GOP decries practice it began

WASHINGTON — Look at the photos on the Web site of FreedomWorks, the conservative action group, and the message on climate change legislation is clear enough.

"Fire!! The Cap and Trade Supporters," reads a poster at one of the groups' rallies. "Cap+Trade=Gov. Scam," reads another.

But the protesters do not have to look far to find the architects of cap and trade: FreedomWorks's chairman and founder, former Rep. Richard K. Armey, R-Texas, was a co-sponsor of the law that created it 20 years ago. One of the group's other founders, C. Boyden Gray, was President George H.W. Bush's top lawyer when Mr. Bush proposed it and then signed it into law in 1990 as part of the Clean Air Act amendments.

GOP MUM ON OWN RECORD

That one of the Republican establishment's biggest legislative achievements in the 1990s has been transformed into toxic terminology may not be surprising, given the divisions in the nation's capital these days. But just as Republicans barely speak of their own record-setting expansion of government health care seven years ago — the Medicare prescription drug program — cap and trade has become a story that is only half-told in the political discourse.

ROOTS OF CAP AND TRADE

The conservative roots of cap and trade were news to Mark L. Barie, president of the Upstate New York Tea Party, who said last week that party officials are putting together their agenda for the next several months, including climate legislation if it heats up in Congress. Sens. John Kerry, D-Mass., and Lindsay Graham, R-S.C., are working on cap-and-trade legislation again, Capitol Hill aides say, even though Mr. Graham declared the idea dead a month ago.

Rather than a heavy-handed power grab by the government, cap and trade was such a nod to business interests that most environmental groups opposed it. Allowing companies to buy and sell pollution credits on the open market, rather than face a prescribed emissions limit at each plant, was too favorable to polluters, or even immoral, some critics argued.

But away from the heat of political stump speeches and rallies, experts in environmental and energy policy now generally agree that cap and trade has been a stunning success and saved the Adirondacks — the home base of tea party favorite Douglas L. Hoffman — from the ravages of acid rain, which destroys trees and renders pristine lakes lifeless. The U.S. Environmental Protection Agency in March revealed that acid rain pollution has hit a record low.

Through cap and trade, coal-burning power plants in the Midwest have cut down dramatically on sulfur dioxide emissions, which create acid rain in New York. The program, still in use, has achieved its emission reduction goals earlier than predicted and at a fraction of the $20 billion annual cost some government officials predicted. Compliance is near 100 percent.

"We're years ahead of where we thought we'd be on sulfur," said John F. Sheehan, a spokesman for the Adirondack Council.

Indeed, the Adirondack Council and others are calling for legislation to further reduce acid rain emissions, again through cap and trade. Congress could well face a vote on cap and trade — but maybe not the one the tea party activists were counting on.

Basically, the program sets a national limit on emissions and allows companies to buy and sell credits to achieve the goal. A company that greatly reduces pollution at a plant can sell credits to a plant that doesn't, essentially requiring plants to pay to pollute.

The idea is basically the same for carbon dioxide. But there are important differences, critics say.

"It's too unruly for carbon dioxide," said Wayne Brough, vice president for research and chief economist at FreedomWorks. The acid rain program was targeted at one industry — coal-fired power plants — while carbon dioxide has many other sources and is a global issue. "It's just too large," he said.

Critics list other differences as well. When the Republicans created cap and trade, the technology to cut acid rain pollution already existed and was in use at recently built plants, said Jeffrey R. Holmstead, former assistant EPA administrator for air and radiation during the George W. Bush administration, and now a partner at the business and environmental law firm Bracewell and Guiliani in Washington. The technology only had to be improved, and the program gave businesses an incentive to do that, he said.

"There's no doubt that a cap-and-trade program is a very effective way to get the institution of pollution controls," said Mr. Holmstead, who called himself a longtime proponent of cap and trade. For reducing carbon emissions, it would be less expensive than dictating each plant's emissions limit, he said.

But controlling carbon dioxide is "a lot more complicated," Mr. Holmstead said. Because the technology to reduce a plant's emissions is not established, he said, the program effectively would force companies to shut down older plants and build new ones, which is more expensive than adding scrubbers or other hardware as plants have done for the acid rain reductions.

"You can't just say it worked for sulfur, then it works for carbon," Mr. Holmstead said.

The acid rain program also benefited from good luck. Deregulation of the railroad industry reduced the cost of shipping low-sulfur coal from western states to the Midwest and East, Mr. Holmstead said.

Finally, the acid rain program was devised before the restructuring of the electric power industry, when plants were generally owned by federally regulated utility companies. Now, individual owners are part of the mix as well, and lawmakers are figuring out how to apply the program to them, said Dale Bryk, a senior lawyer at the Natural Resources Defense Council, which supports climate change legislation.

The acid rain program also did not have to contend with "windfall profits" that companies can generate when the government does not charge them for emissions permits, Ms. Bryk said. Although making companies pay for permits increases the cost of doing business — which can be passed on to ratepayers — simply giving them the permits has been a flop in Europe, where utilities are generating tens of billions of dollars in windfall profits, according to news reports.

A study commissioned by four electric industry associations last year concluded that utilities in unregulated markets will pass along the cost of emissions permits to customers even if the government gives them the permits for free, generating billions of dollars in windfall profits. In New York, that could spell nearly $500 million in additional annual profits for coal-based power generators, according to the study by Synapse Energy Economics.

As for regulated utilities, lawmakers working on cap-and-trade legislation have been looking for ways to give away permits but require the utilities to pass along the full value to customers, Ms. Bryk said.

Mr. Brough, at FreedomWorks, said even the founders of cap and trade say it has become "this frenzy" over the details of carbon regulation.

Mr. Barie, of the Upstate Tea Party, said he sees cap and trade as a tax on power plants and "additional interference by government," which run counter to the party's limited-government principles.

While acid rain pollution could be attributed to specific plants, Mr. Barie said, carbon dioxide comes from myriad sources that affect "every aspect" of people's lives. "I don't think the model for acid rain matches."

ACID RAIN REDUCTIONS

Emissions of sulfur dioxide,

nationally:

1990: 15.73 million tons

2000: 11.20 million tons

2005: 10.22 million tons

2008: 7.62 million tons

2009 (preliminary): 5.75 million tons

State emissions of sulfur dioxide, 2008 to 2009:

New York:

2008: 65,427 tons

2009: 47,528 tons

Ohio:

2008: 709,444 tons

2009: 601,101 tons

Pennsylvania:

2008: 831,915 tons

2009: 582,551 tons

Source: U.S. Environmental

Protection Agency