Is it cap and trade, or cap and tax?

The Waxman-Markey Climate Bill (H.R. 2454), which was passed in the House last month, implements a mechanism commonly known as cap and trade. (The idea can get complicated but there's a good summary here.) Some, though not all, Congressional Republicans tend to call it cap and tax or an energy tax. They say it will simply increase energy costs for consumers and businesses.

As an example, take Republican Representative Chris Lee, who voted against the bill. He talked about the cap and trade plan during a press conference this morning at a Greece gas station. He stood next to a pump and cited a Congressional Budget Office analysis that says the program could increase gas prices as much as 77 cents per gallon.

But that's one of the ideas behind cap and trade - the market sets a price on carbon which nudges consumers and businesses to alter behaviors. When energy rates go up - be it the cost of a gallon of gas or the price of a kilowatt hour of electricity - consumers try to use less.

To use Lee's example, if the cost of a gallon of gas goes up 77 cents, then consumers will theoretically look for ways to mitigate the increases. The next time they buy a car, they might consider a more fuel-efficient vehicle or one that operates on cleaner fuels. Or they may simply drive less. So that extra 77 cents a gallon promotes conservation, which is the cheapest and easiest way to cut greenhouse gas emissions, and it helps advance fuel-saving technology - burning less fuel means emitting fewer greenhouse gases.

 It's a "worthy goal" to want to lower carbon emissions, Lee said. But he'd rather see it done via tax breaks and incentives - he didn't offer specifics about which areas he'd target. He did say he wants to see more options for producing energy: more domestic oil and natural gas exploration, more nuclear power, and even coal.

"There is opportunity to use coal effectively," he said.

He pointed to carbon capture and sequestration as a worthy technology that the government and private sector should pursue. But the technology is in its infancy and presently is used on an experimental basis.

The irony is that H.R. 2454 contains a lot of what he's looking for: it supports developing carbon capture and sequestration, and also includes tax breaks and incentives. It also provides money for technologies that will help reduce fossil fuel consumption.