTANT AND COST-EFFECTIVE MEANS OF ACHIEVING EMISSIONS REDUCTIONS, AND SAVES MONEY FOR AMERICAN BUSINESSES.

3) I strongly disagree with the process by which Congress was forced to take this vote. This bill did not stop changing until 3 AM on the night before the vote when a 300-page amendment was added. I did not feel there was enough time to research, review, and fully digest the contents of this massive bill. With so much at stake, rushing the vote was unacceptable to me.

Robert Stavins: I ALSO DID NOT LIKE THE 3 AM PROCESS OR — MORE IMPORTANTLYTHE SUBSTANCE OF SOME OF THE 3 AM AMENDMENTS, BUT THE FINAL BILLWITH ALL ITS FLAWSREMAINS A SOLID FOUNDATION FOR MOVING ON TO THE SENATE. ON THIS, PLEASE READ MY THREE MOST RECENT POSTS AT MY BLOG, AN ECONOMIC VIEW OF THE ENVIRONMENT.

4) My final reason for opposing this bill was you, the constituents of New York’s 29th Congressional District. In the week leading up to the vote, our offices received hundreds of phone calls urging a ‘no’ vote. In fact, after we tallied the responses, the “vote no” calls outnumbered the “vote yes” calls by a ratio of 19 to 1. My job is to represent you, and that’s exactly what I did in casting my vote. While voting based only on polling data is not in concert with my vision – representing this District is my job and I take your concerns very seriously.

Robert Stavins: OK, THE CONGRESSMAN CHOSE TO FOLLOW THE POLITICAL WINDS.

Now the conversation must move forward. I stand fully committed to crafting and implementing solutions that will move us in the right direction on this issue, and I hope you will work along side me as we do the hard work that is required. There will certainly be times when you disagree with my votes or my stances on issues, but as your Representative in Washington, I will always level with you and tell the truth. I believe that open and honest dialogue should be the norm, and I welcome your input, your opinions, and your expertise as we work through the countless issues that come before Congress. Thank you for taking the time to read this email, and please know that I am no one’s Congressman but your Congressman, and I thank you for your support.

Very Respectfully,

Eric Massa