A DRAFT BILL in Congress to tackle global warming through a so-called cap-and-trade system represents a strong commitment to reducing the nation's outsized carbon footprint. And yet the plan for action remains sketchy. The bill totals more than 600 pages, but does not spell out how the system for cutting greenhouse gas emissions would actually function. The House Energy and Commerce Committee plainly has much more work to do.
Cap-and-trade systems harness the power of the market. The government caps emissions, and companies have to buy allowances to continue releasing the gases.
The bill, written by Representatives Henry Waxman of California and Edward Markey of Massachusetts, sets ambitious goals. It calls for reducing emissions 20 percent below 2005 levels by 2020, even as President Obama has called for only a 14 percent reduction. To meet this goal, the congressional bill will have to place a restrictive cap on emissions and force polluting industries to pay dearly for the right to continue releasing carbon dioxide.
In the past, similar bills have gotten nowhere in Congress. This one has a much better chance because the lawmakers know that if they don't act, Obama's Environmental Protection Agency is moving on its own to regulate greenhouse gases - something the Bush EPA refused to do. The chief hurdle to passage of a strong bill is the recession, since Congress will be loath to impose new costs on industry.
But if the United States continues to sit on the sidelines in the effort to curb global warming, it will be impossible to bring countries like China, which has replaced the United States as world leader in carbon emissions, into an international agreement.
The lesson of both Europe's cap-and-trade system and the one just started by Massachusetts and other states of the Regional Greenhouse Gas Initiative is simple: no pain, no gain. If a cap on carbon dioxide is set too high and if too many industries get pollution allowances for free, the "price" on carbon allowances will be too low to change the way utilities produce energy and manufacturers use it. So, the committee should require that virtually all allowances be auctioned off, with the proceeds cycled back to mid- and lower-income taxpayers.
The bill has other important features: Utilities would have to get at least 25 percent of their power from renewable sources by 2025, and electric and natural gas distribution companies would be required to meet an efficiency standard by helping their customers shave their consumption. But the bill's ultimate success will depend on forging a cap-and-trade regime that does not trade away tough curbs on emissions.