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 / Summer 2008 / Issue 51(originally published by Booz & Company)


The Making of a Market-Minded Environmentalist

Those few words would ultimately open many doors. On the day of publication, I got a call from C. Boyden Gray, then the counsel to Vice President George H.W. Bush. (In 2006, Gray would become the U.S. ambassador to the European Union.) He told me how refreshing it was to hear an environmentalist talking about markets, and he asked me to come to the White House to meet with him.

Otherwise, we were pretty much ignored by the political right and faced a lot of criticism from the left for being, as Citizens Party cofounder Barry Commoner put it, “cynical and gutless.” But we pressed on, and began working with a young Harvard professor named Rob Stavins, who had been an EDF intern in California. With Senators Tim Wirth (Democrat from Colorado) and John Heinz (Republican from Pennsylvania) cosponsoring the effort, we wrote a report called “Project 88,” intended for the winner of that year’s presidential race, describing how market mechanisms could solve environmental problems. One chapter outlined the use of emissions trading to cut the sulfur dioxide pollution that causes acid rain.

After Bush’s inauguration in 1989, I called Gray and we met again. During the New Hampshire primary campaign, environmentalists had elevated acid rain as a critical issue. Fish and plants in the lakes and forests of the Northeast had begun to die at an alarming rate, and scientists had determined that sulfur dioxide pollution from power plants was the primary culprit. Bush had promised that he would do something to tackle the problem. Gray told me that the president was serious about fulfilling that pledge and promised that “if you guys can write up a market-based plan, I’ll make sure the president considers it.” At EDF, my colleagues (Tom Graff, Dan Dudek, Joe Goffman, and others) and I were already concerned about global climate change. We saw that a national emissions market in sulfur dioxide could create a large-scale dem­onstration model for a way to rein in the greenhouse gases that cause global warming.

Emissions trading had already been the subject of intense legal skirmishing all the way to the Supreme Court, but those cases involved emissions trading without a cap, fostered by individual states striving to improve air quality. Now we were proposing a federal emissions trading system, with a declining national cap. Because the idea was so radical within the en­vi­ronmental community, we were ner­vous. And we did stir passions. Some thought we were giving corporations a way to “pay to pollute,” that emissions trading would just shuffle around the same amount of pollution. The Bush administration did try to get us to sign off on a trading mechanism without the cap, which would have been exactly that kind of shell game. But we refused to support it, insisting on a cap with a 50 percent mandatory cut, and deeper cuts over time. Bush ultimately took a stronger position on this issue than Senate Democratic Majority Leader George Mitchell had taken just a few years earlier. I thought that was pretty incredible.

In retrospect, we didn’t do a good enough job explaining the declining cap to the public or to our colleagues. When I was quoted in papers across the country as being in favor of Bush’s new acid rain proposal, the blowback was intense. It wasn’t just from environmental groups. Many in the administration and in Congress were mistrustful of a system with such flexibility. Regulations had always specified technologies, and we were asking the lawmakers to let go of that approach and adopt a performance-based standard, in which their role would be not to mandate certain practices but rather to rigorously measure outcomes. Even today, as Congress debates greenhouse gas control bills, some lobbyists and legislators still want to pick the winners, promoting their chosen technologies rather than letting the market find the most efficient ways to meet the emissions cap.

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