Designing a Cap-and-Trade System for the United States

Posted by Brad Johnson Wed, 04 Nov 2009 20:30:00 GMT

Attention to U.S. climate legislation is increasing on Capitol Hill. In June of this year, the House passed the American Clean Energy and Security Act introduced by Reps. Henry Waxman (D-Calif.) and Edward Markey (D-Mass.), and the Senate is considering a similar proposal by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.). With international climate negotiations scheduled in Copenhagen for December, many view U.S. action on this issue as critical to a successful outcome. As a result, the central debate is no longer about the need for action, but about the form our actions will take.

On November 4, the Brookings Institution will host a discussion on a new series of papers on U.S. climate policy design. Each paper tackles a different design topic, but they all share a common set of goals: to acknowledge the complexity inherent in climate policy; to explain the fundamental challenges involved in addressing a particular set of design features; and to suggest a credible path forward, calling attention to tradeoffs where they exist. Panelists will focus on such issues as emissions reduction targets, cost containment measures, oversight of the carbon derivatives market, the allocation of emissions allowances and provisions to mitigate the impacts on trade-exposed industries.

After the panel, participants will take audience questions.

3:30 pm–3:45 am

Welcoming Remarks and Introduction

Charles Ebinger, Senior Fellow and Director, Energy Security Initiative, The Brookings Institution

3:45 pm–5:00 pm


  • Bryan Mignone, Fellow (on leave), The Brookings Institution
  • Adele C. Morris, Fellow and Policy Director, Climate and Energy Economics Project, The Brookings Institution
  • Carolyn Fischer, Senior Fellow, Resources for the Future
  • Richard Morgenstern, Senior Fellow, Resources for the Future
  • Craig Pirrong, Professor of Finance and Energy Markets Director for the Global Energy Management Institute, Bauer College of Business, University of Houston

To RSVP for this event, please call the Office of Communications at 202.797.6105 or click here.

The Brookings Institution
Falk Auditorium
1775 Massachusetts Avenue, NW
Washington, DC 20036

MIT Analysis of Carbon Policy Further Misinterpreted by Weekly Standard

Posted by Wonk Room Sat, 25 Apr 2009 18:09:00 GMT

From the Wonk Room.

Reilly Letter
John Reilly’s April 14th letter to Rep. John Boehner (R-OH). Reilly explains that the GOP continues to misrepresent his study, which found that annual price for the average household for strong cap and trade would start at $65 in 2015, averaging “about $800” through 2050.
Accusing Massachusetts Institute of Technology economist John Reilly of using “fuzzy math” and “fuzzy logic,” the Weekly Standard has further distorted an MIT study of the economics of carbon regulation. By making an economically unsupportable assumption, Weekly Standard editor John McCormack transforms a $3100 fabrication promulgated by House Republicans into a $3900 fabrication:
While $800 is significantly more than Reilly’s original estimate of $215 (not to mention more than Obama’s middle-class tax cut), it turns out that Reilly is still low-balling the cost of cap and trade by using some fuzzy logic. In reality, cap and trade could cost the average household more than $3,900 per year.

In reality, the energy economist from the Massachusetts Institute of Technology who co-authored the “Assessment of U.S. Cap-and-Trade Proposals” report does a better job of interpreting “reality” than McCormack. It’s McCormack’s logic that is “fuzzy.”


The MIT study estimates the average value of the carbon market over a thirty-five year period to be $366 billion per year. If you were to divide that value by the number of households in America, you get $3,128 per household. Asserting that the value of the market is equivalent to the economic cost of the policy – which one has to do to claim that the cost of cap and trade is $3100 per household— requires the assumption that this revenue stream magically disappears somewhere. Reilly attempted to explain this to the Weekly Standard:

It is not really a matter of returning it or not, no matter what happens this revenue gets recycled into the economy some way. In that regard, whether the money is specifically returned to households with a check that says “your share of GHG auction revenue”, used to cut someone’s taxes, used to pay for some government services that provide benefit to the public, or simply used to offset the deficit (therefore meaning lower government debt and lower taxes sometime in the future when that debt comes due) is largely irrelevant in the calculation of the “average” household. Each of those ways of using the revenue has different implications for specific households but the “average” affect is still the same.

For example: Exxon Mobil became the largest corporation in the world by raking in $442.9 billion in revenue in 2008, “costing” the average American household $3,785.

Is the existence of Exxon Mobil a $3,800 tax on American families? No, because most of its revenues are redistributed in the economy—as oil rig employment, petroleum products (which fuel transportation and trade), and of course, multimillion-dollar salaries for its top executives and massive profits for its shareholders.


The MIT study of the economic effects of cap and trade did estimate the “welfare cost” of the transition from an unsustainable pollution-based economy to a clean-energy economy. As Reilly explained to McCormack (to no avail), this cost to the economy involves all those actions people have to take to reduce their use of fossil fuels or find ways to use them without releasing [greenhouse gases]>

So that might involve spending money on insulating your home, or buying a more expensive hybrid vehicle to drive, or electric utilities substituting gas (or wind, nuclear, or solar) instead of coal in power generation, or industry investing in more efficient motors or production processes, etc. with all of these things ending up reflected in the costs of good and services in the economy.

The MIT study found that this “welfare cost” is tiny with respect to the size of the economy, even with strong reductions in global warming pollution and a very high price for carbon permits. The change in total welfare is less than one-tenth of one percent in 2015, never rising above two percent for the forty-year run of their model. Averaging out the “price” of a clean-energy economy versus the status quo over those forty years, Reilly found the cost for “the average household just in 2015 is about $80 per family, or $65 if more appropriately stated in present value terms,” and the “present value cost per average current household through 2050” is “about $800.”

McCormack decided to add $3100 to $800 and get $3900, even though Reilly told him one has to assume the carbon market value gets flushed down the toilet:
If you took the revenue and flushed it down the toilet or burned it, the cost would then be the Republican estimate plus the cost I estimate. But that is quite unrealistic, as the auction revenue will be recycled into the economy some way.

Using McCormack’s logic, we could take our $3,800 Exxon Mobil “tax” and then add in, say the $855 per household per year spent on the war in Iraq (given a lowball estimate of $100 billion in total expenditures per year) as the welfare cost of the existence of Exxon Mobil. Adding $3785 to $855 returns a figure of $4640 per average household.

Saying “Exxon Mobil is a $4640 tax” would be silly and intellectually irresponsible. But that’s essentially what McCormack is doing, as is the once-respected Heritage Foundation, who is promoting McCormack’s nonsensical $3900 figure.


The actual costs and benefits to individual consumers is dependent on how the policy is constructed. As Reilly explained in his April 14 letter, “the burden on lower income households can be offset through the use of auction revenues.” The cost of building a green economy could be paid entirely, in fact, by the richest one percent of the United States, for example – those whose income has nearly tripled in the last thirty years of our pollution-based economy while the bottom 80 percent has seen an increase of only 20 percent.

A cap-and-trade market involves only the corporations who own the power plants, oil refineries, and large factories that are responsible for the covered emissions. Any “cost” for the “average household” can only be derived from a model of how corporations pass costs onto consumers. This is not a simple one-to-one process, as both the House Republicans and McCormack assert. For example, the MIT study found that oil companies enjoy significant economic “rent” – in other words, undeserved profits – because of factors like the inflexibility of production with respect to consumption, the lack of fuel switching in the transportation sector, and the existence of oil cartels. Carbon regulation acts “in effect like a monopsony buyer that extracts some of the producer rent,” substituting the undeserved profits of companies like Exxon Mobil with public revenues.

To calculate the macroeconomic cost of carbon regulation, economists compare a model of the economic status quo with a model that implements the effects of a cap and trade system. As the MIT study warns, pulling out “precise numerical results” from these models is dangerous:
Given the many assumptions that are necessary to model national and global economic systems, the precise numerical results are not as important as the insights to be gained about the general direction of changes in the economy and components of the energy system and about the approximate magnitude of the price and welfare effects to be expected given alternative features of cap-and-trade design.

Reilly’s $800 estimate does not explain how, say, a family earning $36,000 in Toledo would be affected in 2015, or how their electricity or gas bills would change. What this figure does indicate, however, is that the cost of rebuilding our economy to end our dependence on Exxon’s oil and avoid catastrophic global warming is on the order of a dollar a day per person.


The biggest lie of McCormack’s piece, putting aside the deliberate refusal to accept economics 101, comes from the assumption that staying on a pollution-fueled path is cost-free. The MIT study, like other economic models of the cost of new policy, fails to factor in the significant health benefits of reducing fossil-fuel pollution, and most significantly ignores that the level of greenhouse gas emissions in the reference case would lead to catastrophic global warming, with out of control floods, storms, wildfires, droughts, and sea level rise, mass extinction and international insecurity.

Furthermore, no attempt was made to model the economic benefits to either the nation at large or to individuals of the mandate for technological innovation. The shift from a pollution-based economy requires the widescale deployment of modern technologies. The new pathways of economic growth that follow are difficult, if not impossible, to model accurately. The cost of being left behind in the race to develop twenty-first century technologies by clinging to nineteenth-century fuels is similarly difficult to model. So most economists don’t make the attempt.

David Axelrod: Climate Legislation Is 'Long Overdue'

Posted by Brad Johnson Sat, 07 Feb 2009 22:25:00 GMT

David AxelrodOn Tuesday, Sen. Barbara Boxer (D-CA) stood with fellow Democratic members of the Senate Committee on Environment and Public Works to introduce principles for climate legislation, saying “We know that we have to act, and we intend to act.” David Axelrod, one of President Obama’s senior advisers, told E&E News that the effort by Congress to construct legislation to fight global warming is more than welcome:

We think that it’s healthy that there’s so much momentum in Congress to address this problem. It’s long overdue.

Boxer admitted that December is her working deadline for getting a bill “out of committee.” Other Senate chairs, including Energy and Natural Resources Chairman Jeff Bingman (D-NM) and Finance Chairman Max Baucus (D-MT) intend to weigh in on any legislation. “All of those committees,” Majority Leader Harry Reid (D-NV) told E&E News, “especially my old committee, EPW, have an important role to play for the Senate to produce a sound cap-and-trade bill that meets the president’s emission reductions objectives.”

At Climate Progress, Joe Romm therefore doubts climate legislation will be passed before 2010: “So this has to get through multiple Senate committees, pass the full Senate, be reconciled with whatever comes out of the House, and then pass both House and Senate again, and finally end up on Barack Obama’s desk.”

Meanwhile, President Obama continues to build a green-powered administration, with the selection of Robert Sussman and Lisa Heinzerling as senior EPA policy advisers, Todd Stern as the State Department climate envoy, climate justice leader Ron Sims as deputy secretary for the Department of Housing and Urban Development, and even new assistant White House chef Sam Kass, a strong supporter of local, sustainable, and healthy food.

On February 4th, the EPA and Department of Justice restarted a “national initiative, targeting electric utilities whose coal-fired power plants violate the law,” with a lawsuit against a Kansas utility whose coal-fired power plant has been in violation of the Clean Air Act for more than ten years. The case against Westar Energy had been held up by the Bush administration since 2003. A memo from Stephen Johnson’s deputy Marcus Peacock practically shut down all enforcement activity in 2005.

GAO: European Cap-And-Trade Program Skewed To Industry

Posted by Brad Johnson Tue, 02 Dec 2008 22:16:00 GMT

A report from the Government Accountability Office finds that Europe’s initial cap-and-trade system for limiting greenhouse gases set overly high limits and gave redistributed significant wealth to covered entities. The report (GAO-09-151), requested by Republican members of the House Energy & Commerce Committee, was completed November 18 but publicly released today.

The summary notes that the cap was set too high:
By limiting the total number of emission allowances provided to covered entities under the program and enabling these entities to sell or buy allowances, the ETS set a price on carbon emissions. However, in 2006, a release of emissions data revealed that the supply of allowances-the cap-exceeded the demand, and the allowance price collapsed. Overall, the cumulative effect of phase I on emissions is uncertain because of a lack of baseline emissions data.
The report also notes that polluting entities passed on the price of emissions permits to consumers, despite receiving them for free, resulting in windfall profits:
Studies have found that in the EU’s deregulated energy markets, power producers passed on the market value of allowances to consumers by adding the value of the allowances to energy rates.

The GAO also describes Europe’s international offset system, the Clean Development Mechanism, and notes the extreme difficulty in accurately calculating the worth of such investments in terms of emissions reduction. CDM investments are intended to prevent or lessen future emissions or factors such as deforestation which reduce the sequestration of greenhouse gases. Thus, the reductions are based against a hypothetical business-as-usual scenario, which cannot be precisely determined.

Romney: McCain's Cap And Trade Plan Would 'Just Kill Jobs' In The U.S.

Posted by Wonk Room Tue, 04 Nov 2008 01:27:00 GMT

From ThinkProgress’s Ali Frick.

romney-mccain.jpgToday, the right wing – enthusiastically joined by Sen. John McCain (R-AZ) and Gov. Sarah Palin (R-AK) – attacked Sen. Barack Obama (D-IL) for advocating in a January interview a cap and trade plan that would reward new coal plants built with carbon capture technology. McCain said he wanted to control emissions, but insisted, “I’m not going to let our coal industry go bankrupt.” Palin claimed Obama has been “talking about bankrupting the coal industry,” and pledged, “John McCain and I, we will not let that happen to the coal industry.”

Now former governor Mitt Romney is using McCain’s attacks against Obama to attack McCain himself. On Glenn Beck’s radio show today, he denounced McCain’s cap and trade program, saying it would “kill jobs” in the U.S. and that he would “endeavor to convince” McCain to change his plans:

BECK: How would you address the cap and trade on the day when everyone’s paying attention to coal?

ROMNEY: Well as you know, there were a number of places in the primary campaign where I disagreed with John McCain, and his cap and trade proposal was one of them. ... If you want to negotiate with someone and you feel it’s important to bring down global CO2 emissions then China has to be part of the picture. And if we go out there and put a burden on our own industry and they don’t put a burden on theirs, why you’ll just kill jobs here.

Listen here:

McCain, Obama Share Common Policy Of Mandatory Caps On Coal Plant Emissions

Posted by Wonk Room Mon, 03 Nov 2008 21:03:00 GMT

From the Wonk Room.

Both presidential candidates, Sen. John McCain (R-AZ) and Sen. Barack Obama (D-IL) have called for a mandatory cap on carbon emissions in the United States. Coal-fired power plants, which produce about 49 percent of U.S. electricity, account for 83 percent of power-sector emissions. Because of the global warming footprint, the cheapness of coal-fired electricity is illusory. Under a cap-and-trade system, the cost of those emissions – now a market externality – would have a dollar cost. In a January 2008 interview with the San Francisco Chronicle, Obama used blunt language to describe how a cap and trade system would change the future of the power sector:
That will create a market in which whatever technologies are out there that are being presented, whatever power plants are being built, they would have to meet the rigors of that market and the ratcheted-down caps that are imposed every year. So if somebody wants to build a coal-powered plant, they can. It’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted. That will also generate billions of dollars that we can invest in solar, wind, biodiesel, and other alternative energy approaches.
Obama’s statements carry the same sentiment as his opponent. At a September 15 townhall meeting in Orlando, FL, McCain warned against building new coal plants:
We’re going to build new plants that generate energy, my friends, we’re going to build them. We’ve got to. There’s an increased demand for it. And it seems to me, it’s going to be coal, which I believe will increase greenhouse gas emissions dramatically, or it’s going to be nuclear, or it’s going to be clean coal technology.
In the San Francisco Chronicle interview, Obama similarly stated that the future of power involves coal:
But this notion of no coal, I think, is an illusion. Because the fact of the matter is, is that right now we are getting a lot of our energy from coal. And China is building a coal-powered plant once a week. So what we have to do then is figure out how can we use coal without emitting greenhouse gases and carbon. And how can we sequester that carbon and capture it. If we can’t, then we’re gonna still be working on alternatives.
Under either candidate’s cap and trade program, constructing new coal plants that do not employ “clean coal technology” – that is, carbon capture and sequestration technology – would raise costs “dramatically.” Independent analysts have found that new coal plants would “create significant financial risks for shareholders and ratepayers” because of the likely cost of their greenhouse gas emissions. Thus, energy providers will have a financial incentive to pursue alternative energy and energy efficiency. McCain explained the market signal of a cap and trade program in his May 12 speech on climate change:
And the same approach that brought a decline in sulfur dioxide emissions can have an equally dramatic and permanent effect on carbon emissions. Instantly, automakers, coal companies, power plants, and every other enterprise in America would have an incentive to reduce carbon emissions, because when they go under those limits they can sell the balance of permitted emissions for cash. As never before, the market would reward any person or company that seeks to invent, improve, or acquire alternatives to carbon-based energy. . . A cap-and-trade policy will send a signal that will be heard and welcomed all across the American economy. Those who want clean coal technology, more wind and solar, nuclear power, biomass and bio-fuels will have their opportunity through a new market that rewards those and other innovations in clean energy.

McCain emphasized who the winners under a carbon cap-and-trade system are: “clean coal technology, more wind and solar, nuclear power, biomass and bio-fuels.” The market “incentive,” “reward,” or “signal” is a euphemism that the winners will make money because the losers will pay more. And the losers, above all, are traditional coal plants—no matter who is elected president.

Dingell and Boucher Unveil Draft Climate Legislation

Posted by Wonk Room Wed, 08 Oct 2008 21:24:00 GMT

From the Wonk Room.

Dingell, stepping it upAs the 110th Congress comes to a close, two of the legislators in charge of climate legislation in the House of Representatives yesterday released a draft climate plan. Rep. John Dingell (D-MI), the powerful chair of the House Energy and Commerce Committee, and Rep. Rick Boucher (D-VA), chair of the Energy and Air Quality subcommittee, have primary jurisdiction in the House for legislation that puts mandatory limits on carbon emissions. Although such legislation has been a top priority for Nancy Pelosi (D-CA) since she became Speaker of the House in January 2007, Dingell and Boucher declared they would not be rushed, instead working on the 2007 energy bill, holding several hearings and releasing four white papers from October to May of this year. Dingell’s district is in the heart of the U.S. auto industry; Boucher represents Virginia’s coal country. Below is an analysis of some of the key issues raised in their 460-page draft legislation, an ambitious effort by the two congressmen.

EMISSIONS TARGETS. Dingell and Boucher call for emissions reductions of 80 percent from 2005 levels by 2050, in line with the minimum of scientific recommendations, but with reductions of only six percent below 2005 levels by 2020. Punting any significant reductions until after 2020 means that the Dingell-Boucher plan falls grossly short of what is needed to forestall catastrophe:

Dingell-Boucher emissions pathway

In contrast, Europe is maintaining its commitment to unilateral reductions of 20 percent below 1990 levels by 2020.

REGULATORY STRUCTURE. In their letter to other members, Dingell and Boucher criticize the Supreme Court’s Massachusetts v. EPA decision that the EPA must regulate greenhouse gases, saying, “We believe that elected and accountable representatives in the Congress, not the Executive Branch, should properly design that regulatory program.” Their legislation would overturn the Supreme Court ruling by removing greenhouse gases from the Clean Air Act’s National Ambient Air Quality Standards regulations.

The draft provides a broad range of options for dealing with vehicle emissions standards, ranging from preempting the right of California and other states to provide additional protection from automotive pollution to allowing the EPA and the states to implement such protections. They also signal that they see state-level regulation of emissions as an economic threat, saying their actions “could be disruptive to interstate commerce and counterproductive to the goal of limiting national greenhouse gas emissions.” Their draft legislation would outlaw any state or regional cap and trade program.

MONEY. The Center for American Progress strongly supports the “polluter pays” principle for cap and trade programs to reduce global warming. The cost of pollution allowances should not be shifted to the taxpayer. Giving free permits to polluters would be a global warming bailout. The polluting industries are lobbying heavily to receive most if not all permits for free, particularly in initial years of the program. The European cap-and-trade system originally gave away permits, resulting in massive windfall profits for polluters. They are moving to a full auction of permits, like the new Regional Greenhouse Gas Initiative cap-and-trade program that covers northeastern states.

The Dingell-Boucher draft does not take a position on how permits should be allocated initially, instead detailing four scenarios, three of which involve massive giveaways to covered industries. In every scenario, Dingell-Boucher would protect low-income consumers from increases in energy prices through tax breaks and rebates, and invest heavily in new technology deployment (e.g., renewables, advanced coal, advanced vehicles). Although their allocation scenarios are risible in detail, they do a good job of covering the competing priorities in moving to a low-carbon economy:
  1. Protect low-income consumers from energy costs
  2. Minimize compliance costs for covered polluters
  3. Invest in technology development and deployment
  4. Invest in complementary programs in efficiency and clean energy
  5. Support international efforts and adaptation
  6. Give rebates to middle- and upper-income consumers

Dingell and Boucher believe that low-income families must be protected, that industry should receive pollution cost protection and new technology support, and that all else is up for debate. Nearly two-thirds of their Democratic colleagues indicated last week a very different set of priorities, that focuses not on protecting polluters but on respecting scientific urgency, delivering economic equity, and capturing the energy opportunity.

Representatives Announce Legislative Principles to 'Save the Planet from Calamitous Global Warming'

Posted by Wonk Room Thu, 02 Oct 2008 21:02:00 GMT

From the Wonk Room.

Principles letterToday, 152 members of the House of Representatives – over one-third of all members and nearly two-thirds of all Democrats – signed and submitted a letter to House Speaker Nancy Pelosi stating their guiding principles for “comprehensive global warming legislation” to “save the planet from calamitous global warming.” The letter, led by representatives Henry Waxman (D-CA), Ed Markey (D-MA), and Jay Inslee (D-WA), was delivered to Pelosi this morning.

The legislators describe four key goals:
  1. Reduce emissions to avoid dangerous global warming;
  2. Transition America to a clean energy economy;
  3. Recognize and minimize any economic impacts from global warming legislation; and
  4. Aid communities and ecosystems vulnerable to harm from global warming.
These are the necessary principles that should guide any path out of the climate crisis. What makes this letter significant is the strong, specific details endorsed by the 152 signatories. These include the following measures to respect the severity of the danger of rising greenhouse gas emissions:
  • “The United States must do its part to keep global temperatures from rising more than 3.6 degrees Fahrenheit (2 degrees Celsius) above pre-industrial levels.”
  • “Total U.S. emissions must be capped by a date certain, decline every year, be reduced to 15% to 20% below current levels in 2020, and fall to 80% below 1990 levels by 2050.”
  • “A mechanism for periodic scientific review is necessary, and EPA, and other agencies as appropriate, must adjust the regulatory response if the latest science indicates that more reductions are needed.”
  • “Cost-containment measures must not break the cap on global warming pollution.”
  • “The United States must reengage in the international negotiations to establish binding emissions reductions goals under the United Nations Framework Convention on Climate Change . . . for the United States and other developed nations to achieve combined emissions reductions of at least 25% below 1990 levels by 2020, as called for by the Intergovernmental Panel on Climate Change.” .

The letter makes clear that a national cap-and-trade system to limit carbon emissions is necessary, but not sufficient. The signatories call for “complementary policies” like “smart growth measures, green building policies, and electricity sector efficiency policies.” They also agree that a national system should not preempt state efforts: “Federal global warming requirements must be a floor, not a ceiling, on states’ ability to protect their citizens’ health and state resources.”

The signatories also explain that polluter payments must go into building a green recovery, by calling for strong limits to free allowances, if any are made. Instead, the funds derived from auction pollution permits should go to:
  • Clean energy and efficiency measures
  • Low and moderate-income households
  • Workforce development
  • State and local adaptation and response to “more severe wildfires, intensified droughts, increased water scarcity, sea level rise, floods, hurricanes, melting permafrost, and agricultural and public health impacts”
  • Assistance for developing countries
  • Survival of wildlife and natural ecosystems
As Center for American Progress president John Podesta wrote in November, 2007, introducing the Center’s plan for progressive growth built on a green economy:
Restoring economic mobility for Americans, sustaining economic growth in a global economy, and combating global warming are great challenges, but America is up to the task.

The signatories represent a diverse cross-section of House Members, including members of the Blue Dogs Coalition (11), the Congressional Black Caucus (27), the Congressional Hispanic Caucus (8) and the New Democrat Coalition (30). Download the letter here

Climate Change Legislation and Revenue Recycling

Posted by Brad Johnson Tue, 16 Sep 2008 12:00:00 GMT

Clean Air-Cool Planet and the Environmental and Energy Study Institute (EESI) invite you to a policy discussion to explore how revenues generated through potential climate change legislation can be recycled through the tax code to lower the overall societal cost of reducing greenhouse gas emissions. During debate of climate legislation on the Senate floor earlier this year, use of generated revenues was a significant area of discussion.

The expert panel will include a Member of Congress who has sponsored climate change legislation that provides for revenue recycling; a senior analyst from the Congressional Budget Office who has written extensively about the design of efficient climate change legislation; a leading academic; and experts from two think tanks.


  • Rep. John Larson (D-CT), Member, House Ways and Means Committee
  • Terry Dinan, PhD, Senior Advisor for Climate Policy, Congressional Budget Office
  • Kenneth P. Green, PhD, Resident Scholar, American Enterprise Institute
  • Robert Repetto, PhD, Senior Fellow, UN Foundation
  • Robert J. Shapiro, PhD, Chairman of Sonecon, LLC; former Under Secretary of Commerce for Economic Affairs

Continental breakfast will be served.

Please RSVP to Brenda Rogers at (202) 775-8971 or with your name, affiliation, phone number and email address.

House Democrats Introduce Climate MATTERS Act 3

Posted by Brad Johnson Tue, 17 Jun 2008 15:19:00 GMT

U.S. Representatives Lloyd Doggett (D-Texas), Chris Van Hollen (D-MD) and Earl Blumenauer (D-OR) today introduced the Climate MATTERS Act (Climate Market Auction Trust and Trade Emissions Reduction System) to institute a cap-and-trade system designed to reduce greenhouse gas pollution. This is the first such bill to receive primary referral to the Ways and Means Committee, which is scheduling a hearing on it within a month.

The bill’s 2050 target is 80% below 1990 levels, and auctions 85% permits from the start, moving to 100% by 2020. Funds from the auction are directed primarily to consumers and workers, including a fund for healthcare.

The following environmental organizations released a joint statement heralding the legislation for its “strong, science-based targets” and “best practices of cap-and-trade policy”: Alaska Wilderness League, Defenders of Wildlife, Earthjustice, Environmental Defense Fund, Environment America, Greenpeace, League of Conservation Voters, National Audubon Society, Physicians for Social Responsibility, Sierra Club, Union of Concerned Scientists, The Wilderness Society.

Bill summary provided by the authors:

The Climate MATTERS Act (Climate Market, Auction, Trust & Trade Emissions Reduction System)

The Climate MATTERS Act develops an innovative plan for the auction, revenue and trade aspects of a cap and trade system.

Strikes a Balance: The Climate MATTERS Act is environmentally strong, but realistic about its goals and methods to accomplish them.

Domestic Auction
  • The Climate MATTERS Act emissions cap will reduce emissions 80% below 1990 levels by 2050.
  • Beginning by auctioning 85% of all emissions allowances, this bill quickly moves to a 100% auction in 2020.
  • While excluding agriculture, forestry and small businesses from the emissions cap, this bill also provides incentives for these sectors to reduce their emissions.

Green Investment Plan for Auction Revenue

  • As the comprehensive auction system raises significant new revenue, this bill recognizes that this revenue is an important aspect of a comprehensive response to global warming. The Climate MATTERS Act devotes this revenue to addressing the social, economic and environmental aspects of adapting to a clean energy economy and offsetting the inevitable impacts of climate change.

Consumer and Worker Assistance

  • Consumer Assistance: Provides substantial assistance to American families in meeting their household needs and making energy efficient improvements.
  • Part of the revenue is used to create the “Healthy Families Fund.” The reserve fund acknowledges that climate change and lack of access to affordable healthcare are two of the largest problems America confronts. This fund will assist households with the costs of obtaining and maintaining healthcare coverage as we transition to a new clean energy future.
  • Affected Worker Assistance: Provides funding for adjustment assistance, employment services, income-maintenance, and needs-related payments for workers to ease the transition to a low carbon economy. Funds will also assist communities in attracting new employers, provide local government services.
  • Worker Training: Supplements funding for green worker training, and provides funding for the advancement of environmental education to create an environmentally-literate workforce.
Environmental Protections
  • Provides funding to conserve natural resources, mitigate impacts and help wildlife and ecosystems survive global warming. Provides funding to help the developing countries begin to adapt to a changing climate.
  • Provides funding to achieve real, verifiable, additional, permanent, and enforceable reductions in greenhouse gas emissions from the agriculture and forestry sectors, as well as promoting forest restoration and deforestation reduction efforts internationally.

Transition to a Clean Energy Economy

  • Technological Development: Provides funding for the advancement of basic renewable energy technologies.
  • Energy Efficiency: Provides funding for energy efficiency and conservation, advancement in mass transit and provides funding to load serving entities to implement energy efficiency programs for their customers. In addition, the bill provides funding for heating and weatherization assistance programs.
  • Early Action: Provides funding to operators of emitting facilities in recognition of early action to reduce greenhouse gases.
  • International Technology and Adaptation: Provides funding to qualified developing countries to accelerate low carbon technologies and assist the most vulnerable developing countries cope with climate change impacts.

International Cooperation

  • The Climate MATTERS Act also provides strong encouragement to other countries such as China and India to participate through a combination of carrots and sticks in a manner designed to be WTO compliant.
  • The bill provides incentives to encourage early implementation of cap and trade agreements by allowing flexibility in setting emissions levels in a limited number of initial agreements.
  • Carbon-intensive goods from countries lacking such emissions caps cannot enter the U.S. market without allowances purchased to cover their carbon footprint.
  • In addition, the Climate MATTERS Act acknowledges the substantial benefits of tropical deforestation reductions by providing negotiators the ability to reward countries that significantly reduce deforestation, even if they are unable to implement a comprehensive emissions cap.

Tax Offset

The Climate MATTERS Act devotes a portion of the auction proceeds to ensure the bill does not add to our national debt.

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