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There are many good people who, with real passion and sincerity, support the Lieberman-Warner American CSA even while, in most cases, agreeing that it has serious problems, such as the 40% or so of pollution permits that will be given away over the next 25 years.

They have made, in essence, a political calculation that they need to bribe serial polluters within Lieberman-Warner as a path toward securing vote.

This is a flawed approach, in my view, for a number of reasons.  All of which will get some arguing that I am for “ideological purity” over reality, don’t understand “sausage making”, and why can’t I simply get in line behind support the bill …  Well, let me try to lay out some quite basic and core issues that create concern.

1.  SERIOUSLY WEAKENS FUTURE FLEXIBILITY/OPTIONS: We should not, if we can avoid it, have legislation passed that fundamentally undermines improving the situation and reacting to greater knowledge in the future. By giving away $500 billion (perhaps slightly less and perhaps substantially more) in pollution permits, L-W greatly undercuts future flexibility.  Does anyone seriously think that Duke Energy (et al) will take things lying down if, in 2010, there is a desire to take back these huge grants?

2.  WINDFALL PROFITS:  In the historical record of cap & trade (such as Clean Air Act, European Cap & Trade), grants of pollution permits have consistently lead to windfall profits. The “savings” value has not been passed onto consumers, who have been charged the value of the permits, with the value pocketing into Corporate profit lines. Do not be caught into an argument that the permit giveaways are there to protect consumers.  This could happen but would fly in the face of the history and general business practices.  ( E.g., in terms of responsibility to shareholders, a CEO would be remiss not to take these profits for the corporation …)

3.  COST OF CONFRONTING GLOBAL WARMING:  The giveaway of permits, therefore, ends up creating a higher total cost for confronting the challenge of pushing the economy / system below the target levels.  It is, fundamentally, an inefficiency.  Confronting GW will be a long, ardous, costly task. If done right, we have the potential for net positive in terms of overall system value (even without accounting for avoided cost of not having utterly catastrophic climate change).  Giving away roughly 40% of permits, enabling a borrowing early against later permits, etc will significantly raise the cost and lower the efficiency of dealing with Global Warming.

4.  PROGRESSIVE VISION OF THE FUTURE:  The pollution permit give-away are an extended program of wealth transference from “average” citizens to a few.  To a very large extent, these permit giveaways will be a path for further enriching Mr 26%’s tuxedo-wearing base.    These funds could, on the other hand, help foster a path toward progressive energy independence and a more equitable society.

5.  UNDERCUTTING BUILDING A GREEN-BLUE PROGRESSIVE COALITION:  The serious wealth-transference in this bill will make building coalitions to combat global warming more difficult. The permit giveaway will make this more costly for the nation and for individual citizens (the ‘average Joe’).  Does anyone think that will make it easier to sustain a progressive coalition in support of serious measures to combat Global Warming?

Now, I think that there should be a recognition that, while one might quibble about a word here or there, the above is basically a factual representation of some of the quite serious negative issues in the bill relative to the permit giveaways.  (There are many other negatives, such as the $400 billion for carbon capture and sequestration, along with allowing new coal plants, when we don’t know if CCS will work. The bill also is not scientifically adequate in terms of 2050 objectives. Etc … There are positives, by the way, such as a reasonable 2020 target, that is actually more serious (with the exception of ability to borrow against the future) than the Sanders-Boxer bill put forward.)

The question, the “legitimate” debate, is about the politics of this. 

Boxer, Senate Democratic Leadership, many environmental organizations believe it very valuable to have this bill on the Senate floor, that this is a statement of leadership, that it is important to put people on the record re Global Warming. They believe that pollution permit giveaways to serial polluters is critical to being able to rally enough votes.  And, they believe that George W Bush will, no matter what, veto the bill, thus the consequences of ‘poison pill’ material such as large pollution permit giveaways are not that serious a problem.  That this is simply setting the stage for debates and legislation to come, let us say in 2009.

There are others, such as Friends of the Earth and Sierra Club, who are greatly concerned about the bill.  If it passed, is a veto a 100% certainty; could there be a calculation that this will tie the hands of a future Democratic President, inhibiting more aggressive action come 2009? Even if vetoed (or not passed to get to the President’s desk), the precedent of so many, so enthusiastically supporting a bill with such serious problems undercutting future flexibility seems, in my political judgment, to undercut the debate of a year or two years from now about what a bill should look like.  And, I believe that there are other routes to follow that could have gained the votes without providing this direct path toward windfall profits to serial polluters, but instead directly helped communities and the serial polluters move away from the energy inefficient and polluting regimes that they are in right now.  These routes were not, however, explored by Lieberman and Warner, from what I can tell based on discussions with involved people.

I understand sausage making.  The Energy Bill has some very serious problems (such as the huge, almost certainly unsustainable, biofuels targets), but I am strongly supporting it (yes, even while pointing out that it is not perfect — just as Markey and Pelosi and others have raised that it is simply a downpayment).  The Lieberman-Warner “America Climate Security Act”, however, I cannot support.  It has ‘posion pill’ elements that would seriously undercut our ability to move toward better policy in the coming years. 

One can legitimately call it the “Coal Subsidy Act” or the Climate InSecurity Act (or CISA).  As I wrote there, 

And, well, going back to the original question, what would it take to make the CISA an acceptable (even if flawed) CSA?  That it not incorporate provisions that undercut our future ability to adapt policies to better address energy and global warming challenges. Giving away these tremendous resources, a handout of resources that will not be recovered, is such a provision.  And, as long as so many pollution permits are being handed out for free, this remains a Climate InSecurity Act.

It is the CISA, which merits about as much support from this community, in my view, as did FISA.