Tuesday, April 14, 2009

US Cap-and-Trade: What and Why

As the world's largest polluter American environmental leadership is crucial for the planet. This week the US Congress begins a round of hearings on a serious energy and climate bill. This is an important piece of legislation that will be supported by the President and many Democrats.

According to a Grist article, the bill unveiled by Waxman and Markey "would create a cap-and-trade system for carbon dioxide that covers any entity emitting more than 25,000 tons of CO2 per year." The proposed bill sets aside a certain number of allowances for energy-intensive industrial sectors like steel, aluminum, iron, paper, cement, glass, and chemicals. The draft also includes several provisions to control the price of carbon credits.

The draft includes a number of renewable energy and efficiency provisions as well as provisions for a smart grid. The proposed legislation includes emissions standards for new coal fired power plants, heavy vehicles, and airplanes as well as limits for the carbon content of fuel. The bill also includes efforts to accelerate progress on carbon-capture-and-sequestration.

As reported in a Money article, Rep. Henry Waxman (D-Calif.) chair of the Energy & Commerce Committee, said he intends to have a cap-and-trade bill ready by late June. Sen. Majority Leader Harry Reid (D-Nev.) promised comprehensive energy legislation including cap-and-trade laws will be put to a vote this August.

The importance of climate change legislation cannot be overstated. Energy policy is vital to American national security interests. As is evident in America's Energy Security Trust Fund Act, energy policy is a national security issue.

According to Environmental Defense Fund President Fred Krupp and journalist Miriam Horn's book "EARTH: The Sequel," cap-and-trade is the "silver bullet" needed to unleash clean technologies at the scale and speed required to address climate change. As Horn stated in a greenbiz interview, "we have got to do this quickly for the sake of the economy as well as for the sake of the atmosphere, and a cap-and-trade mechanism mobilizes enormous sums of money -- private money, not government money -- to flow to these low carbon solutions and allow the innovations to really advance."

According to Horn, cap-and-trade is a great way to incentivize technologies and guarantee an environmental outcome. Cap-and-trade would create the conditions that will help US companies catch up to European and Asian companies. Many green companies will experience an accelerator effect from cap and trade, this will bring them to market quickly and due to the cost advantage this will bring them to scale much faster than would otherwise have been the case. If the bill is passed into law we can expect even faster growth of renewable energy sources.

The US energy and climate bill would create millions of clean energy jobs, make America less dependent on fossil fuels, and reduce global warming pollution. This bill lays the foundation for broad international action on the climate crisis and is an important part of a climate strategy that both protects the economy and achieves environmental goals.

Energy technology is the economic engine of the coming century and if America is to lead, passage of cap-and-trade legislation is crucial.

Next: US Cap-and-Trade Part 2, Obstacles and Solutions / US Cap-and-trade Part 3, Positioning Your Business

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