The U.S. Congress is currently debating a historic bill, the America´s Climate Security Act, that shows how far the national pendulum has swung toward “green” initiatives, even under the Bush administration. The bill aims at slashing emissions of greenhouse gases through a cap-and-trade system, similar to that being used in the new EU carbon market: the government would set a national limit on emissions and then distribute tradable permits to pollute up to that amount. Firms unable to stay within the limits would have to buy pollution “permits” from cleaner firms who under-pollute. The idea has long been applauded by economists as a way of “internalizing” the externality of pollution, and the United States has successfully used it in other areas, such as the 1970s transition to unleaded fuels.

However, the bill points up the complexity of the U.S. political system, with its checks and balances, separation of powers and intense competition of interests. The bill is sponsored by a Republican and supported by the greens and a broad spectrum of business interests. However, debate over how exactly to operate the system continues to divide Congressmen, and even if agreement were reached and the bill were passed, President George Bush might veto it. This would require even greater agreement in Congress to ensure its passage. Previous bills on emissions control have foundered for similar reasons.

Despite the remaining hurdles, this bill has gone further than any of its predecessors and shows that even if it fails, legislation under a new administration is highly likely. Meanwhile, ten northeastern states, impatient with delays in federal emissions-control bills, have formed the Regional Greenhouse Gas Initiative, or RGGI. Its cap-and-trade scheme is due to being operation on January 1, 2009. RGGI hopes to avoid the problems of the EU´s infant carbon market by issuing a lower number of permits and selling all of them rather than giving them away. Other states are working on similar schemes.