Utilities should plan for U.S.-wide CO2 emissions restrictions that will be more effective than state efforts.
Chuck Chakravarthy and John Rhoads are senior executive and consultant, respectively, at Accenture. Contact Chakravarthy at firstname.lastname@example.org and Rhoads at email@example.com. The authors would like to acknowledge the contributions made to this article by their Accenture colleagues William Pott, Nate Turner, and Andrew Wickless.
If carbon dioxide (CO2) emissions restrictions are mandated at a federal level, the method almost certainly will be a cap-and-trade system based on both the European Union and United States emissions trading systems. A cap-and-trade system likely will be chosen over other alternatives for four fundamental reasons: 1) dramatic success of the U.S. SOx and NOx cap-and-trade systems; 2) compatibility with other regional trading frameworks; 3) economic efficiency in distributing credits, and; 4) business acceptance due to flexibility of abatement options.
The U.S. SOx and NOx cap-and-trade system, implemented in 1995, has been hailed widely as a success and has familiarized U.S. companies with emissions trading. However, the major problem with the SOx/NOx program is that it does not restrict a local geographic concentration of polluting sources. SOx and NOx are “local pollutants” that cause the most damage when concentrated within a specific geography. The problem of local concentration does not apply to CO2, since CO2 restrictions are designed to reduce global rather than local concentrations of atmospheric CO2.