Cap and trade
For eight long years the U.S. government fiddled while the Earth sizzled under a growing cloud of greenhouse gases. But there is hope. The American Clean Energy and Security Act of 2009, passed by a House committee Thursday, marks a much-needed shift away from fossil fuels and toward renewable energy.
Anything less than this far-reaching legislation would not mitigate the global-warming crisis that could displace millions with rising sea levels, and bring drought, more wildfire, shrunken snowpack, severe weather and economic hardship to the West.
A key component of the nearly 1,000-page bill is a cap-and-trade system that sets limits beginning in 2012 on industrial carbon emissions and lowers the limit each year, reducing emissions 83 percent below 2005 levels by 2050. The first target is a 17 percent reduction by 2020. Originally, Democratic sponsors wanted a 20 percent cut but settled for 17 percent, a major compromise.
Power plants, utilities, steel and cement plants would be required to have one "allowance" for each ton of CO2 they emit. Companies could buy more allowances from other companies that didn't use their allotment. Companies that reduce emissions would be able to sell their allowances. So, essentially, the government sets the cap, and the market decides how to reach it, through technology and efficiency. That seems to us a fair way to reward companies for cleaning up their act and our air, better than a straight carbon tax.
The committee decided, after much debate, to award most allowances free instead of auctioning them as President Obama first proposed. That results in lower initial cost to polluters and consumers but produces no federal revenue. Eighty-five percent of allowances would be given to industries and 15 percent sold. Utility companies would get 30 percent of all the free allowances and, in exchange, they would be required to mitigate the cost to consumers.
The other free allowances would be distributed to cushion the impact on energy-intensive industries: 15 percent to steel, cement and glass manufacturers that face international competition; 9 percent for local natural gas distributors; 3 percent to makers of cars fueled by electricity or other renewable fuels; and 2 percent for oil refineries. Over time, free allowances would be phased out until 90 percent are sold.
A nationwide cap-and-trade system like this one is the best way to rein in carbon emissions in the U.S. and help prevent the worst global consequences of climate change. Though the current version of the bill is not likely to be the final version, it is a reasonable start.