Cap and Trade: Lessons from History

At the back of the current issue of Smithsonian magazine, behind the feature about Alabama's scenic Cahaba River and the profile of bodybuilder Charles Atlas, there's a history of the wonky idea that has entered the lexicon as "cap-and-trade."

As the article recounts, back in 1988, acid rain was the environmental topic of the hour. Environmental Defense's Fred Krupp brought cap-and-trade to the attention of C. Boyden Gray, the Reagan administration lawyer headed for a job as White House counsel for the incoming presidency of George H.W. Bush.

Krupp and Gray liked the idea. Few others did at the time. Indignant enviros called it a license to pollute. EPA bureaucrats didn't think it would work. Congressmen were skeptical. Utilities thought that emissions allowances would cost too much. Out on the fringes, there were batty ideologues – still around, by the way – who refused to let facts get in the way of conspiracy theorizing about a supposed acid rain hoax.

Fortunately, President Bush went with the idea, it was rolled into Clean Air Act amendments, and the results are plain. In 1990, acid rain-causing emissions from regulated sources totaled 15.7 million tons. By 2008, they had dropped to 7.6 million tons, nearly 2 million tons below the statutory emissions cap for last year. Except for a 2005 price spike, emissions allowance prices have fluctuated well below what utilities had predicted while the legislation was debated.

Cap-and-trade is an idea that fits with Republican notions about using market forces to clean up the environment. A Republican president embraced the idea to begin solving a pollution problem that had been scientifically documented three ways from Sunday.

Jump forward 20 years to the debate about climate change legislation. Today, many Republicans in Congress are bashing cap-and-trade as "cap-and-tax," a red-meat slogan that communicates that its adherents have no intention of doing anything to reduce emissions, either through cap-and-trade or a carbon tax, no matter how much science is thrown at them. It's the politically correct thing to do, I suppose, but it shows little regard for the achievements of the party's past leaders. True conservatives would show more respect for what their forebears accomplished.