Posts Tagged ‘cap and trade’

Congressional Debate on Climate Change Begins, and Ends (for now anyway)

Saturday, June 21st, 2008

After years of anticipation, climate change legistlation finally made it to the floor of the US Senate in June, in the form of the Leiberman-Warner Climate Security Act.  The fact that the bill made it this far is a positive step.  Unfortunately the bill met an untimely demise, and was quickly pulled from debate. 

One of the common concerns raised is that climate change legistlation will cost business and consumers too much, and make US businesses less competitive in the world economy if China and India do not put a price on carbon.  Continued climate change action on the international stage will need to include these important developing nations or it will prove ineffective.

The final legistlation may or may not be based on the current Leiberman-Warner bill, but it is likely to use a cap and trade form to control emissions, putting a price on greenhouse gas emissions.  In a cap and trade system, overall greenhouse-gas emissions are limited, and members of key industries are each given allowances for emissions.  If they exceed their allotment, then they can buy credits from others who cut their emissions more through carbon markets.  One piece that is less clear still is how the initial allowances will be distributed.  The most likely choices are that they will either be handed out to polluters, or auctioned to the highest bidders.  Those representing states and industries that are heavily invested in coal or other important greenhouse gas emitters favor handing out allowances, saying that an auction would impose an unfair economic burden on them.  Those representing environmental interests favor an auction, eager for the cost of carbon to be felt, driving rapid reductions in greenhouse gas emissions.

Is the debate is over?  Hardly.  For now, the states will continue to move forward with their plans and most experts are betting the US Government will enact climate change legislation fairly soon, in the next 1-2 years.  Probably after the upcoming elections.  Candidates of both parties profess a belief in the importance of action on climate change.  When it does, carbon will become an important commodity, with hundreds of billions of dollars moving through carbon markets to favor clean and price effective solutions for climate change.  Something to look forward to.