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Angie Drobnic Holan
By Angie Drobnic Holan November 8, 2010

Obama abandons cap and trade as Republicans take over the House

The last time we checked in on cap and trade, its prospects didn't look good. The legislation had passed in the House in 2009, but had not been taken up in the Senate. And last week, President Barack Obama himself acknowledged the proposal was doomed.

What is cap and trade? The idea is that the government sets a limit (the cap) on how much carbon different companies can emit. The government then issues permits to companies -- typically electric utilities and manufacturers --and allows them to buy and sell the permits as needed (the trade). If the policy works as planned, overall emissions decline, companies determine for themselves the best way to lower emissions, and the free market rewards those who lower emissions most effectively.

Republicans, however, attacked the plan as a job-killing energy tax, a description that is not entirely accurate. The plan never made it to a vote in the Senate.

Last week, Republicans won elections across the country, increasing their presence in the Senate and winning the majority in the U.S. House of Representatives. At a press conference the next day, Obama acknowledged a changed political landscape while holding out hope for other issues.

"I think there are a lot of Republicans that ran against the energy bill that passed in the House last year," he said. "And so it's doubtful that you could get the votes to pass that through the House this year or next year or the year after.  But that doesn't mean there isn't agreement that we should have a better energy policy.  And so let's find those areas where we can agree."

"Cap and trade was just one way of skinning the cat; it was not the only way," he said later. "It was a means, not an end.  And I'm going to be looking for other means to address this problem."

Obama may make headway on some of his other promises on energy and the environment, but it's clear he's giving up on this one because it can't make it through Congress. We rate it Promise Broken.

Our Sources

By Lukas Pleva July 26, 2010

Cap and trade will have to wait, say Senate leaders

We last reported on President Obama's campaign pledge to implement a cap and trade system in January 2010. At the time, we rated the promise In the Works, since the House had passed a comprehensive energy bill in June 2009. Meanwhile, in the Senate, Sen. John Kerry, D-Mass., and Joe Lieberman, I-Conn., released their own version of a cap-and-trade bill in May of this year.

It's been awhile since our last update, so we wanted to see how things have been unfolding.

Turns out, things have not been going so well in the Senate. On July 22, 2010, the Democratic leader Harry Reid told reporters that Democrats "don"t have the votes" to pass a comprehensive bill that would put caps on greenhouse gas emissions. Instead, Reid said that he will introduce a bill to reform the regulatory process for gas and oil drilling, provide incentives for production and purchase of natural-gas fueled vehicles, and possibly lift the liability cap for companies that cause oil spills. Still, even these scaled-down provisions are facing opposition from political and industry groups.

Reid said that the leadership had to shelve the cap-and-trade bill -- which would set limits on carbon emissions -- because of Republican opposition, though Robert Dillon, a spokesman for Sen. Lisa Murkowski, R-AK, said that even Reid's own party does not unanimously support the measure. Kerry and Lieberman are hopeful that they can continue to work in September on a proposal to cut emissions from electric companies, but Democratic Policy Committee Chairman Byron Dorgan said that he doesn't think that there will be time for "two energy packages on the floor this year."

We'll keep our eyes open to see what happens in September, but for now, it's clear that cap-and-trade will have to wait. We change the rating to Stalled.

Our Sources

By Catharine Richert January 13, 2010

Congress debates cap-and-trade in fits and starts

It's been a while since we updated President Barack Obama's promise to create a cap-and-trade system -- and there's a lot to report.
After Obama included the concept in his budget, House heavyweights Henry Waxman of California and Edward Markey of Massachusetts introduced legislation that would lower carbon pollution by 17 percent by 2020 and 83 percent by 2050. Under their plan, most pollution permits initially would be given out free. But eventually, companies would have to buy those permits from the government.
The House passed the legislation 219-212 on June 26, 2009.
In the Senate, things got a little more dramatic. Sens. John Kerry of Massachusetts and Barabara Boxer of California did not introduce their cap-and-trade bill until late September. Nevertheless, the legislation was incomplete; a big part of the bill language were omitted, leaving lots of room for negotiation. About a month later, Boxer released more details on her bill and pushed forward on debate despite objections from Republicans. Recognizing the legislation had no legs without GOP support, Kerry backed away from the bill and joined Republican Lindsay Graham and independent Joe Lieberman to draft a bipartisan version. 
The idea, of course, was to have a bill passed in time for the landmark climate change meeting in Copenhagen, where world leaders were supposed to hash out an agreement to lower global greenhouse gas emissions. After two weeks of haggling, the final accord turned out to be only a statement of intention to take action on climate change. Without a binding treaty, some of the steam has been taken out of the domestic climate change debate.
And then there's health care, an issue that has overshadowed nearly everything else Congress has tried to tackle this year. Lawmakers plan to take up the massive health system overhaul again once Congress is back in session. After that, they'll turn back to cap-and-trade, with Senate leaders likely cobbling together the final version of the upper chamber's climate bill.
Clearly, this promise is still In the Works; cap-and-trade represents a major change, so we wouldn't expect this pledge to be fulfilled overnight. For now, we'll follow the issue closely and offer updates throughout 2010.

Our Sources

The New York Times, A Grudging Accord in Climate Talks, by Andrew C. Revkin and John M. Broder, Dec. 19, 2009

CQ Weekly, 2009 Legislative Summary: Climate Change Mitigation, by Coral Davenport, Jan. 4, 2010

Angie Drobnic Holan
By Angie Drobnic Holan March 3, 2009

Cap-and-trade is in the budget

Barack Obama said during the campaign he would attack global warming by setting up a cap-and-trade system.

The idea behind cap-and-trade is that the government sets a limit on how much carbon different companies, such as electric utilities or manufacturers, can emit (the cap). The government then issues permits to companies and allows them to buy and sell the permits as needed so they can conduct business (the trade). If the policy works as planned, overall emissions decline, companies determine for themselves the best way to lower emissions, and the free market rewards those who lower emissions most effectively.

When President Obama released his budget on Feb. 26, 2009, he included the cap-and-trade system as part of his plans. The initiative would reduce greenhouse gas emissions, compared with 2005 levels, by about 14 percent by 2020 and 83 percent by 2050.

The policy would result in "dramatically reduced acid rain at much lower costs than the traditional government regulations and mandates of the past," said Obama's budget outline.

Obama also hopes the program will generate revenues for the government of about $150 billion over 10 years, starting in 2012. That money will go to paying for some of Obama's other initiatives, including helping communities transition to a green economy, according to the budget outline.

Republicans say the cap-and-trade system will result in higher electricity rates and higher prices for consumers. Those increases are a de facto energy tax, they argue.

Obama's budget director, Peter Orszag, said electricity costs may go up but most Americans would see other benefits to offset the higher costs.

"I just reject the theory that the only thing that drives economic performance is the marginal tax rate on wealthy Americans and the only way of being promarket is to funnel billions and billions of dollars of subsidies to corporations," Orszag said in an interview.

So cap-and-trade is in the budget outline. Orszag's remarks signal that the Obama administration intends to aggressively defend the plan in the face of opposition. We move this promise to In the Works.

Our Sources

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