Cap and Trade Rules
Why Cap and Trade Makes Sense

By Angus Duncan
February 13, 2009

The Oregonian's editorial board asks why Gov. Ted Kulongoski persists with his
carbon cap and trade proposals. After all, the action has shifted to Washington,
D.C. President Obama has taken charge. The carbon fix is in. There's no more
need for Oregon or other states to bother.

By contrast, Oregon's Global Warming Commission on Jan. 22, 2009, adopted a
seminal resolution recommending that "Oregon continue to move forward with the
development of the Western Climate Initiative proposed framework" for a regional
carbon cap and trade mechanism.

The commission and its predecessor stakeholder groups have been calling since
2004 for Washington to take this issue seriously. Our resolution reaffirmed
support for a "fair and effective national solution to achieving greenhouse gas
reduction goals comparable to Oregon's." The commission was well aware of the
arguments the editorial board cites. But after vigorous debate, and by a 7-1
margin, the commission voted to support the regional process also.

How did we and the Oregonian come to such divergent conclusions?

First, the editorial board evidently subscribes to the Obama-as-Superman
hypothesis. The president proposes carbon legislation; the Congress instantly
and enthusiastically complies. Current negotiations on a stimulus package should
put this narrative to rest.

Then consider the challenge in roping 60 senators and a House majority into
legislation that will, among other measures, have to cut coal plant emissions
drastically. Those plants supply over 50% of electric power nationally, with
higher concentrations in the Southeast and industrial Midwest. Already coal
state senators - including many Democrats - are organizing to resist, or at
least slow, the needed conversions.

Recall John Dingell (D-Michigan), who for 30 years as chairman of the House
Energy and Commerce Committee "protected" Detroit by stopping any increases in
auto fuel economy standards (and, more recently, auto tailpipe carbon reductions).

Any national carbon strategy must rely on organized regional support in the
West, Northeast and elsewhere to overcome resistance in regions defending the
status quo. The president needs the Western Climate Initiative.

There are other reasons to continue Oregon's efforts. The best way for Western
states to ensure fair treatment in a national cap and trade is to propose a
design that works here. Will national legislation accommodate the wetter/dryer
cycles of Western states dependent on hydropower? Not as likely if it's designed
by Eastern states.

A third reason: Early adopter states may earn extra emissions allowances, as the
Senate's 2007 legislation provided. That helps us transition our more vulnerable
households and businesses.

And a fourth: early action will boost Oregon's economic future. We're already
positioned to be winners in the new, low-carbon economy with leads in green
buildings, energy efficiency, and solar fabrication. We should bear in mind the
example of Denmark, a country about Oregon's size, which today owns 1/3 of the
global market for wind turbines because Danish tractor companies started
building wind turbines and competing for emerging wind business 25 years ago.

The Oregonian's editorial board, and Rep. Peter DeFazio, express concern that
markets can be corrupted by greed, lack of transparency and inept regulation. I
agree, but that's only a compelling case against using market mechanisms to
reduce carbon if we also believe the preferred solution to the mess in home
mortgage markets is to declare that banks will no longer offer mortgages.

Ignoring the efficiencies markets provide simply guarantees that abating carbon
will cost more. Better to regulate the markets effectively, capture those
efficiencies, and keep costs down.

Angus Duncan is president of Bonneville Environmental Foundation and chairman of
the Oregon Global Warming Commission.


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