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Greenhouse Gas Emissions Continued

GHG Emissions 

I previously reviewed some sources of information regarding measurement and control of Greenhouse Gas Emissions (e.g carbon dioxide). This subject has been generating considerable news in recent days as the US Senate is considering legislation to implement a “cap and trade” system. The White House has already indicated that it will veto the legislation. Thus the current debate may be more informative of what might be passed next year. The Senate is currently debating Bill 3036, that would require a 70% reduction in emissions by 2050. The bill would institute a cap and trade system, and provide emission allowances designed to offset higher energy costs. The allowances would initially be set a 73.5% of the base level with the remainder auctioned off in 2012.

The major costs of the measure to business would result from emission allowances covering only a portion of their needs, requiring that they purchase offsets for their other emissions. The number of allowances would decrease every year until 2027. The act would mandate the creation of the cap and trade system within 18 months of being made law.

Included in some of the most recent bill action is language that will provide free allowances to energy intensive manufacturers like iron, steel, paper, pulp, cement, rubber, chemicals, glass, ceramics, aluminum and other ferrous metals. It also has provisions for free allowances for “trade-exposed” manufacturers.

In a recent report by the Pew Center on Global Climate Change, various models of the bill’s impact on the economy were compared; including the EPA’s, the Energy Information Agency’s and NAM’s. Factors driving the costs of the act on the economy include the availability of low carbon technology like wind, nuclear, and coal carbon capture and storage and the availability of offsets and international offsets. The various models show a negative impact on economic growth ranging from .3% to 2.7 percent, a reduction from the base case showing economic growth of 183%. The likely winners from such a system will nuclear power generators, biofuel companies, and companies that have been early adopters of energy efficiency measures. Coal fired power plants, factories, and the airline industry are more likely to see higher costs.