Stuck in Second Gear: Cap-and-Trade Legislation, Transportation Bill Reauthorization

In an interview you did with us in February of last year you said, "I anticipate that Congress will be making $1 trillion worth of commitments in the year ahead to rebuild and renew America. The commitment will include efforts to stabilize the economy and spread an economic recovery with an eye toward sustainable initiatives." Where are Congress and the Obama Administration on realizing that ambition?

Between the economic recovery package and the House bill on climate legislation, we are already on track for $1 trillion in federal investments. We've been looking at putting probably another $100-200 billion in play in the next two to three months. What frustrates me is that too much of this has been based on past patterns instead of new opportunities to renew, rebuild, and revitalize America. Some of the billions dealing with energy, such as the smart grid, are still in the pipeline. Unfortunately, the legislation that would have reauthorized the current Surface Transportation Act is still languishing. We have been extending that on a piecemeal basis, which pumps more money in, but doesn't begin to have the full impact of a six-year reauthorization-which in and of itself should amount to north of $400 billion. On balance, the numbers are there but I wish we were spending in a way that had more long-term impact.

Last March you introduced the Clean Low-Emissions Affordable New Transportation Efficiency Act, or CLEAN-T (HR 1329). How does that legislation fit with your ambitions for spending?

If we're going to meet our targets to reduce carbon pollution, we have to deal meaningfully with transportation. Our transportation system emits more carbon pollution than China, India, and the European Union combined. In the Waxman-Markey Bill, we incorporated provisions of CLEAN-T that would provide billions of dollars of additional resources to state and local governments to reduce the carbon footprint of local transportation systems. This marker could be used to leverage more money as it passes through the Senate. The climate change discussions, both internationally and in the United States, demonstrate an emerging consensus for the federal government to provide a framework like the legislation that has passed and is now pending in the Senate. I'm confident that a final bill will build on what we passed in the House.

What importance should be ascribed to the Obama Administration's commitment to high speed rail funding?

It was extraordinarily encouraging to see the administration make a multi-year commitment of an initial $8 billion, plus additional funds in the out years. Bear in mind that just a few years ago, we celebrating getting $500 million just to keep Amtrak alive. Now we have a significant show of support, which is prompting efforts all over the country to see how these funds can be leveraged. Certainly the California high speed rail initiative plays into this and you have a strong claim to some of this money; you're further along with a bold plan than any other state.

However, this is still pretty weak beer. The amount of the federal commitment over the next couple of years is less than China will spend in the next three months. They already have a head start on us. We are moving in the right direction, but we're still moving far too slowly to deal with our needs. We're relying far too much on air travel for shorter trips, simply because we don't have any real alternative. One third of American air trips are 350 miles or less, and they simply don't pencil out. We need to not just reduce our carbon footprint but provide transportation options that are economic and sustainable. Intercity passenger rail service can play a key role in revitalizing our central cities.

You noted in your answer that there is an issue about how we leverage and fund our rail systems. In metropolitan Los Angeles there is a proposal by the mayor and his allies to accelerate three transit projects by borrowing on future revenues from the federal government and Measure R. What are your thoughts on the merit of accelerating projects by borrowing against future state and federal revenues?

In an era of historically low interest rates, it can make sense to make investments that will pay dividends for decades. Intelligent use of credit, in these circumstances, can be a wise choice. Government agencies at all levels, however, should be sure that these investments deliver the stated benefits; we need to take care that we're not just mortgaging our future for short-term gains. We should all be concerned about the fact that, in a period of significant economic downturn, operating revenues are shrinking even as we go forward with capital programs. Since the public is much more likely to support capital investments than operations, we are seeing, in some parts of the country, previously funded and popular capital expansion paired with cutbacks to local sales taxes, service, and passenger revenues. This paradoxical situation makes it even harder to move forward with future rail projects.

In an earlier interview you described your views on cap-and-trade as follows, "Personally I'm agnostic, we could accomplish these goals with a carbon tax or with a cap-and-trade program, but what is important is that we tax the cost of carbon pollution and that we use the resources generated from this cost to help people comply and to minimize the impacts, especially those who are least able to afford them." Governor Schwarzenegger went to Copenhagen to tout California's adoption of a cap-and-trade program. Does cap-and-trade still have traction?

There has been aggressive energy expended on behalf of the cap-and-trade program, which the House ultimately passed. In fact, that was an historic piece of legislation, despite virtually unanimous Republican opposition and difficulties presented by the geographic, economic, and philosophical differences in the Democratic caucus. This subject would be contentious and complex under any circumstances; the current political climate made it even more so. Nonetheless, we got the job done in the House. Cap-and-trade is the approach most likely to garner the necessary support in the Senate; it certainly has the capacity to address the costs associated with carbon pollution as well as a mechanism to reallocate resources in order to minimize future pollution. I'm hopeful that it will be passed by the Senate in 2010. It is encouraging to see Senator Kerry, Senator Lieberman, and Senator Graham coming together to develop some consensus on this piece of legislation.

The contention of many in the environmental community and in the Western States is that, despite what happened in Copenhagen, more significant is the action at the subnational level. California and Portland are today, many assert, far more important to understand trends and to evaluating new technologies and sustainable practices. Do you subscribed to that thesis, or was Copenhagen, and Mexico City in 2010, where the action is?

Certainly, all nations need to contribute to global efforts; climate change is not going to be resolved until the United States, China, India, the European Union, Brazil, Indonesia, among others, commit to turning things around in the next 20 years. But there is nothing more encouraging to me than what has happened at the grassroots level. More than 1,000 cities around America have decided not to wait for the federal government; they're moving forward on their own. Over half the states have developed renewable energy standards and/or portfolios and there are countless businesses, churches, and college and university campuses that have stepped up out of a sense of global responsibility. They all recognize that we can no longer continue to waste more energy than anybody else in the world, regardless of their stance on the human effects on climate change and extreme weather events. I am fascinated and encouraged by this movement at the local level and think it is going to make a big difference, not just in the United States but around the world.

You serve as a member of the Trade Subcommittee of the Ways and Means Committee of the House, and you have publicly argued that federal climate policies can impose the same costs or carbon constraints on imports that we now impose on our own business.

There is nothing in World Trade Organization protocols that requires us to import other countries' carbon pollution or export our own. Having a balanced system that takes into account the carbon content of products can help make sure that we're operating on a level playing field. If we know that certain items have a high carbon content and are produced in a fashion that further damages the climate, we can create regulations that factor those costs in. By the same token, we should employ a trade structure that encourages the lowest carbon impacts, by using a cap-and-trade mechanism to assess carbon costs and provide incentives. This approach can reduce illegal logging, encourage forest protections, and discourage destructive agricultural practices. A lot of money is going to change hands. By rewarding people for doing the right thing, we can use these mechanisms to achieve the best environmental result, lower costs for American businesses, and help emerging economies develop in a more sustainable fashion.

At the end of January you returned for a third year in a row to VX2010: The VERDEXCHANGE Green Marketmakers Conference. You addressed, with many other global and California leaders, such themes as how we finance conversion to a greener energy economy. How we make that conversion efficiently?

Part of the answer is how we go about rebuilding and renewing America. The United States needs desperately to invest, not hundreds of billions, but trillions of dollars in our infrastructure over the course of the next decade. We need to do this not only to repair failing bridges, deteriorating transit systems, or aging and inadequate water infrastructure; we need to reduce our carbon emissions.

I'm a strong believer in using monthly utility bills to finance deep green renovation and energy efficiency; it's the simplest and most direct way to go about it. By providing ongoing financing and the ability to negotiate conservation rates, we could enable institutions that aren't in a position to assume more debt in a traditional way to contract with utilities-whether gas, electric, or sewer and water-and contractors to establish greater efficiency levels. This approach would more than pay for conservation efforts over the course of the next decade without encumbering their balance sheets.

Lastly, share your projections for action by the Congress in 2010 on climate change and energy. What is the likely timeline, and what coalitions must come together for Congress to act?

The House has already passed a good climate bill and is prepared, with a month's notice, to move ahead on the next six-year transportation bill. Now it's up to the Senate to move ahead on both of these issues. If Senators Kerry, Lieberman and Graham are able to break something loose within six months, we ought to see some legislation passed and making a difference. My hope is that the House receives the right signals to initiate action in February, which would give the Senate the opportunity to pass final legislation before the next construction cycle.

The key is getting public consensus to strengthen the increasing support from business, local governments, and advocacy groups. If the momentum is there, moving this legislation will enable us to take specific steps to jump start the economy, strengthen communities, and protect the planet.