Big Oil Pulls Out. Is It RIP for Cap and Trade?

(MoneyWatch)  It wasn't long ago that cap and trade legislation was the darling of a growing segment of the business world, as well as many areas of the United States. But in shifting political winds, fame and good fortune have proved fleeting for this once-popular technique for reducing greenhouse gas emissions.

This morning BP America, Caterpillar and ConocoPhillips all chose this morning to announce that they're leaving the U.S. Climate Action Partnership, a lobbying group that was pushing cap and trade to Congress. ConocoPhillips gave a few reasons for its exit in a press release:

"House climate legislation and Senate proposals to date have disadvantaged the transportation sector and its consumers, left domestic refineries unfairly penalized versus international competition, and ignored the critical role that natural gas can play in reducing GHG emissions," [CEO Jim] Mulva continued. "We believe greater attention and resources need to be dedicated to reversing these missed opportunities, and our actions today are part of that effort. Addressing these issues will save thousands of American jobs, as well as create new ones."

The company's criticisms hark back to earlier days in the debate over cap and trade, when American oil refiners complained that the cuts demanded from them were out of proportion to those asked of other industries, amounting to a de facto gas tax.

But that was almost a year ago. If ConocoPhillips and other members of the USCAP have held their grievances for so long, why didn't they bail out on cap and trade earlier? The explanation is simple: at the time, cap and trade seemed almost certain. Now, by a cold-blooded calculation, industry has decided that the legislation is a sinking ship that it's time to abandon.

They're not alone. A couple weeks ago, Arizona decided to withdraw from the Western Climate Initiative, which plans to enact a regional cap and trade system between several American and Canadian states. Last week the Wall Street Journal reported that Utah is also considering removing its support. Further, only four of the 11 members of the WCI have started work on the system, and even climate-friendly California is considering a moratorium.

Will anything replace cap and trade -- for instance, the straightforward carbon tax that some advocate? Perhaps, but not soon. It's not just that the Republican party, which is staunchly against cap and trade, has gained more power in Congress.

Instead, with a recession already underway, it seems that cap and trade's foes have successfully spread the notion that the plan would be another blow to the average American's pocketbook. Never mind that any legislation wouldn't take effect for several years. In the current deadlock, even working toward an emissions reduction system is off the table.

[Image of a ConocoPhillips refinery via madrigaelic / flickr.]