Spring Break
Curb Your Enthusiasm for Curbing Carbon with Cap-and-Trade
Issue date: 4/23/07 Section: Opinion
Since the Democrats have taken over Congress, utilities have dramatically changed course and begun advocating for a national, mandatory plan to reduce greenhouse gas emissions. They want uniformity instead of facing a patchwork of state legislation.
Some others in the business community are also reversing course and beginning to recognize that some form of regulation on the emissions of carbon is inevitable. The day before President Bush gave his State of the Union Address this January, the CEOs of ten major businesses including industrial giants GE, DuPont, and British Petroleum joined four environmental groups in a coalition called the United States Climate Action Partnership (USCAP) to encourage Congress to introduce a program to reduce carbon emission by ten percent within ten years.
Both USCAP and the utilities advocate a method to reduce emissions called cap-and-trade. This program first "caps" national carbon dioxide equivalent emissions at a certain level. Emitters that produce less emissions than their allotment can sell credits, and those that produce more can buy them, hence the "trade" half of the name. Those in Congress who want to reduce greenhouse emissions also generally support this method, and it was the central feature of the most prominent piece of legislation to reach the floor of either chamber of Congress, the McCain-Lieberman Climate Stewardship Act.
The willingness for the business community and government to approach global warming seriously should be applauded, but their preferred cap-and-trade solution is very problematic and complex. Its main drawback is a fluctuating price that fails to provide a clear price signal to investors in renewable energy technology and more importantly power plant owners, who must choose whether to modernize their facilities. And even if a plan is implemented, political fights to set future emission targets will likely be intense.
In contrast, the other primary option to reduce emissions, a carbon tax, sets a clear price that allows businesses to make reasonable decisions concerning emission cuts. It should be relatively easy to implement, and there should be less political controversy surrounding it once it becomes law. If it is argued for correctly, it also offers Democrats excellent rhetorical opportunity to appear friendly to business and against extensive bureaucracy or complicated rules. (Calling it a carbon price is the first step toward making this argument, and the option will be referred to in this manner for the remainder of the article. The word "tax" has many negative connotations that detract from the excellent features of a stable carbon price.)
Some others in the business community are also reversing course and beginning to recognize that some form of regulation on the emissions of carbon is inevitable. The day before President Bush gave his State of the Union Address this January, the CEOs of ten major businesses including industrial giants GE, DuPont, and British Petroleum joined four environmental groups in a coalition called the United States Climate Action Partnership (USCAP) to encourage Congress to introduce a program to reduce carbon emission by ten percent within ten years.
Both USCAP and the utilities advocate a method to reduce emissions called cap-and-trade. This program first "caps" national carbon dioxide equivalent emissions at a certain level. Emitters that produce less emissions than their allotment can sell credits, and those that produce more can buy them, hence the "trade" half of the name. Those in Congress who want to reduce greenhouse emissions also generally support this method, and it was the central feature of the most prominent piece of legislation to reach the floor of either chamber of Congress, the McCain-Lieberman Climate Stewardship Act.
The willingness for the business community and government to approach global warming seriously should be applauded, but their preferred cap-and-trade solution is very problematic and complex. Its main drawback is a fluctuating price that fails to provide a clear price signal to investors in renewable energy technology and more importantly power plant owners, who must choose whether to modernize their facilities. And even if a plan is implemented, political fights to set future emission targets will likely be intense.
In contrast, the other primary option to reduce emissions, a carbon tax, sets a clear price that allows businesses to make reasonable decisions concerning emission cuts. It should be relatively easy to implement, and there should be less political controversy surrounding it once it becomes law. If it is argued for correctly, it also offers Democrats excellent rhetorical opportunity to appear friendly to business and against extensive bureaucracy or complicated rules. (Calling it a carbon price is the first step toward making this argument, and the option will be referred to in this manner for the remainder of the article. The word "tax" has many negative connotations that detract from the excellent features of a stable carbon price.)
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