Ready for CO2 Allowances? U.S. Passes on Emissions Cap, Kyoto or No

Fortnightly Magazine - May 15 1998
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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.

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