What could have enormous impacts on global warming and U.S. business was debated this week in the U.S. Senate. Starting to be hacked out are details of proposed “Cap and Trade” legislation aimed at reducing carbon dioxide over the next five decades. Although the bill was defeated June 6, it is certain to be revived since both potential presidential candidates John McCain and Barack Obama favor it.
If approved, it would be the most sweeping environmental legislation in nearly 20 years. Similar bills could cost up to $7 trillion by 2050, by some estimates. Distinct winners and losers would be created among U.S. corporations. The leading proposed bill was drafted by U.S. Sens. Brett Lieberman, a Connecticut independent, and John Warner, a Virginia Republican. Their bill would cut carbon to 2005 levels from most sources by 2012 and then 70 percent below 2005 levels by 2050.
Similar to a 1990 system that greatly decreased sulfur dioxide emissions and reduced acid rain, the carbon “cap and trade” would allow polluters so many carbon emissions per year. In theory, these could be sold off if a polluter has extra ones or bought if a company needs more carbon credits to build a new generating station or factory. The European Union already has a variant.
The yet-to-be-decided details are extremely important. The biggest carbon polluters are big coal-burning utilities, such as American Electric Power or the Southern Company. If all of carbon units from all their coal-fired plants are grandfathered in, they could make a very large pile of cash once carbon trading commences.
Here are some possible winners and losers.
Winners: Large electric utilities with coal-fired capacity; natural gas companies, nuclear power service plants, railroads (which are now projecting themselves as very “green.”), auto companies that have switched to less polluting hybrids.
Losers: Large electric utilities with non-coal-fired capacity such as nuclear or hydroelectric, large manufacturing companies, coal mining firms, oil companies (potentially), airlines, unreconstructed auto firms, trucking companies.
The legislation is always expected to wean industry away from carbon-based fuel by making it more expensive. That will hurt lower income people but some aspects of the proposed laws would create special funds to help them. George Bush and the National Manufacturers Association hate the cap and trade idea. Although the bill garnered only 48 of 60 needed votes in the U.S. Senate, the bill isn’t going to go away. This week’s debate may spotlight areas of possible compromise when this Lieberman-Warner bill or other variants come forward again.
