UPDATED: The U.S. Action Climate Partnership also is offering its take on what the new climate change policy should include.
American utilities know a new federal emissions cap-and trade program is coming, so they are offering their own ideas about what the program should entail.
The Edison Electric Institute (EEI), which represents the bulk of power producers and retailers, outlined those suggestions Wednesday. Ideas include: cutting emissions to 80 percent below today’s level by 2050 and setting a lower and upper limit for the prices of trading emission allowances.
Regulating pricing would ensure that the cap-and-trade scheme wouldn’t become too costly for its members, the EEI argues. The gap between the lower and upper limits should start small, and grow only as more technologies become available to allow utilities to cut emissions more quickly.
Cost, of course, is a huge concern for utilities. They have no doubt watched the fight put up by Poland and some other European countries in recent months as the European Union worked on tightening its own emissions cap-and-trade program.
A cap and trade program sets limits on how much different types of polluters can emit, and requires those that pollute more than allowed to buy credits from those that emit less than permitted. The idea is to set strict emissions standards so that polluters will be compelled to reduce emissions instead of having to shell out big money to buy allowances.
The European Union started its cap-and-trade program in 2005, and its effectiveness is under debate. Some of the E.U. member countries also are worried that the a stricter emissions mandate would hurt their industries’ competitive edge especially when the global economy is in poor health.
The EEI’s call for reducing emissions to 80 percent below the current levels by 2050 is more lenient than what President-elect Barack Obama has advocated. The new president’s energy platform, outlined during the election, calls for reducing emissions to 80 percent below the 1990 levels by 2050.
The organization also wants the new cap-and-trade program to allocate 40 percent of the initial allowances to the electric power industry, which it says generates 40 percent of the emissions in the country.
The EEI says that while it favors a cap-and-trade program, it also would consider supporting a carbon tax or a hybrid program.
Meanwhile, the U.S. Climate Action Partnership (USCAP) is due to unveil its own suggestions for what to include in the climate change legislation (which would include the cap-and-trade program). The Wall Street Journal's Environmental Capital blog got to review the USCAP's ideas in advance. The group is made up of large energy, car and chemical companies such as PG&E, General Electric and Dow Chemical. The Nature Conservancy and the National Wildlife Federation also are members.
Among other things, the USCAP wants the government to give away a big portion of emissions allowances for free to major polluters. It also wants a pricing floor for trading the allowances, and that should be $10 per ton. The group believes when you start at this price, you will give those big polluters incentives to cut emissions.
