With climate-change legislation headed toward the Senate floor in a couple of weeks, itâ€™s time to take a closer look at the arguments that are sure to unfold. Todayâ€™s Sustainability column looks at a big issueâ€”the question of whether to auction or allocate the permits that companies will need to emit greenhouse gases under any cap-and-trade scheme.
Yes, itâ€™s inevitably wonky, but the stakes couldnâ€™t be higher. The permits will be worth roughly $150 billion during the first year the bill takes effect; over time (that is, between now and 2050), their value will likely exceed $3 trillion. As you would imagine, there are lots of ideas about how to spend that money.
The Lieberman Warner bill spreads the wealth aroundâ€”giving some to utilities, others to forestry and agricultural projects that store carbon, others to fund energy research, energy-efficiency projects, even job training. Supporters of the legislation are using the funds, in part, as way gather more votesâ€”60 will be needed to pass the bill in the Senate, given likely attempts to filibuster. Of course, all that money won’t be created out of thin air–it will ultimately be paid by consumers of energy (and most everything else) as the price of emitting carbon dioxide is spread through the economy.
The complexity of climate-change policy is daunting, which is why you don’t see a lot of coverage of the legislation in the mainstream press. Just explaining cap-and-trade is a challenge; digging deeper into the next-level issues of auctions/allocations, a safety valve or price controls, the role of offsets, and banking/borrowing permits seems almost certain to drive away all but the most dedicated readers. Yet these questions matter. I don’t have a solution to this problem.
Hereâ€™s how the column begins:
A climate-change bill that has widespread support as it heads to the Senate floor will create an estimated $150 billion of new assets in the first year it takes effect. Between now and 2050, regulating greenhouse gases could easily generate $3 trillion worth in value in the United States.
Should that value go to utility companies, electricity customers who will face rising rates, government investments in new technology or tax cuts? Or should it be returned to all Americans?
That question is being debated vigorously by energy companies, politicians and environmental groups. Next week, an influential coalition of big companies and green organizations called the U.S. Climate Action Partnership (U.S. CAP) — its members include GE (GE, Fortune 500), General Motors (GM, Fortune 500), Ford (F, Fortune 500), DuPont (DD, Fortune 500) and Shell (RDS-B), as well as utilities Duke Energy (DUK, Fortune 500), FPL Group (FPL, Fortune 500) and PG&E (PCG, Fortune 500) — will take up the issue.
Business interests will have a big voice in Congress as the bill moves through the legislative process. Passage is unlikely in 2008, but you never know. You can read the rest of the column here.