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David Rotman

A View from David Rotman

Energy Bill Heads to the House

Will the cap-and-trade scheme work? Here’s what the record in the EU shows.

  • June 26, 2009

According to most news report, the massive federal energy bill will go to the floor of the U.S. House of Representatives today–or maybe not (the confusion is typical of the political posturing that has bedeviled the legislation). The bill is an admirable effort to try and control the emissions of greenhouse gases, using a cap-and-trade system that is meant to put a price on carbon dioxide emissions. You can be forgiven, however, if you haven’t read all of the 1,201 pages. Actually, you can be forgiven if you can’t even keep track of who favors the bill and who doesn’t (many traditional environment groups back it, but this week Friends of the Earth and Greenpeace have both said they oppose it as too weak to address climate change). Today’s Washington Post has a good summary.

Perhaps the most interesting and confusing part of the legislation centers on the details of the cap-and-trade program. There is ample reasons to worry that the system, as outlined in the bill, will not be effective in reducing greenhouse gases, and, more specifically, will not be effective in spurring the development of innovative new energy technologies. In the current issue of Technology Review, Peter Fairley, an experienced environment journalist based in Paris looks at how a similar cap-and-trade scheme has been a failure in Europe. Fairley documents how the European Union system has given windfall profits to polluting industries and hasn’t spurred any real switch to cleaner energy technologies. The reason for the failure: politics and special-interest groups meddling with the system to such an extent that it could no longer function as designed. Says Fairley:

What is especially disappointing is that even as the Europeans seek to undo many of the features that have made their carbon-trading system weak and dysfunctional, legislators in Washington seem determined to repeat their mistakes.

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