Can Washington make a carbon cap fit?
LAGUNA NIGUEL, Calif.--Despite formidable political challenges, the United States has a good chance of passing legislation to regulate greenhouse gas emissions in the next nine to 12 months, energy industry experts said here on Monday.
The critical factor to passing climate change laws is managing the transition to low-carbon energy sources without sharply raising prices for consumers, said panelists at the Fortune Brainstorm Green conference.
The House on Tuesday will begin hearings on an energy and climate bill its sponsors hope to pass this summer. The Environmental Protection Agency on Friday issued a preliminary finding that greenhouse gas could be regulated under the Clean Air Act because they pose a threat to public health and safety.
These developments make it more likely than in previous years that rules to put a price on emitting carbon dioxide in the U.S. will be put in place. If they take hold, it would be a turning point for the U.S. economy, creating the financial foundation for sustainable and green technologies, said William Bumpers, the chair of the climate change practice at law firm Baker Botts.
"If enacted and implemented, 20 years from now we'll look down the road and see this is as the most important piece of legislation in the history of the country," said Bumpers. "It has truly transformational potential."
On the panel were energy industry executives who are lobbying for quick enactment of carbon regulations, which would be phased in over the next five years. They included Jim Rogers, the CEO of utility Duke Energy, and NRG Energy CEO David Crane, a power generation company that relies primarily on fossil fuels.
Despite the support in some quarters, climate change laws are opposed by some business leaders and politicians, particularly from states in the South and Midwest that rely heavily on coal for power generation. As such, even if the House passes a bill this year, it faces a tough road in the Senate.
That's why negotiating the details of a "transition period" between now and a future low-carbon economy are so crucial, panelists said.
"We can keep the costs to households to pennies a day," said panelist Fred Krupp, the president of Environmental Defense Fund. "We can limit the costs to very manageable levels if we do it right. I think the equitable thing to do is to have a transition."
Handicapping Washington and carbon: From left Marc Gunther of Fortune, Environmental Defense Fund President Fred Krupp, NRG Energy CEO David Crane, William Bumpers of law firm Baker Botts, Applied Materials CEO Michael Splinter, and Duke Energy CEO James Rogers.
(Credit: Martin LaMonica/CNET)Businesses typically favor a cap-and-trade system, rather than a straight carbon tax. With a cap-and-trade system, big polluters such as utilities and cement manufacturers purchase or are given permits to emit carbon. Permits can be traded among participants to stay under an emissions limit--the cap--established by government.
Up for debate are how many of those permits are given away, rather than auctioned off. The House bill, for example, calls for giving away permits to heavy polluting industries in an effort to keep them competitive internationally.
Panelists said that a legislative approach to regulating carbon emissions is better than having the EPA regulate them under the Clean Air Act because Congress can better deal with the complexity of the situation. The Obama administration, too, prefers "comprehensive legislation" over regulation by the EPA.
Best or last chance?
It's important to establish a price on carbon emissions because large businesses are waiting for a "price signal" before they make investments in low-carbon technologies, Krupp said.
Once that price is in place, a utility that relies heavily on coal, for example, will invest in renewable energy or technology to store carbon dioxide underground. That also helps create jobs for people in clean-energy industries, Krupp added.
In cap-and-trade proposals in general, there is a long-term horizon for emissions target reductions--the House bill targets an 83 percent decrease in carbon emissions compared with 2005 levels by 2050.
Because of that time scale, a utility can upgrade its power generation facilities around cleaner forms of energy and efficiency and address the "carbon issue" at the same time, said Duke's Rogers.
"The fact is that electricity prices will go up anyway as we retire and replace power generation so why not address this environmental issue at the same time," he said.
"The key is to smooth out the cost increases as much as possible, to help the business plan, and help us use electricity more efficiently," he said.
Successfully managing the transition to minimize or eliminate cost increases on consumers is important to get right in the coming year, Bumpers said. Otherwise, carbon regulations will be set back years.
"Businesses will have an obligation to deal with a capital commitment over the next 30 years that is unprecedented," Bumpers said. "If we don't manage this transition by mitigating cost impacts...there could be political backlash because prices have gone too high too quickly...Those trillions of dollars of investments will turn out to be bad investments."
Martin LaMonica is a senior writer for CNET's Green Tech blog. He started at CNET News in 2002, covering IT and Web development. Before that, he was executive editor at IT publication InfoWorld. E-mail Martin. 
How can something that is naturally occurring in our atmosphere, humans EXHALE it, and has been there since before humans ever came to being, be considered pollution and a "threat" to the Earth? There is no credible scientific evidence that humans increasing CO2 has caused the Earth to warm. Not to mention that the Earth has actually COOLED in the past 8.5 years and wiped out all the warming of the 20th century. Antarctica has actually increased it's ice area since records have been kept.
Until the science is more proven and not based on computer models that have consistently failed to predict anything correctly, regulating and trying to control more of the private sector is counter productive to a healthy society. It is nothing more than a scheme to control more of our lives. This is pure fascism and is being promoted by both parties, mostly Democrat, though.
I notice that everywhere people comparing their personal "carbon footprint" to other individuals. The behavior of getting into others business while the government invades and takes over businesses and lives is the slight-of-hand social/governmental trick that is occurring during our time.
Wikipedia the term "fascism." Make your own decision.
"We can keep the costs to households to pennies a day," said panelist Fred Krupp, the president of Environmental Defense Fund. "We can limit the costs to very manageable levels if we do it right. I think the equitable thing to do is to have a transition." - This is a complete unadulterated lie. Enacting a carbon tax or cap and trade system will increase the cost of producing power, which in turn will increase the cost of everything thing else.
Every business, every company, every government agency, every human being in this country, or any other country on this planet for that matter, relies on some type of energy. Fossil fuels are simply the least expensive sources of energy that exist. Energy is all about getting the biggest bang for you buck. The cheaper it is to produce energy, the cheaper it costs and the cheaper everything else is. Do people seriously think that energy producers and business will see their costs rise exponentionally and they won't pass that on to their customers? Not a chance. Renewable energy sources all sound good in theory, but they produce too little energy at too high a cost and they cost too much to get the energy produced to where it needs to be. The only reason ethinal, solar power, wind power and others survive is because of government subsidies, a.k.a. our tax dollars. These forms of energy are unable to be economically feasible or compete with fossil fuels. Until those costs are competative, then renewables won't work, and artificially raising the cost of fossil fuels, which in essence is what is being proposed by these carbon taxes and cap and trade programs, won't do the trick. It just raises the cost on everything.
One other thing, manmade global warming or climate change is a con and a lie. I have news for you, the climate of this planet is changing because it is always changing. It has been changing constantly over hundreds, thousands, millions and billions of years and it will keep changing regardless of what we do or don't do. One day this planet will become an uninhabital rock, and there isn't a thing we can do about it. I find it laughable that we seem to believe that we are so powerful and important that we can change the climate with a hundred years of industrial activity. Give me a break. Just look at the effect of a good sized volcano, The geological activities of the Earth alone have a bigger effect, not to mention that normal cycles that lead to ice ages as well as warming periods. Manmade climate change is a lie supported by a scientific community trying to justify the importance of their own research (who is going to give them grants if their doomsday theories are wrong?). Obama, the liberal Democratcs in Congress and the environuts (many of whom would be happy to see us back in the Stone Age) wil destroy the fabric of our economy if they aren't stopped.
The contribution of US man-made CO2 is nearly insignificant worldwide, but hey a few extra billion in tax revenue can't hurt, right? Water vapor contributes far more to global warming than CO2 does, so maybe we should tax people extra when it rains.
The warming is accelerating much faster than the models predicted, so it is probably too late too save the earth, but we might buy a few more years.
- by ClimateTF April 22, 2009 4:03 AM PDT
- @Endbringer: Which is one in a long list of reasons that I support a revenue-neutral carbon tax as opposed to a cap and trade system...
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