Friday, June 26, 2009

US Cap-and-Trade Implications for Business

Small business has more to fear from unchecked CO2 emissions than it does from cap-and-trade. If proposed climate change legislation can gain the support of lawmakers, cap-and-trade will help businesses make the transition to a low carbon economy.

The American Clean Energy and Security Act, aka the Waxman-Markey Bill (HR 2454), promises a cap-and-trade system that will reduce U.S. carbon emissions 17 percent by 2020 and 83 percent by 2050, compared to 2005 levels.

The US House of Representatives is about to vote on climate change legislation and the Senate is expected to act as early as the end of the year. There are many who disagree with the proposed cap-and-trade and opponents are seeking amendments that could severely undermine the bill's ability to reduce American emissions.

Republicans and some Democrats have expressed concerns about increased energy costs associated with cap-and-trade. Some lawmakers are insistent that nations like China share the burden of CO2 reduction.

Others on Capitol Hill dismiss the current legislation and prefer a straight forward carbon tax. However there are advantages to cap-and-trade that cannot be achieved by a simple tax. By putting a price on carbon the proposed Waxman-Markey Bill takes advantage of the efficiency of free markets and thereby offers the most expedient system of carbon reduction.

Placing a price on carbon would not only benefit low-carbon businesses. The legislation would enhance efficiency, establish national mandates for renewables, and boost clean energy research. It would also raise capital to offset the increased costs for vital energy intensive industries.

According to the bill as it now stands, businesses that emit more than 25,000 tons of carbon per year (large electric utilities, natural gas distributors, cement producers, etc) would receive approximately 80 percent of the emission permits.

The remaining permits would be sold at auction and these funds would help to manage higher energy costs, reduce deforestation in tropical countries, increase research and development of clean-energy technologies and assist developing countries to reduce their emissions. Half of one percent of the funds raised by auctioning CO2 will go to worker assistance and low CO2 job training programs. Commercial buildings will also be eligible for financial support for weatherization programs.

The lines are drawn and the positions of many of the players are well known, all except for small business. However as reviewed above the cap-and-trade legislation being discussed in the US does not warrant small business' silence. Further if this bill does not become law, future efforts to reign in CO2 will have to be much more aggressive and this could mean stringent regulation. Small business has a vested interest to make its voice heard now.

The outcome of cap-and-trade legislation is as yet uncertain. However, the odds of passage could improve dramatically if the small business community can overcome its fear of the unknown.

Next: Helping Small Business Accept US Cap-and-Trade

Related Articles:

Small Business Can Save Cap-and-Trade
Small Business' Silence on US Cap-and-trade Legislation
US Cap-and-Trade: What and Why
US Cap-and-Trade: Business
US Cap-and-Trade: Solutions
COP 15 Implications for Business
COP 15 Timetable
Primer on CO2 and other GHGs
The Effects of Global Warming
CO2 Myths and the Science of Climate Change
China-US Cooperation
Green Stimulus and Opposition
US Green Legislation
Environmental Politics
Market Based Social Change
Cap-and-trade in Ontario and Quebec
Green Capitalism
Green Blueprint

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