Senate Republicans Revive Kyoto Lite

Bad policy ideas never die; they just get recycled. A prime case in point is the Senate’s recent passage of the Growing Climate Solutions Act (S. 1251). All but two Senate Republicans (Jim Inhofe of Oklahoma and Mike Lee of Utah) voted for it. The bill would establish a credit market for farmers who “voluntarily” reduce greenhouse gas (GHG) emissions associated with agricultural and forestry activities.

The basic idea has already had four bites at the apple. A Trojan horse for Kyoto Protocol-style cap-and-trade regulation, the policy has been variously called credit for early action (1998), credit for voluntary reductions (1999), transferable credits (2002-2005), and Clean Energy Incentive Program (2015-2016). CEI has been instrumental in foiling or leading the opposition to it on each occasion.

Originally the brainchild of former Sen. Joe Lieberman (D-CT) and the Environmental Defense Fund, the policy is designed to build the accounting framework and corporate clientele for a GHG cap-and-trade program.

As explained in more detail in this testimony:

• U.S. government provision or certification of credits for “voluntary” GHG reductions would build a corporate clientele for cap-and-trade policies. Such credits derive their economic value solely from the threat or imposition of an emissions cap. Consequently, all credit holders acquire financial motives to lobby for a cap.
• Although participation in credit markets is not mandatory, neither is it truly voluntary. Such programs transfer wealth, in the form of tradable emission allowances, from those who do not “volunteer” to those who do. Non-participants are penalized under a future cap—hit with extra burdens they would not face absent an early action credit program.
• The political result of this coercive, zero-sum dynamic is all-too-predictable: a large mass of companies holding carbon-reduction credits that mature and attain full market value only under a cap. The program will expand the ranks of energy-rationing profiteers.
• Bottom line: Enacting S. 1251 will further corrupt the politics of energy, growing the coalition for Green New Deal-style subsidies and regulations.

You may be wondering why 48 out of 50 Republican senators would vote for such mischief. Short historical memories may partly explain it. “Voluntary,” “win-win”—it sounds harmless enough. On the other hand, can so many senators really be that wet behind the ears?

Near-unanimity on an issue as contentious as climate change is never a good sign. Sometimes one side is pulling the wool over the other side’s eyes. At other times, however, party leaders from both sides of the aisle collude to enrich special interests at the expense of consumers or taxpayers.

Recall a previous feat of bipartisanship—California’s electricity restructuring program. The state legislature approved it unanimously in 1996. Every special interest got something it wanted—at least in the short run. The reckoning came in 2001: skyrocketing electric prices, rolling blackouts, the bankruptcy of Pacific Gas and Electric Company, and the near-bankruptcy of Southern California Edison.

Let’s have a closer look at S. 1251. As summarized by Congress.Gov:

This bill authorizes the Department of Agriculture (USDA) to establish a voluntary Greenhouse Gas Technical Assistance Provider and Third-Party Verifier Certification Program to help reduce entry barriers into voluntary environmental credit markets for farmers, ranchers, and private forest landowners.

S. 1251 directs the Secretary of Agriculture to establish regulatory protocols for the calculation, verification, and trading of credits for “current and future activities that prevent, reduce, or mitigate greenhouse gas emissions or sequester carbon.”

People are already free to participate in “voluntary” carbon credit markets. Why bother imposing a federal accounting framework unless it is the setup for cap-and-trade? Indeed, as noted above, the chief “barrier to entry” is the absence of a mandatory reduction policy that can turn otherwise worthless Kyoto coupons into gold.

Activities qualifying for credits include:

• Land or soil carbon sequestration;
• Emission reductions derived from fuel choice or reduced fuel use;
• Livestock emissions reductions, including emissions reductions achieved through feeds, feed additives, and the use of byproducts as feed sources;
• Manure management practices;
• On-farm energy generation and energy feedstock production;
• Fertilizer or nutrient use emissions reductions;
• Reforestation and forest management, including improving harvesting practices and thinning diseased trees;
• Prevention of the conversion of forests, grasslands, and wetlands;
• Restoration of wetlands or grasslands;
• Grassland management, including prescribed grazing;
• Current practices associated with private land conservation programs administered by the USDA; and
• “[S]uch other activities, or combinations of activities, that the Secretary, in consultation with the Advisory Council, determines to be appropriate.”

In other words, just about any farmer can earn credits for doing what he already does for a living. Sweet!

To be sure, the Secretary’s protocols are to “account for additionality.” That means credits awarded for “voluntary” reductions must be additional to reductions that would have occurred anyway absent the incentives created by the program. But separating “anyway tons” from “additional tons” is not always easy. That murkiness is a feature, not a bug. It creates opportunities both for rent-seekers and for bureaucratic overseers.

Did the farmer remove diseased trees to protect his bottom line or to save the planet? Did he reduce fuel usage by 150 gallons instead of 100 gallons because of incentives created by the credit program or would he have done so anyway on account of rising fuel prices, his smaller post-pandemic workforce, or increased competition after Biden dumps Trump’s tariffs? Was the credit program a key factor in the farmer’s decision to allow wind generation on his property, or would he have done so anyway given the financial incentives provided by his local utility, the state, and the IRS?  What baseline will additionality be measured against—a historical baseline (how many tons of byproduct feed the farmer used in the past) or a future projected baseline (how many tons the farmer would use in the future if there were no credit program)?

All of this invites the pretense of knowledge and precision in the measurement of farm activity baselines, snooping and regulatory rent collection by “third-party certifiers,” and auditing by the USDA. Little to none of this would exist in a free market. It is a recipe for increased government surveillance and meddling in agricultural markets already rife with subsidies, favoritism, and regulation.

And here’s the really great news if you are part of the Green New Deal coalition. Once the federal government establishes “voluntary” markets in one sector, lawmakers will have a model for imposing similar frameworks in other sectors. If the objective is to mobilize lobbying for a national cap-and-trade program, this is the way to go.

If, on the other hand, you believe Americans have more to fear from climate hysteria and the NetZero agenda than from climate change itself, now would be a good time to stop planting these weeds in the soil of American politics.