Right climate choice

Is it too late for conservatives to take the lead in designing a sensible climate change policy for America?

Until very recently, President Bush’s “watch and wait” mantra — a bow to both the energy lobbies and climate-change skeptics within the Republican Party — effectively left the field to others. But in the last few months disinterest has ceased to be a practical political option. For one thing, companies including BP, Royal Dutch Shell, Duke Energy and Exelon have broken the energy industry’s united front against action. For another, a dozen states, with California in the vanguard, are no longer deferring to Washington.

To avoid being trampled by history — and environmentally conscious swing voters — conservatives need to identify their own approach to containing climate change, one that aims for maximum flexibility and minimum cost along with the least possible government interference in the economy. Of course, a detailed strategy can’t be outlined in less time than it takes for John Kerry to muff the punch line of a joke. But a few principles do go a long way.

Keep it simple, keep it comprehensive. One way or another, containing the gases that warm the atmosphere means containing the use of fossil fuels. The temptation is to pick and choose the activities that should be contained in the process — say, by giving home heating priority over private jets in use of petroleum. But the long, dreary record of economic regulation of everything from trucks to pipelines to agriculture suggests such intervention is bound to open climate policy to the worst sort of interest-group politics. The lighter the government hand, the better.

Rely on the wisdom of markets. The most straightforward way to contain emissions — requiring proportional cuts from all sources — is also the most expensive. If it costs me $50-a-ton to reduce my carbon dioxide emissions and it costs you just $10, far better to let me pay you to get the job done.

A market-based “cap-and-trade” program, setting an overall limit on carbon emissions and letting businesses choose to cut emissions on their own or buy rights to emit from others, would double or triple the bang for a buck invested in conserving energy or switching to more benign fuels. That’s not a matter of faith: Cap-and-trade programs have reduced sulfur dioxide and nitrous oxide emissions by power plants at a tiny fraction of the cost of direct smokestack controls.

Auction emissions rights; don’t give them away. Washington could assign rights on the basis of past use. Indeed, this prospect explains why some companies have abandoned their flat opposition to emissions regulation. But this approach would perversely favor businesses (and consumers) that emitted the most before regulation. Better to auction rights to emit greenhouse gases and let the initial buyers trade these rights on organized exchanges.

Neutralize the revenue. If the rights to emit carbon dioxide were auctioned for $20 a ton — a plausible price, based on Europe’s experience with its own cap-and-trade program — businesses and consumers would pay about $140 billion a year. That amounts to 1 percent of GDP, a manageable shock in terms of inflation as the costs rippled through the economy. But there’s another downside: An extra $140 billion in revenue would be spent in a hurry by a Congress inclined to subsidize everything from rice grown in the California desert to Alaskan bridges to nowhere.

The best way to sequester the revenue and minimize the inflationary impact would be to dedicate it to lowering taxes that reduce incentives to work, save and invest. Probably the target of choice is the Social Security payroll tax, which is paid equally by employers and employees and creates an efficiency-draining gap between the cost of labor and take-home pay.

Level the technological playing field. Energy technologies ranging from hybrid cars to biofuels are being heavily subsidized in the name of climate control. But nuclear power, the carbon-sparing technology that already yields 16 percent of our electricity supply and could deliver far more without heroic technological advances, remains in the doghouse.

This doesn’t mean Washington should throw money at new reactors or ask regulators to ignore the very real waste management and terrorism issues linked to nuclear power. But the equally real threats from climate change should add perspective: Without a policy shift that lowers the hurdles for nuclear energy, the costs of containing climate change are bound to be much higher.

Don’t let China and India off the hook. The new Asian economic powers aren’t doing much to slow global warming. But that is no excuse to drag our own feet or bloviate about the responsibilities of poor nations to pitch in.

To induce emerging economies to cooperate, we need carrots and sticks: on the one hand, a willingness to pay part of their costs in switching to carbon-sparing technologies; on the other, a warning we won’t allow countries to gain competitive advantage by exempting their industries from emissions-containment costs.

In getting from here to there, compromises will no doubt be needed that reflect the leverage of the coal industry, subsidy-addicted alternative fuel makers, environmental lobbies — and incumbent legislators in search of pork for the nice folks back home. But conservative principles can still be the benchmarks by which proposals are judged. Indeed, I would argue that conservatives could go a long way to restoring their image as both no-nonsense problem-solvers and the defenders of free markets by playing a principled role in the debate.

Climate change legislation is coming — soon. The question is whether conservatives can overcome a history of myopia and put their mark on that policy.

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