Obama cli­mate plan stirs cap and trade from deep sleep

The Pak Banker - - BUSINESS -

Dreams that a cap-and-trade mar­ket could be­come a force for low­er­ing car­bon emis­sions died in the US. Se­nate in 2010, scut­tled by pol­i­tics and a bad econ­omy.

Pres­i­dent Barack Obama's cli­mate plan em­braces cap-and-trade mar­kets as a way to cut power plant emis­sions blamed for warm­ing the planet. It re­wards 11 states in the US. North­east and Cal­i­for­nia that al­ready have car­bon mar­kets by giv­ing them credit for their early ac­tions. And the plan could in­cen­tivise more states, in­clud­ing some in the heav­ily coal­re­liant Mid­west, to even­tu­ally join in.

"To un­der­state it, there has been a ret­i­cence to dis­cuss cap and trade poli­cies in the United States," since 2010, said Tom Lawler, the Washington, D.C. rep­re­sen­ta­tive for the In­ter­na­tional Emis­sions Trad­ing As­so­ci­a­tion, a non-profit group.

"Maybe it was dead, maybe it was dor­mant, but now it looks like the op­tion of choice." Cap-and-trade mar­kets use the power of cap­i­tal­ism to cut emis­sions. Power plants that cut car­bon pol­lu­tion un­der a set limit, ei­ther by mov­ing from coal to nat­u­ral gas or by in­vest­ing in re­new­able energy and ef­fi­ciency, earn cred­its they can sell to power plants that choose not to make the in­vest­ments.

As the emis­sions limit set by gov­ern­ment falls over time and the cost of per­mits rises, mar­ket forces are ex­pected to drive over­all emis­sions down.

Obama's cli­mate plan gives states the op­por­tu­nity to trade car­bon cred­its among them­selves, with­out the need for in­ter­state agree­ments. The En­vi­ron­men­tal Pro­tec­tion Agency said it is com­mit­ted to sup­port­ing states that want to trade car­bon cred­its.

Jason Bord­off, a for­mer top ad­viser to Obama on energy and the found­ing di­rec­tor of the Cen­ter on Global Energy Pol­icy at Columbia Univer­sity, said cap and trade will ben­e­fit the econ­omy and the en­vi­ron­ment "at the low­est cost to con­sumers and busi­nesses." There is al­ready a cap-and-trade sys­tem in place for tra­di­tional smog-form­ing pol­lu­tants like sul­phur diox­ide, giv­ing reg­u­la­tors and util­i­ties a fa­mil­iar tool to com­ply with the Clean Power Plan. Cap and trade also gives states some flex­i­bil­ity to de­cide when to run coal and gas plants in or­der to en­sure steady power sup­plies, said Chuck Bar­low, vice pres­i­dent of en­vi­ron­men­tal pol­icy and strat­egy at New Or­leans-based power gen­er­a­tor En­tergy Corp.

Whether more states will soon join the group of 10 in the East that trade cred­its in the Re­gional Green­house Gas Ini­tia­tive (RGGI) or other states in the West will join Cal­i­for­nia, is an open ques­tion. States have un­til Septem­ber 2016 to sub­mit plans to re­duce emis­sions and com­pli­ance does not be­gin un­til 2022.

Se­nate Ma­jor­ity Leader Mitch McCon­nell, a Repub­li­can from coal-pro­duc­ing Ken­tucky, has urged gover­nors from all 50 states to refuse to par­tic­i­pate in the Clean Power Plan. A hand­ful have in­di­cated that they will refuse.

Un­der Obama's plan, states that refuse to form their own pro­gram to meet the emis­sions tar­gets will be sub­ject to a fed­eral plan that could pres­sure them to join cap-and-trade mar­kets.

McCon­nell spokesman Don Stewart said the lack of in­ter­state com­pacts is the Achilles heel of the clean power plan. "With­out an in­state agree­ment, it's not en­force­able so what state is go­ing to sign up?" But even be­fore Mon­day's roll out of the rule, some states in the coal-de­pen­dent Mid­west asked the ad­min­is­tra­tion to cre­ate ground rules for them to par­tic­i­pate in cap-and-trade mar­kets.

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