It seems like a win-win scenario: the government sets a cap on carbon emissions, based on the latest scientific data and a comprehensive energy policy. Companies then determine how or when they wish to make reductions in their carbon emissions based on their own bottom line. Those who choose to make the capital investments to implement the necessary technologies and reduce their emissions end up with extra allowances that they can, in turn, sell. Those who decide it is more feasible to buy emissions allowances than to implement reduction measures may do so as well.
However, opponents of the current cap and trade proposal say that it is financial disaster. For starters, the technologies to reduce carbon emissions are simply not available, leaving energy producers with two choices—either cut operations or buy allowances. They estimate that cap and trade will reduce the GDP by $161 billion in 2020 and deliver a crippling blow to the American economy…all in the name of climate change, a scientific phenomenon that some are now openly calling into question.
In his 2010 State of the Union address, President Obama reiterated his commitment to clean energy and climate legislation, commending the House for passing the American Clean Energy and Security Act of 2009 but failing to mention cap and trade by name. The president’s proposed budget for 2011 reportedly eliminates revenues from the sale of emissions allowances as well, leaving many in Washington to speculate that the Obama Administration might be willing to consider other options. But if cap and trade is out, then what’s next?
EPA Regulations
In December, the EPA officially declared greenhouse gasses a danger to public health and welfare, opening the door to regulating those companies that produce greenhouse gas emissions. Proponents argue that regulations are the best way to reduce and eliminate emissions pollutants on both a large scale and in a timely manner. However, opponents argue that implementing punitive measures in advance of technological advancements is not a sustainable option and will cause nothing less than an economic catastrophe.
Carbon Tax
Given the threat of EPA regulations and the apparent lack of support for cap and trade, some policy makers and businesses are opting for a straightforward carbon tax. Proponents claim that, phased in over a period of years, a carbon tax program would allow businesses the time they need to plan for reducing emissions in a cost-effective manner. In addition, revenues from a carbon tax could be rebated to Americans through dividends or tax-shifting. Opponents claim that a carbon tax has all the disadvantages of cap and trade (i.e. companies still have to retrofit existing or build new facilities) without the advantages of being able to trade emissions allowances in the marketplace.
Voluntary Goals & Incentives
Many businesses are taking pro-active steps to measure and disclose their carbon emissions via independent organizations such as The Carbon Disclosure Project. Still others are participating in voluntary public-private partnerships including the EPA’s Climate Leaders and the DOE’s Climate VISION Programs which promote energy efficiency and emissions reductions. In addition, free market proponents have recommended the government reduce regulations for renewable energy start-ups and limit litigation against clean tech ventures in order to facilitate the adoption of greener sources of energy. However, opponents argue that voluntary goals and incentives are not enough; climate change demands government intervention now. Even those who remain agnostic about the effects of climate change acknowledge the importance of energy independence from both a national security and an economic point of view. The question is: What do we do now?
Perhaps the first step is to build consensus on what our end goal is. The focus of current regulations and proposed legislation seem to imply that our end goal is to reduce greenhouse gas emissions to acceptable levels. However, reduced emissions are actually a by-product of our end goal, which is (or should be) the creation of a domestic source of energy that does not produce pollutants in the first place. Any action that does not have that end goal clearly in sight will miss the mark.
More and more, the American public is making it clear: Environmental sustainability is certainly important, but so is energy security and economic prosperity. We need a plan that will allow us to achieve our end goals, not get side-tracked by the byproducts of those goals. And we want a government that will work with the businesses that provide jobs and economic stability—not against them—to achieve those goals. At the end of the day, we want a strategy that will actually help solve the problems that face us, not just control them.
First appeared on the Anderson Cooper 360 Blog - February 11, 2010
Showing posts with label cap-and-trade. Show all posts
Showing posts with label cap-and-trade. Show all posts
Thursday, February 25, 2010
Monday, August 24, 2009
Trade Offs
Like so many people, I have been pondering the pros and the cons of the current cap-and-trade legislation. My instinct is to jump on board with anything that will benefit both the environment and the economy; however, I have this niggling doubt that the current bill up for consideration may fail on both counts.
This morning, I came upon an interesting editorial in the Wall Street Journal that I think bears repeating. Wisely, the authors of this piece did not get mired in the scientific debate over whether or not Global Warming is "real." Instead, they looked at whether or not this bill will actually solve our environmental dilemma in an economically sound manner.
At the end of the day, capping our carbon emissions and cutting back on our energy consumption may buy us time to come up with a new carbon-free energy technology; but it is not the answer. Breaking the link between our productivity and our carbon emissions is.
For most environmentalists (and I include myself in this category), the elephant in the room is that, of all the technologies we currently have available to us, nuclear is the clear winner in terms of being able to provide baseload power with virtually no carbon emissions. If dramatically reducing carbon emissions as soon as possible while still maintaining our economic productivity is our real goal, then we have to at least consider this alternative.
France figured this out in the 1970's; and as a result, currently 75% of its electricity comes from nuclear energy. According to the World Nuclear Association, France is the largest exporter of nuclear energy in the world, earning EUR 3 billion from those exports. France also recycles or "reprocesses" used fuel, utilizing 30% more energy from the original plutonium. And only about 3% of the used fuel is considered "high-level wastes" which require special storage and disposal.
Every problem has multiple solutions, most of which involve trade offs between what we want and what we don't. The key, I think, is to first be clear about our intentions and then be open to a variety of solutions to achieve our goals. Whether the current cap-and-trade proposal will help or hinder us in the process of reducing carbon emissions and boosting our economy remains to be seen.
I do, however, wonder: If our government's intention is to slash carbon emissions and reduce our dependence on fossil fuels (both of which are laudable goals), then why is it not developing strong incentives for the development of nuclear power and the recycling of nuclear waste?
This morning, I came upon an interesting editorial in the Wall Street Journal that I think bears repeating. Wisely, the authors of this piece did not get mired in the scientific debate over whether or not Global Warming is "real." Instead, they looked at whether or not this bill will actually solve our environmental dilemma in an economically sound manner.
At the end of the day, capping our carbon emissions and cutting back on our energy consumption may buy us time to come up with a new carbon-free energy technology; but it is not the answer. Breaking the link between our productivity and our carbon emissions is.
For most environmentalists (and I include myself in this category), the elephant in the room is that, of all the technologies we currently have available to us, nuclear is the clear winner in terms of being able to provide baseload power with virtually no carbon emissions. If dramatically reducing carbon emissions as soon as possible while still maintaining our economic productivity is our real goal, then we have to at least consider this alternative.
France figured this out in the 1970's; and as a result, currently 75% of its electricity comes from nuclear energy. According to the World Nuclear Association, France is the largest exporter of nuclear energy in the world, earning EUR 3 billion from those exports. France also recycles or "reprocesses" used fuel, utilizing 30% more energy from the original plutonium. And only about 3% of the used fuel is considered "high-level wastes" which require special storage and disposal.
Every problem has multiple solutions, most of which involve trade offs between what we want and what we don't. The key, I think, is to first be clear about our intentions and then be open to a variety of solutions to achieve our goals. Whether the current cap-and-trade proposal will help or hinder us in the process of reducing carbon emissions and boosting our economy remains to be seen.
I do, however, wonder: If our government's intention is to slash carbon emissions and reduce our dependence on fossil fuels (both of which are laudable goals), then why is it not developing strong incentives for the development of nuclear power and the recycling of nuclear waste?
Wednesday, May 27, 2009
What's all this about cap-and-trade?
This past week the House Energy and Commerce Committee passed the American Clean Energy and Security Act of 2009, commonly known as the Waxman-Markey bill. At the core of this legislation is a cap-and-trade program, designed to reduce carbon dioxide emissions 83 percent below 2005 levels by the year 2050.
Proponents claim that the legislation will create millions of clean-energy jobs, at the same time reducing our dependence on fossil fuels and decreasing greenhouse gas emissions which cause global warming. However, opponents say that it will drastically increase the cost of energy and actually cause the loss of millions of jobs in this country. As one opponent reportedly summed it up, “This bill is the biggest energy tax in the history of the United States.”
If you don’t understand the intricacies of this 900+ page bill, count yourself in good company. According to Rasmussen Reports, only 24 percent of Americans understand that the cap-and-trade proposal currently winding its way through Congress has to do with environmental issues. Others incorrectly guessed that it had to do either with regulating Wall Street or reforming our health care system.
So, what is cap-and-trade?
The Environmental Defense Fund explains that a “well-designed” cap-and-trade program consists of the following elements:
(1) The government must place a mandatory emissions cap—in this case a limit on carbon dioxide emissions—on the total tons of emissions that may be emitted by all polluting entities in a given compliance period.
(2) The government must allocate—either by giving away or at auction—a fixed number of allowances for each polluting entity. Each allowance gives the holder the right to emit one ton of pollution.
(3) Companies that emit less than they are allowed may either bank their unused allowances for future use or trade them to those companies which are emitting more than they are allowed.
(4) At the end of the compliance period, each company must meet clear performance criteria and prove that their tons of emissions have not exceeded their allowances.
(5) Throughout this process, companies have the flexibility to choose when and how they will reduce their emissions. They do not have to reduce emissions right away; they can do it on their own timeline. If it is more cost-effective for them to buy allowances from another company than to install the technologies necessary to reduce their own emissions, they may do so. As long as their emissions do not exceed their allowances, whether those allowances were allocated by the government or bought from another polluting source, they will not be penalized.
Proponents say the cap-and-trade system was a huge success in this country during the 1990’s when it was used to reduce the sulfur dioxide emissions which caused acid rain. According to the Environmental Defense Fund, “the U.S. acid rain cap and trade program achieved 100 percent compliance in reducing sulfur dioxide emissions.”
However, opponents such as the American Legislative Exchange Council say carbon dioxide is far more ubiquitous than sulfur dioxide. In addition, while the technologies necessary to reduce sulfur dioxide emissions were widely available in the 1990’s, the technologies for reducing carbon dioxide emissions are currently still in the research and development stage, with no clear timeline for when they will become commercially viable.
There are, of course, a number of other details that have become sticking points for both sides in this legislation and a number of larger issues being considered; and doubtless there will be hours of heated debate about those in the coming months. But even if a cap-and-trade bill does finally pass through Congress, it will do little to eliminate the link between our productivity and our carbon emissions. And, ultimately, if we are to succeed, we must innovate clean technologies that will do just that.
Proponents claim that the legislation will create millions of clean-energy jobs, at the same time reducing our dependence on fossil fuels and decreasing greenhouse gas emissions which cause global warming. However, opponents say that it will drastically increase the cost of energy and actually cause the loss of millions of jobs in this country. As one opponent reportedly summed it up, “This bill is the biggest energy tax in the history of the United States.”
If you don’t understand the intricacies of this 900+ page bill, count yourself in good company. According to Rasmussen Reports, only 24 percent of Americans understand that the cap-and-trade proposal currently winding its way through Congress has to do with environmental issues. Others incorrectly guessed that it had to do either with regulating Wall Street or reforming our health care system.
So, what is cap-and-trade?
The Environmental Defense Fund explains that a “well-designed” cap-and-trade program consists of the following elements:
(1) The government must place a mandatory emissions cap—in this case a limit on carbon dioxide emissions—on the total tons of emissions that may be emitted by all polluting entities in a given compliance period.
(2) The government must allocate—either by giving away or at auction—a fixed number of allowances for each polluting entity. Each allowance gives the holder the right to emit one ton of pollution.
(3) Companies that emit less than they are allowed may either bank their unused allowances for future use or trade them to those companies which are emitting more than they are allowed.
(4) At the end of the compliance period, each company must meet clear performance criteria and prove that their tons of emissions have not exceeded their allowances.
(5) Throughout this process, companies have the flexibility to choose when and how they will reduce their emissions. They do not have to reduce emissions right away; they can do it on their own timeline. If it is more cost-effective for them to buy allowances from another company than to install the technologies necessary to reduce their own emissions, they may do so. As long as their emissions do not exceed their allowances, whether those allowances were allocated by the government or bought from another polluting source, they will not be penalized.
Proponents say the cap-and-trade system was a huge success in this country during the 1990’s when it was used to reduce the sulfur dioxide emissions which caused acid rain. According to the Environmental Defense Fund, “the U.S. acid rain cap and trade program achieved 100 percent compliance in reducing sulfur dioxide emissions.”
However, opponents such as the American Legislative Exchange Council say carbon dioxide is far more ubiquitous than sulfur dioxide. In addition, while the technologies necessary to reduce sulfur dioxide emissions were widely available in the 1990’s, the technologies for reducing carbon dioxide emissions are currently still in the research and development stage, with no clear timeline for when they will become commercially viable.
There are, of course, a number of other details that have become sticking points for both sides in this legislation and a number of larger issues being considered; and doubtless there will be hours of heated debate about those in the coming months. But even if a cap-and-trade bill does finally pass through Congress, it will do little to eliminate the link between our productivity and our carbon emissions. And, ultimately, if we are to succeed, we must innovate clean technologies that will do just that.
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