If you want to cut carbon emissions, there are some ways of doing so which
actually make money, in net present value terms. Some methods, however, cost
money – and many of the most promising emissions-reduction schemes cost
a lot of money. Under a cap-and-trade system of carbon credits, the
higher the cost of such credits goes, the more that ambitious carbon-reduction
schemes become econmically viable. That’s the whole point of a system. But the
electric utilities, of course, are pretending
not to understand:
Executives of major utilities are prodding Congress to install a feature
in climate-change legislation that would prevent the price levied upon carbon-dioxide
emissions from rising too high.
At least 26 utilities have signed a letter calling for an "economic safety
valve" as part of a system that would set a limit on such emissions…
"We need a mechanism that would send a more predictable price signal
that would help us plan for the billions of dollars of investments that we
and others will have to make to move to a desired lower-carbon economy,"
said John Bryson, president and chief executive officer of Los Angeles-based
According to the U.S. Department of Energy, electric utilities are the largest
sector that would be covered by a law curbing CO2 because they produce about
40% of the nation’s emissions. Cutting emissions would require utilities to
build more nuclear- or wind-power plants.
Any "safety valve" mechanism would defeat the purpose of a cap-and-trade
system, which is, um, to cap emissions. A cap-and-trade system without an emissions
cap is basically a carbon tax without the tax, and the chances that it would
result in any meaningful reduction in emissions are slim indeed.
The fact is that nuclear- and wind-power plants are expensive, and the best
way of making them economically feasible is to allow carbon-based energy prices
to rise as far as the market takes them.
All that said, if you are going to have a safety valve, then Joe Lieberman’s
proposal seems to be the best way of having one:
There are two types of safety-valve mechanisms in legislation being prepared
by the Senate. One, proposed by Sen. Jeff Bing-aman (D., N.M.), would allow
the government to freeze the price of a carbon-emission credit once it reached
a certain level. Another, which is about to be introduced by Sen. Joseph Lieberman,
a Connecticut independent aligned with Democrats, would create a politically
appointed board of experts, similar to the Federal Reserve Board, with authority
to adjust various aspects of trading, such as borrowing credits from future
years, if it saw "significant harm to the economy" in prices.
At least that way the total cap in emissions is retained, even if the cap in
any given year is breached.