Don't Throw The Baby Out With The Bathwater: Why we should give "cap and trade" a fair chance

An official report by the Environmental Protection Agency finally confirmed what many Greenistas, Tree huggers, and Activists have been shouting for years; greenhouse gases from carbon emissions are harmful, and are contributing to global warming.

The Clean Air Act was first implemented in 1955, in an attempt to regulate the quality of our air. It has been ratified several times over the years in response to our growing industrial society. In 1990 the Supreme Court ruled that the EPA had failed at regulating air quality and mandated that strict provisions be made to clean up our skies. But, President George W. Bush, undercut the ruling, and set national standards to less than that of the EPA regulations; thus allowing greenhouse gas emission to flourish.

But times they are a changing. With the new administration tooting its horn for sustainability, clean energy, and climate change initiatives, the EPA now has the support it needs to enforce strict regulation on air quality.

In a press release issued on April 17, 2009 the EPA reported that “In both magnitude and probability, climate change is an enormous problem. The greenhouse gases that are responsible for it endanger public health and welfare within the meaning of the Clean Air Act”.

The debate is finally over. No matter what side of the fence you fall; left, right, or smack dab in the middle; one must now admit that climate change is a real issue, and must be addressed with real solutions.

But, now a new debate is brewing. How do we improve greenhouse gas emissions, while protecting consumers and making the world a safer place? Better yet, how do we do it without causing more economic strain on an already bleeding global economy?

The Union of Concerned Scientists (UCS) claim that they only way to reverse the effects of climate change is to take swift and aggressive measures; like reducing carbon emissions 80% by 2050. The UCS argues that “This daunting task will require countries to quickly deploy clean energy technologies and develop new low-carbon technologies, using a combination of policies to help spur these activities. Foremost among them is a well-designed cap-and-trade program, which would put a price on carbon emissions that reflects the costs of global warming”.

The current administration is proposing a “cap and trade” system similar to that of the European Emissions Trading System (EU RTS) created under the Kyoto Protocol. A cap and trade system is one in which polluters purchase, or are allocated, a set number of credits that allow them to pollute. This is the cap. If the company does not use all their credits they can sell them to other companies who need more credits. This is the trade aspect of the plan. The cap on emissions would be decreased slightly every year until the desired level of carbon emission reductions is achieved. The outcome of a well designed system would also increase production and demand for clean energy technology.

Like many schemes, this looks good on paper. But can it really work?

Many opponents of a “cap and trade” system are skeptical of the outcome. Top lawmakers from both sides of the isles have expressed disdain for the plan.

Mike Pence, a U.S. Representative from Indiana says that “the cap-and-trade legislation represents an economic declaration of war on the Midwest”. He fuels these allegations by stating that the proposal “could cost the Average American household more than $3,000 a year in higher energy costs”.

Many other lawmakers on capital hill are supporting this criticism, claiming that the cost the companies incur from purchasing the carbon allowances will be passed on to the consumer.

Roy Blunt, a Republican from Missouri, agrees with Pence and others. Blunt is concerned that the rising cost of energy will hurt already struggling businesses as well as consumers. “I doubt there is ever a good time to burden American Consumers with extra costs, but I believe that now is probably the worst time to implement and energy program that will pass the costs directly to the consumer” he says. These are powerful words that ring loud in the ears of fearful Americans, living in unpredictable times.

But for all the opponents of the system, there are supporters with evidence that these allegations are not only misguided, but dead wrong. There are huge pieces of vital information left out of anti cap-and-trade arguments.

APX Inc., a leading infrastructure provider of renewable energies released a fourteen page document outlining the pros and cons of a cap-and-trade system. While the report acknowledges that we will see an initial increase in energy costs, it points out that “this is not solely a problem of cap-and-trade, but would occur under any type of regulation, be it a pure emission or technology standard, or a carbon tax”.

Consumers would undoubtedly see an increase in energy costs; this is an unavoidable factor to cleaning up our environment. However, in the 648 page bill being proposed, carbon allowances will be sold at auction, and the market will determine the cost. According to APEX Inc. this is a fundamental aspect to any successful cap-and-trade system, “Consumer impacts can be addressed by recycling the auction revenue back to consumers”. The President has already suggested this ‘recycling’ through direct rebate checks, funding for public programs, and investments into clean energy technology.

Some critics of the cap-and-trade point directly at the pitfalls of the EU ETS. Representative John Dingell, a Democrat from Michigan, points out that “The Europeans have had two, maybe three, fine failures in their application of cap-and-trade”.

But why throw the baby out with the bath water. The cap-and-trade system can work, and it can be successful if we use the EU ETS as an example model of what works and what doesn’t.

There are many reasons that the EU ETS was not successful. For one, they did not set lower carbon emissions standards during the first phase of the cap-and-trade program. APEX Inc. reports that “No overall emissions reductions were required, and none where achieved”.

Other failures of the EU ETS include lack of data on green house emissions, lack of understanding about regional emissions, failure to recycle revenue from the sale of carbon allowances, as well as lack of regulation and accountability. These, among others, are important factors in determining the success or failure of any program.
Supporters of the cap-and-trade proposal are looking closely at all aspects of the program. James R. Rogers, Chief Executive of Duke Energy Corp., agrees that the bill is a “good start”. He says that “There is a good foundation here to build upon and the draft’s 648 pages present enough material to start lively conversations about a proposal that isn’t just about climate change, but in fact, proposes a fundamental shift in US energy policy”.

In light of all the criticism, it is important to note that the cap-and-trade system has been successful in the U.S. In the early 1990’s a cap-and-trade program was implemented to reduce sulfur dioxide or SO2 emissions that cause acid rain. According to the Union if Concerned Scientists “the Acid Rain Program provides a pioneering example of a successful cap-and-trade program that has greatly reduced power plant emissions of sulfur dioxide (SO2) and nitrogen oxides (NOx), the pollutants that cause acid rain and smog. These reductions were achieved at a significantly lower cost than originally assumed”.

Man made global warming produces many challenges. Lisa P. Jackson, an Administrator with the EPA acknowledges that reducing carbon emissions in an era of high consumption habits will not be an easy road, but goes on to say that “this committee has dealt with difficult challenges before”. She and others are confident that they can draft a bill that will pave the way to a greener and cleaner future.

The American People have put off climate change policy for too long. There were many opportunities to increase emissions standards on cars and invest in clean energy technology when things were good. The result of procrastination is that we now have to take drastic measures at a severely inopportune time.

Avoiding the inevitable will not make it go away. Nor will steering clear of any program that will reflect the true cost of energy. We all need to make the necessary changes in order to ensure a sustainable future for ourselves and our children. If energy costs go up, then walk a little more, wear an extra sweater, and find ways to adjust. This may be the last chance we have to change the world before it changes us.