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Senate carbon bill – is it but sound and fury, signifying nothing?
carbon, solar, recycle, climate, renewable
decarbonizer

The first draft of the latest Democrat-backed Senate cap and trade bill looks like a serious commitment. The legislation proposed by Senators Barbara Boxer and John Kerry, the Clean Energy Jobs and American Power Act, sets a target 20% emissions cut by 2020 (83% by 2050),  from a baseline date of 2005.

At first glance it seems as if the Senate is considering strong action. Critically, it outlines the penalty for non-compliance at twice the annual average market price per tonne for each tonne not surrendered. This penalty would be administered by a new office of ‘offsets integrity’. At the same time, it limits the number of carbon credits that can be imported, demanding action within the US. Interestingly, it proposes higher cuts that the House Bill passed in June, the Waxman-Markey, which called for cuts of 17%.

The reality is not so clear. The use of 2005 as a baseline for emissions data weakens the proposal. It means that even if the Bill passes, proposed US reductions would be lower than those of Europe and Japan, which use the Kyoto framework of emissions reductions from 1990 levels. At the same time, falling emissions due to lower manufacturing and falling power demand (caused by the recent economic contraction) mean that US carbon emissions are expected to be 6% lower in 2009 than 2008. If accurate, that prediction would see 2009 emissions already 8.8% lower than in 2005 – which wouldn’t demand a huge amount of action from US industry. The key issue is that action on climate change needs to be now, if we are to prevent the further build-up of greenhouse gases in the atmosphere.

There are also structural weaknesses within the outline. While the Bill sets a fixed limit on emissions, it retains credits to be auctioned off if the financial pressure gets too great, and it only impacts about 2% of US business (around 7,500 companies). There is also no clarity on the number of permits that would be allocated for free, a practice which when implemented, proved a disaster for the first phase of Europe’s Emissions Trading Scheme.

Environmentalists argue that the cuts are window-dressing, an offering that is too little too late. The general scientific consensus, adopted by the Major Economies Meeting (a non-UN group which includes the US and China) in June 2009, is that the increase in global average temperature must be kept below 2 degrees Celsius to avoid the worst impacts of climate change.  This limit has been accepted within the EU since the mid-nineties and is backed by some of the world’s largest companies.  

Another question is whether, even if the Bill proves to have few teeth, such a bill can be passed. According to reports, when senators held a rally to promote the legislation, not one single Republican Senator joined the party. The new Bill does include funding provisions for nuclear, natural gas and coal, although details would have to be worked out by the Senate. One key issue is how such a programme would be administered, and the House bill saw an agreement that the Department of Agriculture would be responsible for agriculture and forestry projects. The Senate bill seems to side-step that question, which could lose it support within the agricultural lobby. At the same time, limitations on the number of non-US credits could increase the cost base of such a programme dramatically, which would be politically difficult.

It remains questionable whether or not the Bill can be passed in its current fashion, especially given the difficulties encountered by those promoting health reform. So at least its good to know that the Obama administration has a backup plan.

Posted via email from Conquering Carbon


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