Carrot and Stick2009-03-12

 Policy makers from coast to coast contend that a cap on carbon emissions will only be truly effective if there is some sort of trading mechanism for pollution credits that accompanies it. The same two-step applies to passing the legislation: both carrot and stick are required.

Because it possesses and is using both tools, the federal government has to be considered a prohibitive favorite to pass carbon reduction legislation before individual states.

While environmental leaders at the state level mirror federal leaders in articulating a visionary approach--touting green job gains and an economic head start on the competition to make their case to wayward legislators--the Obama administration pulled out one of its big cannons (the Environmental Protection Agency) to land the first blow.

Having climate czar Carol Browner announce that CO2 emissions could be regulated under the Clean Air Act months before Congress takes action on the legislative front was no accident; it was meant to send a loud and clear message to the likely opponents.

The prospect of a national regulatory remedy to global warming as opposed to a legislative one is causing the same sort of hushed fear among leaders of carbon intensive industries that is most reminiscent of the unease of small-time Chicago gangsters in The Untouchables as they watched Robert De Niro’s Al Capone walk around the family table, tapping his baseball bat in his hand.

While some carbon intensive industries and “green” economics doubters will certainly avail themselves of the courts to thwart EPA rules they view as overly burdensome and a grassroots campaign decrying “heavy-handed bureaucrats,” don’t be surprised to see a slew of industry contributions on the mid-year finance reports for Senate Majority Leader Harry Reid’s 2010 re-election campaign as they grasp for any shred of hope to curtail cap and trade before it reaches the President’s desk.

It is precisely this lack of leverage that is hampering state efforts. Pro cap and trade groups have equally compelling arguments to make, but don’t have the tools to open up a second front, making the Western Climate Initiative look more like a modern-day Articles of Confederation in comparison.

That’s not to say that a federal cap and trade bill in 2009 is a forgone conclusion, just more likely than any of the individual states currently considering it. The big takeaway, however, should be that if you want to pass transformative legislation: carrots may bring your adversaries to the table, but the stick keeps them there.