Having failed to garner enough support from House Democrats, the Governor’s cap-and-trade bill now enters what has become a traditional phase for cap-and-trade legislation: the Big Buyoff. A new version of the cap-and-trade proposal was released this week, this time with hundreds of millions of dollars intended for selected industries to earn the votes of particular representatives.

This is a familiar pattern for cap-and-trade. The examples are plentiful.

In Europe’s cap-and-trade system, this occurred only a few years after the system began. As the New York Times noted in 2008, cap-and-trade,

…unleashed a lobbying free-for-all that led politicians to dole out favors to various industries, undermining the environmental goals. Four years later, it is becoming clear that system has so far produced little noticeable benefit to the climate — but generated a multibillion-dollar windfall for some of the Continent’s biggest polluters.

As a result, Europe was nowhere close to meeting its carbon reduction targets until the economic collapse and shrinking business activity “saved” them.

The same thing occurred in Washington D.C. with a national 2009 cap-and-trade proposal, but the buying-off started even before the bill was adopted.

The Waxman-Markey cap-and-trade legislation ran to 1,428 pages. The list of contents includes “Climate Change Worker Adjustment Assistance,” “Davis-Bacon compliance,” “Assisted housing energy loan pilot program,” “Consideration of energy efficiency under FHA mortgage insurance programs and Native American and Native Hawaiian loan guarantee programs,” “Affiliated island energy independence team,” and “Secondary market for residential renewable energy lease instruments.”

The apparent answer to too much government was more government. The complexity was not seen as a fault of the bill, but a feature.

New York Senator Kirsten Gillibrand made this clear when she wrote in the Wall Street Journal that the trading system is so complex, that only Wall Street could manage it. She wrote:

…the wide range of possible carbon reductions—from agricultural offsets, to efficiency technology, to wind power—will require innovative specialized contracts that can meet firms' needs. … New York's financial industry is already the global leader for existing customized commodity products and would be exceptionally well positioned to provide the legal and financial expertise necessary for these new products.

Remember, this was just one year after the financial collapse that “innovative” financial contracts, like the infamous credit default swaps, helped create. This time, however, it is different, according to Sen. Gillibrand.

Now, Washington state is entering this same phase. The multi-billion dollar program has now added the following payouts to various favored industries:

• Provides full rebates for “trade-exposed” industries including – but not limited to – metal manufacturing, paper manufacturing, wood products manufacturing, non-metallic mineral manufacturing (i.e. concrete), chemical manufacturing, computer and electronic equipment manufacturing and food manufacturing. Other industries can be added later.
• Subsidies for every board foot of timber delivered to mills chosen by government as long as those lands are open to recreation.
• A $30 million fund to pay forest landowners to absorb carbon in forests.
• A $10,000 per employee B&O tax credit for lumber mills.
• A tax credit for transporters of logs and agricultural products.
• Provides an additional $70 million to be distributed at the discretion of the “Interagency Council on Health Disparities.”

As you read this list, keep in mind the legislative push by House Democrats to reduce the number of tax “loopholes” in Washington state code.

The legislature could have gone another direction, to a system that is simple and transparent. One that put the power of environmental stewardship in the hands of the individuals who will actually make a difference on the ground.

Once again, however, politics trumped effectiveness and the failures of the past are ignored and whitewashed.

Ultimately, it is unlikely the Big Buyoff will work. It didn’t work in Washington D.C and Senate Democrats killed the bill. Europe is still fighting over carbon accounting, with each country choosing policies that favor them.

Further, the buyout this year will inspire those left out of the deal to demand the price of their support. Once the payoffs begin, it is hard to call them to a stop. The bill has specifically been written to provide exactly that flexibility – discretion to add “trade-exposed” industries and tens of millions of taxpayer dollars to be handed out later by a politically selected council.

Since 2005, when Governor Gregoire said she wanted to make climate policy a key priority of state government, Washington has repeatedly failed to adopt any meaningful climate policy. This year marks the 11^th legislative session that environmental activists and their allies have claimed to want a meaningful policy, but they have failed to deliver, despite controlling the legislature and Governor’s mansion during most of those sessions.

After such a long losing streak, anyone who really cared about environmental success would have altered the approach. In Washington, however, activists’ response after each loss is to double down, hoping that by doubling the bet each time, you only need to win one to make it all back. They use failure as evidence of the mendacity of their opponents, and as a campaign issue. Meanwhile, time slips away, the costs go up and the losses mount.

For more information on Governor Inslee's original cap-and-trade proposal, click here.

For WPC's analysis of Governor Inslee's original cap-and-trade proposal from earlier this year, click here.