Emitters became the “Major Economies,” which came together at the State Department in September 2007. These were the countries that, collectively, represented 80 percent of world GDP, consumed 80 percent of world energy, and produced 80 percent of the world’s CO2. And, therefore, they were the countries that could have the most impact. Moreover, with countries like China, India, and Brazil included, this new grouping provided a way to manage the contentious divide between developed and developing countries.
This was quite a different position from that at the beginning of the Bush administration seven years earlier. But the administration’s time was running out.
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IN SEARCH OF CONSENSUS
The weekend after Barak Obama’s inauguration, phone and e-mail invitations were hurriedly circulated around Washington for his first speech at the White House that following Monday. Those lining up early that chilly morning at the East Gate of the White House, many of them still in the post-inauguration euphoria, thought they were going to an energy event. Yet proceedings in the East Room were really about climate change, the issue that would now define energy policy.
“The days of Washington dragging its heels are over,” said the new president. He added that “America will not be held hostage” to “a warming planet.” The president’s priority was clear. And with the president aligned, the House leadership set out to make cap and trade the law of the land.1
The enterprise was in the hands of Henry Waxman, chairman of the Energy and Commerce Committee, and Edward Markey, chairman of the Select Committee on Energy Independence and Global Warming that Speaker Nancy Pelosi had set up two years earlier.
For Markey, also chairman of the Subcommittee on Energy, climate change had been on his agenda for most of his 33 years in Congress. On the wall of his office, catty-cornered from a large solar panel, hangs a framed front page of the now-defunct Washington Star newspaper from November 7, 1976. The righthand lead is headlined “Natural Gas Supply Cut Is Projected.” The left-hand lead is an interview with a professor from the University of Pennsylvania, warning of coming world crises—one of them being a “world change in climate”—perhaps caused by manmade CO2, but perhaps, the professor allowed, by the natural workings of the glacial cycle.
And in the middle of the page is a photograph of a mop-haired 30-year-old Markey making his first trip ever in his life to Washington, D.C., to take up his seat as a newly elected congressman. Under the headline “A New Mr. Smith Comes to Washington,” the story compared him with the “idealistic hayseed” freshman played by Jimmy Stewart, who shakes up the nation’s capital in Frank Capra’s 1939 classic film. “I’ve got a few things I want to say to this body,” the Jimmy Stewart character says at the climax of the movie. This new “Mr. Smith,” Ed Markey, had, over his 33 years in Congress, quite a few things to say as well on a number of different subjects—on everything from financial derivates to nuclear power safety and proliferation to telecommunications deregulation. But energy preoccupied him. At the 1980 Democratic convention, he had called, in a prime-time speech, for the United States to be “a truly solar society” by 2030. He had written the first national efficiency standards for appliances in 1987 and had continued to work for his “solar/wind future”—albeit not with anywhere near the impact he wanted. Now in 2009, with Barak Obama in the White House and the Democrats in power in Congress, he was, in concert with Waxman, in a position to push cap and trade, and thus reshape the fundamental economics of a substantial part of the entire U.S. economy.
CARROTS AND STICKS
But how did one go about reshaping so much of the economy—energy, auto and transportation, buildings, manufacturing, and all the rest? Waxman and Markey had a two-part strategy. The first part was to bring people on board with the inducements that cap and trade had in terms of handing out allowances for free to specific industries, rather than auctioning off the allowances. That was the carrot. And those carrots were measured in billions of dollars of value.
The second part of the strategy was the stick—the Environmental Protection Agency. As Markey put it, “It was legislation versus regulation.” If there was no legislation, then the EPA, under the Supreme Court ruling, would go back in time to the pre–Clean Air Act era and begin to regulate carbon dioxide, command-and-control style. And unlike the Congress, the EPA would not be able