Create incentive to cut emissions with carbon price

After years, numerous reports and legislation, Olympia is still searching for a coherent policy to address climate change, focusing on a complex accounting system known as cap and trade. That policy, however, won't cover most of Washington's carbon emissions until 2015 and is likely to cost billions in taxes, regulation and lost jobs.

There is an alternative that reduces carbon emissions, engages technological innovation and preserves personal choice. By cutting property and business taxes while creating a stable carbon price — a tax that people or businesses pay for carbon emissions — Washington can create jobs and reduce CO2 emissions immediately.

The politically designed rules of cap and trade are complex and prone to manipulation. Witness Europe, where it has been in place for years. The manager of the German carbon-trading agency lamented that "lobbying by industry" created a web of "exceptional rules." With billions at stake, cap and trade favors those with lobbyists, while costs are paid by families.

Cap and trade is also poor at reducing transportation emissions which comprise the largest part of Washington's carbon emissions. In Europe, transportation emissions have increased.

Advocates of cap and trade are in denial about these weaknesses. State Ecology Director Jay Manning told legislators that Europe is "on track" to meet emission targets. Since Europe signed the Kyoto Protocol in 1997, however, emissions have declined only 0.4 percent. To meet the 2012 target, the system will have to suddenly do 10 times better than it has.

There is an alternative. With a stable carbon price, applied to carbon-emitting energy and fuel, and tax cuts on families and job creation, Washington can immediately and effectively reduce CO2 emissions.

A stable carbon price gives control to decision-makers — individuals and businesses — who know best how to conserve energy in their lives. Some will buy a more fuel-efficient car. Others will telecommute. Tax cuts on innovation energize Washington's creative, technology economy.

Low taxes encourage risk taking, the heart of innovation and job creation, and invite technology experts in Redmond, engineers in Everett and physicists in the Tri-Cities to create efficient technologies.

Innovation is the most effective way to improve environmental quality, dramatically reducing air pollution during the last 30 years despite dramatic increases in the number of miles we drive. The same can be true for carbon emissions.

A stable carbon price has supporters across the political spectrum. Obama's budget director Peter Orzag and top economic adviser Larry Summers favor this approach. So too do conservative economists like Ronald Reagan's economic adviser Art Laffer.

Advocates of cap and trade and the myriad of new regulations that go with it claim their proposal will create jobs. They ignore, however, the many more jobs killed by higher taxes and new regulation.

Environmental activists argue government should pick promising technologies, spending billions in hopes they choose correctly. However, while politicians promoted electric and hydrogen cars, innovators created hybrids. Politicians mandated biofuels despite studies that suggest those fuels may not actually reduce carbon emissions. Hoping politicians get it right this time isn't a bet we should take.

Others argue that cap and trade can be fixed. Each fix, however, adds complexity and opportunities to exploit arcane accounting rules in the manner of Enron. A stable carbon price is simple and transparent.

While many claims of climate alarmists — such as worries about "climate refugees" flooding Washington — are absurd and unscientific, we know CO2 traps heat and that atmospheric concentrations are rising.

A stable carbon price combined with tax cuts can responsibly reduce that risk while encouraging economic growth. It also reduces our reliance on oil from Iran, Venezuela and elsewhere. That's why some who discount the risks of climate change still favor a carbon price.

The choice is simple. Wait seven years before we begin to reduce CO2 or start today. Put our faith in a complex and ineffective system or one that is transparent and effective. A stable carbon price is the only policy that fits Washington's creative economy.

Todd Myers is director of the Washington Policy Center's Center for Environmental Policy.

Monday, Michael Butler, CEO of Cascadia Capital, made a case for Gov. Gregoire's cap-and-trade proposal.