Gov. Inslee's Three Reasons to Support Cap-and-Trade: Politics, Politics and Politics

April 4, 2014

Earlier this week, Governor Inslee, speaking at the University of Washington, explained his support for imposing a cap-and-trade system in Washington state to reduce carbon emissions.

Cap-and-trade, the system used by Europeans and others as part of the Kyoto Protocol, has two key elements. First, it sets a total cap on the amount of carbon emissions allowed, typically over the course of a year, by covered entities in the state. Second, covered entities are allowed to buy and trade permits to emit carbon.

Asked about why he favored a cap, the Governor said, "I think a cap fits Washington better for a couple reasons." He lists three reasons at the 1:26:38 mark in the video.

First, he said Washington should follow the lead of California and Oregon because, "we think this is a consistent policy that we can have on the West Coast of the United States." Put simply, the cool kids are doing it so we should too. Note that he does not argue that cap-and-trade is good for Washington, only that it is consistent with nearby states.

Imposing a carbon cap is the worst approach for Washington state. With heavy reliance on hydro power, Washington state is more dependent on uncontrollable fluctuations in snowpack than either California or Oregon. Only 15% of California's energy comes from hydroelectric power, while nearly 70% of Washington's power depends on hydro power. As a result, Washington's carbon emissions from electricity can fluctuate year-to-year by more than 50 percent as snowpack changes. Such wild swings would cause huge utility price fluctuations for Washington residents in a way that wouldn't occur in California or Oregon. Following California down a path that suits them but is bad for us would have wildly unpredictable results in Washington.

Governor Inslee also said imposing a cap would show "leadership" to the nation. Of course it was believed the Kyoto Protocol would provide leadership on climate issues. Instead, the Protocol failed, no agreement has been made to follow it and many countries, including Spain and Germany, are backing away from their green policies.

Often, "leadership" is just another word for "symbolic gesture." Politicians love symbolic gestures because they are valuable politically even if they have no actual environmental benefit.

Ultimately, leadership begins at home and after two of the four legislative sessions in the Governor's first term, we are actually farther from agreement on climate policy than when he took office.

Second, the Governor said he supports a cap because, "it is a legally binding, enforceable, guarantee that works." Earlier in the session, Inslee argued that caps work well saying, "we know these mechanisms work," citing the Clean Air Act and the cap-and-trade system to limit sulfur dioxide as examples.

It should be noted that the Clean Air Act is not a cap in the sense of “cap-and-trade.” It is a negotiated, regulatory process with strategies and timelines that vary from place to place. In fact, the cap-and-trade system for sulfur dioxide was adopted in the 1980s as an alternative to the Clean Air Act's approach. Inslee mentions the Clean Air Act not because it is an example of the system he claims to support but because it sounds good.

He went on to say, "we can design a system that is unique to the state of Washington." The Governor, however, doesn't want a system that is unique to the state of Washington. He wants a system that is "consistent" with California and Oregon, as he made clear.

Additionally, as noted, cap-and-trade systems are notoriously volatile from year to year. The price of sulfur dioxide permits ranged from $66 to over $600 per ton. The same is true of prices in Europe under the Kyoto Protocol, the system Inslee wants to emulate, which ranged from about $5 per metric ton of CO2 equivalent (which includes other non-CO2 greenhouse gases) to $31. This volatility would be compounded by Washington’s inconsistent energy-related emissions.

Inslee’s faith in cap-and-trade to cut carbon emissions is contradicted by recent history. The Kyoto Protocol, the largest cap-and-trade system for CO2, failed to reduce carbon emissions. Europe's carbon emissions in 2008 were actually higher than they were when the system took effect in 2000. The United States cut carbon emissions more during the 2000s without a cap-and-trade system, than the European Union did.

Dean of the U.W. College of the Environment Lisa Graumlich made the point clearly at the event when she noted, "Those of us who believed the Kyoto Protocol (i.e. cap-and-trade) would solve everything learned that lesson in a very hard way after a very painful decade of thinking that was going to work."

Inslee, however, puts his faith in politics and the veneer of "enforceable" rules, even though similar systems have failed badly and at high cost. Despite claiming a cap creates a "guarantee that it works," the best example of such a system, one he supported, failed miserably.

Trusting politics to create a rational policy is the triumph of faith over experience. The only response he can have is "trust me, this time things will be different."

Thirdly, the Governor’s says he supports cap-and-trade because, "in the long term I think it will be more politically palatable for the people of Washington to accept." He provides no support for this claim. Indeed, Washington lawmakers rejected a cap-and-trade system when Democrats controlled the Governor's mansion and both legislative chambers. Democrats in Washington D.C. blocked a cap-and-trade system in 2009, when Inslee was in Congress and his party controlled both chambers.

Again, however, his calculation is not based on environmental effectiveness but on politics. He thinks, or perhaps hopes, the public will like cap-and-trade once they see what's in it.

Contrast those three political reasons with the preface to the question which noted:

  • That economists say a carbon price is better than cap-and-trade (President Obama's first budget director Peter Orzag and Ronald Reagan's economic advisor Art Laffer are two examples)
  • That it is already being used in British Columbia (and is revenue-neutral) and that it is already successful at reducing emissions. The left-wing Sightline Institute makes it clear that B.C.'s carbon policy has cut both taxes and carbon emissions.
  • And that B.C.'s energy portfolio is similar to Washington state's, and relies heavily on hydroelectric power, making it a more relevant model for Washington. 

The Governor’s explanation for his support of cap-and-trade is emblematic of his highly political approach to climate policy. During the forum, he attacked those who disagree with his approach saying they "don't believe in gravity." The line gets a good, self-righteous laugh from the audience, but it makes it virtually impossible to find opportunities to reduce carbon emissions in ways that are effective and workable.

The only effective environmental policy is to free innovators and individuals to reduce carbon emissions in an efficient and personalized way. Putting more faith in political approaches, as Governor Inslee proposes, would simply repeat past failures.


Europe's cap & trade

I can see why Enslee is keen to start a cap and trade system. They've been a spectacular boon...doggle in Europe. What could possibly go wrong?