Posted by
Average Voter on Saturday, January 24, 2009 6:40:03 PM
There are still holdouts who argue that action on climate change would cripple an already lumbering economy. But the ideological battle is largely over, says Steven B. Corneli, senior vice-president for market and climate policy at power producer NRG Energy in Princeton, N.J., which supports legislation to reduce emissions. "The number of players saying we need to do this is stunning to me," says Corneli. In fact, on Jan. 15, CEO John W. Rowe of utility Exelon and the chief executives of more than a dozen other companies, including General Electric (GE), Xerox (XRX), ConocoPhillips (COP), Caterpillar (CAT), and Duke Energy (DUK), urged Washington to pass climate legislation and even offered detailed policy suggestions.
But why? What would be in it for these companies? Let's take Caterpillar for instance. When the diesel engine industry got slapped with strict new emission regulations back in 2007, Caterpillar could not get their engines to meet those tough regulations and ended up pulling out of the truck engine market all together. Duke energy is a large owner and operator of coal mines, which of course, is the new favorite
target of environmentalists.
The biggest battles will be over the cost of fighting climate change, which will take the form of "cap-and-trade" legislation. The idea here is that the U.S. government imposes steadily tightening limits, or caps, on overall emissions coming from different industries. To keep operating, companies will need permits, or allowances, for each ton of carbon they emit.
But there's a debate over how the permits, which can be bought and sold, should be distributed to different companies at the onset. If they are all sold in an auction, as President-elect Barack Obama has proposed, the advantage goes to utilities with lots of "clean" nuclear plants, such as Exelon (EXC), which won't need to buy as many as those that own dirty coal plants, like Duke Energy. Coal-intensive companies want the government to start the process by handing out free permits based on need.
Cap and trade must somehow be advantages to companies, but why is unclear. This
op-ed piece talks about the advantages of cap and trade versus a carbon tax.
Under a cap-and-trade program, the government sets an overall emissions cap and issues tradable allowances that grant businesses the right to emit a set amount. Those who can reduce their emissions more cheaply are able to sell extra allowances to others who would otherwise have to pay more to comply. Because of this market-based approach, a cap-and-trade system helps assure that you can achieve your overall cap at the lowest possible cost. Cap-and-trade is the basis of the U.S. effort to control acid rain pollution, which has achieved greater reductions at lower costs than anyone anticipated.
Maybe it's another way to make money? Or maybe they know it's coming so they want to be in on the development of the program so they have a say in how much they end up having to pay. Who knows for sure? One thing is for sure, only one person comes out ahead in this whole deal. Any guesses? You got it...the government.
As I have said before, all you have to do is follow the money.