I have to say, this whole “Cap and Trade” deal is a sticky wicket. While researching the topic, I noticed it was very hard to find support for the bill in its current form. While it narrowly passed the House, the so-called Waxman-Markey bill has a long uphill battle to get any further. I feel, as the U.S. Chamber of Commerce does, “that support of legislation to reduce emissions of greenhouse gasses while providing for a healthy economy is enormously important.”
Whether this bill is the way to accomplish that goal remains to be seen.
The system of cap and trade allows the government to impose a cap on how much pollution a plant can emit. The goal today is to reduce emissions 17% by 2020 (down from the original target of 20%) and factory owners are pushing for an even smaller reduction of only 14%–but will that be enough to make the needed difference? According to www.energyportal.eu, environmental scientists now believe the United States and the developed world must cut emissions 25 to 40 percent by 2020 to avoid catastrophic climate impacts.
In order to reach the current goal, factories will have to modernize equipment, use renewable energy sources, invest in a non-polluting company to offset their emissions and buy ‘pollution credits.’ If a factory can operate below the set cap, they can trade or sell their excess credits to other ‘dirtier’ companies. In theory, this will reward the companies that are energy-efficient while easing the transition for the companies that are not, while guaranteeing reductions across the board. However, these ‘offsets’ could allow the major offenders to put off actually making changes as long as they have the revenue to continue purchasing credits.
One of President Obama’s top reasons for the passage of this bill is to make the United States a leader of this ‘green movement’ and that other developed countries will quickly follow suit stating, “the nation that leads in the creation of a clean energy economy will be the nation that leads the 21st century global economy.”
Here’s my issue with that—I am not convinced that if we impose these limits on our own usage that countries like China and India will indeed follow our lead. In 1996, China’s automotive industry produced 382,000 vehicles. In 2006, they produced 3.8 million. That is a significant increase in ten years. In 2008, China had 168 million vehicles on the road and that number is forecast to grow 10% per year. India’s growth rate is even more daunting—from 50 million vehicles in 2005 to an expected 400 million by 2025! Somehow that does not sound like two countries that are going to be interested in doing anything about greenhouse gasses. It is a real concern that this would make our 17% reduction a moot point.
There is also a concern that consumers will be the ones to ultimately bear the burden of costs—that the high price of all the changes a utility company must make will be passed along to us. Republicans have called this bill an “energy tax” and claim it could raise a household’s utility bills by $3,100 a year. The Congressional Budget Office says the cost would only amount to 48 cents per day or $175 annually. That is a mighty wide discrepancy. I, for one, would like a little more definitive information on that; I don’t believe either side on this.
Of course, states like Missouri (and their Democratic Senator Claire McCaskill) are concerned because they have one of the largest coal companies in the world. Sen. McCaskill is open to the new bill, but hopes “we can fix cap and trade so it doesn’t unfairly punish businesses and families in coal-dependent states like Missouri.”
There is not going to be a way to satisfy everyone. It might be better to look at the Waxman-Markey bill as a starting point—a work in progress. Paul Hawken, an entrepreneur and environmentalist (former founder of Smith and Hawken stores) says, “Critics who see it as lacking are right. Reducing U.S. carbon emissions by 17 percent by 2020 is insufficient. But legislation is not actually written in Congress; it is assembled there. One detects the fine hand of environmental and climate experts in the bill, not just big utilities. The provisions and language are accreted from people who have done the heavy lifting in unsung institutions and NGOs, and I for one am thrilled to see some of this work see the light of legislative day under the auspices of a president who will sign and support it vigorously.”
Hawken continues, “My hope is that the bill will begin to form the basis of a more comprehensive energy strategy.”
That said, it will be interesting to see how this evolves and what the bill will look like when it finally reaches the Senate. The Clean Air Act, passed in 1990 to reduce sulfur emissions that caused acid rain, is an example of a cap and trade that worked successfully. However, it took many years to pass and changed significantly (and strengthened) as it made its way to a vote. This bill will probably be much the same and, I’m sure, continue to spark conversation and debate. So, now we wait. Stay tuned, kids.
