Since we released our initial analysis of the Waxman-Markey American Clean Energy and Security Act (ACES), other analysts have confirmed our conclusion that the "cap" in Waxman-Markey would allow carbon emissions in regulated sectors of the U.S. economy to rise at business as usual (BAU) rates through 2030. This includes the Center for American Progress' Joe Romm who, in reversing his long-standing opposition to offsetting wrote, "just because American companies can purchase international offsets to replace their own emissions, that doesn't mean they will."
But whether or not you believe the legislation would result in lower emissions, there appears to be universal acknowledgment that various provisions in Waxman-Markey -- including but not limited to the extensive number of offsets permitted and the strategic reserve pool-- prevent the "cap" from being binding. Given this, Waxman-Markey cannot be accurately referred to as establishing a "cap" on U.S. emissions, much less a "binding cap." Probably the most accurate term is "non-binding cap."
Waxman-Markey advocates have offered reasons why they believe the high levels of legally allowed emissions under the Waxman-Markey "cap" and trade program should not be a concern: a) a 17% reduction in emissions targeted in the bill will be easy and inexpensive to meet, thereby obviating the need for firms to purchase offsets in lieu of reducing their own emissions; b) there aren't enough legitimate offsets available to replace mandated emissions reductions; c) there are other provisions in the legislation, such as renewable energy standards and efficiency standards, that will ensure that targeted reductions are achieved even if the "cap" allows emissions to increase.
While these assertions are debatable, none actually refute the fact that the "cap" in Waxman-Markey would not legally mandate emissions reductions in regulated sectors of the economy for at least two decades. Instead of capping emissions the legislation sets a "target" of 17 percent reductions by 2020. But a "target" is not a "cap" and the two terms are not interchangeable.
It would also be inaccurate to say that the legislation "would mandate emissions reductions" since firms would be able to increase emissions if they purchased off-sets. And it would be inaccurate to say that the legislation "would reduce emissions" since the reduction of the emissions is by no means guaranteed or even mandated. A more accurate way of describing the legislation as a whole (though not the "cap and trade" provision) might be that it "aims to reduce emissions" or something like that.
Most analysts agree that Waxman-Markey will establish some price on carbon, albeit one that will be highly constrained by free allowances, offsetting allowed above the cap, and the strategic reserve auctions, which explicitly limit how high the carbon price can rise. There is disagreement, however, as to a) what the carbon price would be, and b) what degree of emissions reductions, if any, these carbon prices would achieve. Whatever your view, these are projections based on various assumptions -- the behavior of firms, the future price of low-carbon energy, the potential for efficiency and conservation, the availability of off-sets, etc. They are not guarantees of reductions.
Whatever emissions reductions result from Waxman-Markey will be determined by the carbon price set under the various cost-containment mechanisms described above, and the assorted non-cap provisions in the bill, not the "caps" and targets that have dominated most of the debate and press coverage of the bill since it was marked up last month.
In short, there seems to be no one contesting the conclusion that while the Waxman-Markey bill establishes a carbon price and an emissions reduction target, it most notably does not establish a binding cap on U.S. emissions.