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Kevin Bullis

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House Committee Approves Flawed Cap-and-Trade Bill

Congress fails to learn from the cap and trade failures in Europe.

  • May 22, 2009

The Washington Post reports today that the House Energy and Commerce Committee approved a bill that would establish a cap and trade system for limiting carbon dioxide emissions. A cap and trade system is a market-based approach designed to allow utilities and other major emitters of carbon dioxide to find the cheapest way to reduce their emission. It involves setting a cap on emissions and then issuing allowances to emitters. Many experts support auctioning off those credits, but the bill gives 85 percent of them away.

In a similar European cap-and-trade system, giving the allowances away seems to have led to windfall profits for utilities.

President Obama originally supported auctioning the allowances, and budget projections included revenue from such auctions. That money would have been used for clean-energy R&D, and for offsetting energy price increases causes by the cap on emissions.

The bill still faces several hurdles before becoming law. It may undergo review by other committees in the House before coming to the entire House for a vote. Then it has to get past the Senate, which has blocked cap-and trade bills in the past. This bill, however, has strong support from the Obama administration and, according to the Post, extra momentum because of the Energy and Commerce Committee’s approval.

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