[BETA] Fortnightly

FOILING EXPECTATIONS OF BOTH SUPPORTERS AND detractors, the Clinton Administration's proposed electric restructuring legislation offered no new policy on carbon-dioxide emissions, such as a cap-and-trade program similar to that already in place for sulfur dioxide.

But don't breath a sigh of relief. The debate has only begun.

Many observers see the Administration's tactics on CO2 as an obvious attempt to sidestep a highly sensitive political issue. They appear to agree that at some point the Administration must confront CO2 emissions. Any future domestic legislation likely will take the form of a cap-and-trade program, which would cap emissions and set up an allowance trading program as envisioned in the recently drafted Kyoto Protocol.

Congress has indicated that it will not approve the Kyoto Protocol as drafted; the global climate treaty caps U.S. CO2 emissions for the year 2008 at 7 percent less than 1990 levels %n1%n and doesn't include developing countries. Aware of the mood in Congress, President Clinton issued the details of his own domestic plan to meet U.S. obligations under the Kyoto Protocol. He also promised to set up a program to credit companies willing to take early action to cut emissions. %2%n This move further fleshed out the Administration's Global Climate Change Policy announced in late 1997, which included a plan to decrease domestic CO2 emissions through a cap-and-trade program.

For now, some utilities have chosen to ignore the rhetoric and plow ahead with their efforts to address what they feel is inevitable (em a CO2 emissions cap. They're just hoping they'll be rewarded eventually and that any regulation will contain a market-based tool, such as allowance trading. Others have chosen to wait and see. Both options offer their own risks.

Meanwhile, several groups have drawn up proposals on how to implement a CO2 allowance trading program, both domestically and internationally, while others are rubbing their hands together in anticipation of what could be the largest commodity market ever.

What Are the Odds?

According to data from the Energy Information Administration, carbon emissions from energy use should increase about 1.2 percent each year, reaching 1.9 billion metric tons by 2020. Electricity generation accounts for 35 percent of total carbon emissions in the U.S., at about 520 million metric tons in 1996. This share is expected to grow to 38 percent by 2020 (see Figures 1 and 2). Of that figure, coal generation would make up 80 percent; gas-fired plants would account for just below 20 percent.

Environmental groups and other supporters of climate change policy slammed the Administration's proposal for doing little to mitigate utility emissions of CO2, the compound cited as the primary greenhouse gas: %n3%n "This was the single best opportunity the Administration is likely to have to influence greenhouse gas emissions and to show that its commitment goes beyond rhetoric." %n4%n

Observers speculate the Administration backed off from including cap-and-trade provisions for CO2 at the last minute amid rumors of attempts by the EPA to slip Kyoto in "through the back door." %n5%n

"I'm guessing [a CO2 provision] was in there and pulled,"says Linda Schoumacher, Edison Electric