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Sunday, January 17, 2010

Adviser: Gov’t needs to look at global warming

New Hampshire would seem to be surprise proof when it comes to visits from prominent people urging support for various causes, but it was something of an eyebrow raiser a when a former policy adviser for John McCain’s presidential campaign went before business folks Tuesday to say that federal oversight is needed to control greenhouse gases.

“I won’t pretend that I get standing ovations,” joked Douglas Holtz-Eakin, who was a staff economist for President George H.W. Bush and served as chief economic adviser to McCain’s campaign.

He spoke Tuesday to a gathering of New Hampshire businesspeople at the New Hampshire Institute of Politics at Saint Anselm College in Manchester. The title of his Saint Anselm talk, “Impact of Federal Climate Policy on Business and the Economy,” sounds like a businessman’s attempt to ward off regulation.

However, Holtz-Eakin actually argued businesses should support a hugely expanded, nationwide version of RGGI, New Hampshire’s auction-based regulatory system designed to control CO2 emissions.

“We have experience in Europe, we have experience in RGGI. We should build on that experience,” he said in a telephone interview last week.

Why is a prominent fiscal conservative touting the heavy hand of government to tackle a problem – global warming – that some people doubt is a problem at all?

“Conservatives are characterized by their willingness to sacrifice in the present to preserve freedoms and values in the future. This is that kind of issue,” he said. “Frankly, it’s odd that conservatives are not associated with this.”

Part of this, he said, is that climate change has become linked in the public mind with a prominent Democrat, Al Gore, whose movie “An Inconvenient Truth” raised the issue’s profile. This fact has embroiled the debate in partisan politics.

There are also some who doubt that the problem even exists, a feeling that gained prominence late last year when the so-called “Climategate” revealed some unsavory e-mail discussion among prominent climate researchers.

Holtz-Eakin says despite the questions raised by Climategate, he thinks the “balance of risks” is convincing enough that action should be taken, and that cap-and-trade mechanisms, such as RGGI, are the most feasible way to take that action.

As the name implies, these involve capping the amount of pollution that can be emitted from an area, then setting up a market in which companies can trade for the right to emit pollution.

RGGI, the Regional Greenhouse Gas Initiative, involves 10 states in the Northeast, including New Hampshire. It began running last year, covering only carbon released by power-producing utilities such as Public Service of New Hampshire, rather than other industries or vehicles. It has operated four regionwide quarterly auctions without a hitch, selling $432 million worth of allowances; each allowance allows the emission of a ton of carbon during the next three years.

The money from the auctions has been distributed to states, most of which use it for energy-efficiency initiatives, such as paying to weatherize homes of low-income people.

“This is a piece of legislation from which the federal government can learn,” he said.

Holtz-Eakin likes cap-and-trade because it uses a market mechanism – auctions among private companies – to determine the cost of the pollution controls, as compared with a carbon tax in which the cost is set by regulators. Others argue a carbon tax is preferable because it’s simpler and more transparent.

Holtz-Eakin also likes cap-and-trade because he thinks it’s politically feasible in Washington, unlike a carbon tax.

“Sometimes, a minimal bill is the best bill, because it can get bipartisan support. You can beef up in the future if needed,” he said.

Holtz-Eakin has many issues with the current legislation in Washington for a national cap-and-trade, the Waxman-Markey bill, named after its two Democratic sponsors. It has passed the U.S. House of Representatives, but its future in the Senate seems dim.

Holtz-Eakin said key components for a national cap-and-trade involves covering many industries rather than just utilities – he said he thinks “85 percent” of carbon emissions can be covered and go a long way toward meeting national goals in cutting carbon – and using the money collected when companies buy pollution allowances to reduce payroll and corporate-profit taxes.

Using the money from selling allotments for energy efficiency, as is done in RGGI, wouldn’t “scale up” and work with the massive amounts involved in a national cap-and-trade, he argued.

“The degree to which we can recycle the revenue is going to be an important part of the debate,” he said. “This is classic conservative benefit-cost decision.”

David Brooks can be reached at 594-5831 or