Climate Bill Battle: Without a Price on Carbon, It's Just a Bunch of Tax Credits

(MoneyWatch)  First, President Obama left out cap-and-trade policy details in his recently released fiscal 2011 budget. And then Tuesday during a town hall-style meeting in New Hampshire, the president tossed out the possibility that cap-and-trade could be separated from an energy bill before the U.S. Senate, Reuters reported.

There is quite a bit of speculation whether this is some grand strategic move or simply an acknowledgment that a "comprehensive" climate and energy bill faces a likely death knell if cap-and-trade policy is included. And as BNET Energy blogger Chris Morrison also noted today a cap-and-trade bill, minus the cap-and-trade is exactly what the "loyal Democratic opposition to Obama has wanted all along."

UPDATE: Obama urged Wednesday the Senate not to give up on climate change legislation during a televised question-and-answer session with Senate Democrats, the Hill's E2 Wire reported. "Don't give up on that," Obama said. "I don't want us to just say the easy way out is for use to just give a bunch of tax credits to clean energy companies."

The transcript of the much written about exchange during the town hall meeting, makes it clear Obama sees the benefit of placing a price on carbon. The media focus, however, is on his acknowledgment that the Senate may end up separating cap-and-trade policy from the far more popular energy jobs incentives bill. It's not exactly a shocking revelation. But when the president says something like this, well then, everybody listens and searches for the hints and symbolism that may be tucked somewhere between the lines.

But there's a more important question here. Without a price on carbon what will this pseudo-climate and energy bill look like? Well, I'll tell you. you're counting on a bill chocked full of tax credits and other incentives to do the heavy lifting required to bring us into the "new energy future."

Heck, incentives to help develop an industry and create jobs sounds great. And it is. But trying to create a "new energy future" solely through tax credits and other incentives is a flawed approach. One which promises to create a dysfunctional relationship between the government and the developing industry, in this case, clean energy. Suddenly, the survival of a clean energy company rests on whether the government decides to renew the tax credit. It becomes a battle of special interests with plenty of losers.

Just ask the biodiesel industry.