DETAILS OF A CAP-AND-TRADE SYSTEM

These are the questions which MUST be answered, these are the problems which MUST be solved. Or should we just do a carbon tax? This is THE DEBATE OF OUR TIME. What is decided may LITERALLY determine the fate of the earth.

Devil is in details of carbon cap system; Despite broad consensus, fault lines run through ‘cap and trade’ debate
John W. Schoen, April 24, 2007 (MSNBC)

WHO
Affected: all US emitters of greenhouse gases. In the article: David Yarnold, executive vice president of Environmental Defense, Environmental Protection Agency, Chicago Climate Exchange, Michael Morris, CEO of American Electric Power, David Crane, CEO of NRG Energy, U.S. Climate Action Partnership, the US congress

WHAT
The article describes a U.S. carbon emissions “cap-and-trade” system, the benefits, pitfalls and questions. The basic idea: “Companies that produce emissions below a mandatory cap earn carbon credits — which they can then sell to companies that don’t meet the cap. This rewards those who invest in ways of reducing pollution and penalizing those who don’t.”

WHEN
Already operating in Europe and voluntary in the US (CCX), the system has been proposed by many political and business leaders and a decision about such a system seems eminent.
EPA presently administers a successful cap-and-trade system that controls acid rain by limiting sulfur dioxide and nitrous oxide emissions.
USCAP targets a 60-80% emission reduction by 2050.

WHERE
Nationally is necessary, internationally would be better.

WHY
Questions addressed by the article:
How will carbon credits be allocated?
How restrictive should carbon caps be?
Will there be rewards for early adopters?
What level of emissions will be grandfathered?
Should companies be rewarded for investments made years ago?
Also:
How are caps enforced?
When will they be instituted?
How do they affect competition with emerging giants India and China?
How do (non-emitting and government subsidized) nuclear plants fit in?
Should congress follow the USCAP lead?

QUOTES
- David Yarnold/Environmental Defense: “One of the inevitable things about the democratic process is that everybody is going to look for their own version of fairness…”
- Michael Morris, CEO, American Electric Power: “The timeline has to be right, and the reduction targets have to be achievable…It will serve no purpose for Congress to ask the utilities of the world to run a three-minute mile because it won’t happen.”
- David Crane, CEO, NRG Energy: “If the nuclear and gas lobby gets their way and you tie it to megawatts of capacity. that is a windfall…A nuclear plant that was built under a rate-based mechanism with full recovery (of construction costs), and now suddenly gets a carbon benefit, that is a windfall for the nuclear plant. What behavior in the nuclear plant are you going to influence by giving them this carbon allocation?”
- Yarnold: “There is a golden moment right now…There is a confluence of public opinion, of political will, of a level of understanding. And so the question now is not whether there will be climate legislation, but whether there will be climate legislation that gets over a high enough bar to have actually the necessary environmental benefit."
- Morris: “I would expect that between the House and the Senate sometime in the next year or so well come up with a plan that will work."