In a cap-and-trade system, the government sets a cap on greenhouse gas emissions and then lets companies trade carbon credits on the open market. The idea goes back to the days of the Reagan White House, when conservatives embraced the idea as a market-based approach to reducing pollution without direct regulation. Robert Stavins, a Harvard economist who sat on the EPA’s Environmental Economics Advisory Board under both Republican and Democratic administrations, told NPR that for many years, Republicans and conservatives loved this idea and it was Democrats who were skeptical.
But in 2009, it was Democrats who pushed a bill called the American Clean Energy and Security Act, which would have established a modest, nationwide cap-and-trade system.
As NPR reported, that’s when Republicans lambasted the idea as an example of big-government taxation run amok.
For example, in a 2010 campaign ad, Sen. Marco Rubio said: “If cap and trade were imposed on America it would devastate economic growth, it would get rid of jobs, it would be permanently debilitating.” Republicans called the bill and its approach “cap and tax” and said it was a move by tax-and-spend Democrats to grab revenue and make average people pay with higher electric bills.
That was the central claim made by conservative opponents of the legislation: that it would lead to sky-high electricity bills. But in a roundup of California news in Sunday’s Los Angeles Times, Mark Lifsher reports that it isn’t quite working out that way:
Almost 11 million California households will be getting some free electricity on their October-November bills, courtesy of the state’s “cap-and-trade” program for curbing greenhouse gas emissions.
They’ll automatically get an average credit of $35 as their share of the billions of dollars in new state revenue generated by auctions in which polluters buy credits to emit carbon dioxide and other gases that contribute to global warming.
The rebate is the second since April, bringing the total payout to consumers to $756 million, according to the Air Resources Board. The rebates are set to continue semiannually. State officials are urging consumers to spend their credits on energy-efficient lightbulbs as a way of extending their savings.
Average rebates are $40 per household for Southern California Edison residential customers, $36.24 for those served by San Diego Gas & Electric Co. and $29.80 for Pacific Gas & Electric Co. ratepayers.
It’s too soon to evaluate how much California’s cap-and-trade system will reduce greenhouse gases, but they have proven that a state can set up such a program and make it work.
For more on California’s carbon trading scheme, see The Wall Street Journal’s special report by Alejandro Lazo, “How Cap-and-Trade Is Working in California: Carbon Program May Hold Lesson for Other States.”