It's a bitter irony that only after being declared more or less dead on arrival, Sen. John Kerry's American Power Act (APA) would get a political boost from a CBO score saying the legislation would save the government $19 billion over the first 10 years. (Specifically, it would increase spending by $732 billion and increase revenues by $751 billion.) And as Tim laments, this just highlights how nonsensical the Senate's deficit politics are. But the CBO's score also illuminates a less talked-about advantage of cap and trade: It's a big revenue generator, which is the reason the CBO found the APA to be so budget friendly.
A little background: In any cap-and-trade system, emissions permits have to be distributed by the government among various emitters. That usually means an auction -- though the APA gives them away at first before going into an auction system -- and it brings in a good deal of money to offset the costs of other clean-energy provisions promoting efficiency and renewables.
The compromise legislation the Senate will most likely take up in lieu of the APA will probably look something like Sen. Jeff Bingaman's American Clean Energy Leadership Act (ACELA). This would be "energy only" legislation, meaning it abandons cap and trade to focus solely on those provisions for increased efficiency and renewables. The CBO determined ACELA would add $13.5 billion to the deficit over the 10-year period, and that gets us to the rub: By avoiding the political liability of cap-and-trade, the Senate's centrists also forgo its revenue and run smack into the political liability of deficit spending. So the assumption that "energy only" would be an easier political lift -- upon which the argument against doing cap-and-trade has always hung -- may be dangerously mistaken.
-- Jeff Spross
