Does the "Utility Only" Cap and Trade Pass Muster?


Photo via the Blind Eye

The chances of comprehensive clean energy and climate legislation passing the Senate continue to slip away as the election cycle draws nearer. 'Moderate' Dems fear throwing their support behind a climate bill like Kerry and Lieberman's, since Republicans have had some success falsely labeling the bill a 'job-killing energy tax" (never mind that the vast majority of Americans support clean energy legislation). So, a number of alternative options are being considered, such as an 'energy only' bill, and a 'utility only' cap and trade bill -- a bill that would specifically target reducing carbon emissions of electrical power generation.The utility only option would essentially do what the kind of cap and trade bill that passed the House last summer did, but only for the electrical sector. That is, a cap would be set for the amount of carbon pollution utilities could emit, and companies would have to pay for permits to pollute beyond that cap. The result would rein in emissions in the electrical power sector (where coal plants would be the primary target), while doing nothing to address emissions in other industries, like manufacturing or transportation.

Grist's Dave Roberts explains why this is inferior to a comprehensive cap:

Let's be clear: On policy grounds, a comprehensive, economy-wide cap on carbon is preferable to one that one covers only one sector. That is true almost by definition: The power of the economy-wide system is that it maximizes flexibility and encourages investment money to flow wherever the cheapest reductions can be found. If you create a silo'd cap-and-trade system, walling off one industry, you sharply curtail this flexibility. The result will be higher program costs and lower macroeconomic efficiency. (David Leonhardt smartly pointed out that conservatives and "centrists" are pushing policy in consistently more expensive and less efficient directions.)

At this point, however, the question may no longer be whether a comprehensive bill is preferable to a utility-only bill, but whether a utility-only bill is preferable to the energy-only bill the Senate seems bent on passing. Judged against that somewhat pathetic baseline, it is, in fact, preferable.


He goes on to point out that electricity generation is the nation's biggest source of carbon emissions, and therefore is the right target to single out, if a single target must be singled out. He also notes that a comprehensive cap would have the end effect of hitting utilities hardest anyways. With the proper reinforcements (measures to limit oil, and to increase energy efficiency, for example), Roberts says this version of a bill wouldn't be the worst thing in the world, and I'd tend to agree with him.

But the fact remains that even this poor shadow of comprehensive energy legislation will likely be too radical for the current, mostly-spineless Senate.

More on the Climate Bill
Climate Bill Chaos: WTF is Going On?
Kerry-Lieberman Climate Bill to be Transformed Into "BP Spill Bill"?

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