WASHINGTON – Concerns about the financial crisis have sparked debate about the most effective means of combating global warming.
Experts typically support either a cap and trade policy or a carbon tax.
Cap and trade involves government restrictions on total emissions – or a “cap” – which would effectively force companies to lower their emissions or to buy “carbon credits” from other companies that emit less. Over time,the government is expected to lower the cap.
A carbon tax would charge companies a set fee based on how much they emit. Theoretically,the additional cost should cause companies to reduce emissions to lower costs.
The Environmental and Energy Study Institute,a non-profit organization,held a briefing Monday to discuss whether the U.S. economy is ready for a national carbon market using one of these models.
EESI panelists warned that a carbon tax system cannot guarantee that companies will cut emissions – some may choose to pay a fee and continue to emit.
“The reason we're doing this is to lower [greenhouse gas] emissions over time,” said Nathaniel Keohane,director of economic policy and analysis at the Environmental Defense Fund,a non-profit advocacy group focused on environmental problems. “Everything we do has to be in line with that goal.”
Keohane,a former associate professor of economics at Yale University,said he supports cap and trade because it was “the cornerstone of the most successful clean air program in U.S. history” – the acid rain provision of the Clean Air Act.
While he said cutting carbon emissions will be a bigger challenge than decreasing sulfur dioxide,Keohane called the program a “sterling” example of how markets can effectively cut pollution.
“Why markets?” Keohane asked. “Well,because markets work in the real world.”
The New York Stock Exchange's Tom Callahan also supported a market-based approach. Callahan is the chief executive officer of an NYSE Euronext subsidiary,NYSE Liffe U.S.
“Despite the events of the last year – and to some degree,because of the financial crisis – I believe that cap and trade can be successfully implemented,” Callahan said.
The House Ways and Means Committee held two hearings last week on climate change legislation. Gilbert Metcalf,an economics professor at Tufts University,wrote in his testimony at Thursday's hearing on price volatility that a carbon tax is more desirable than a cap and trade policy.
“A pure carbon tax with a legislatively established set of tax rates over the control period provides the greatest certainty over the future carbon price,” Metcalf wrote.
Regulations on greenhouse gas emissions could severely harm the American economy,legislators and company executives cautioned at both hearings.
The Ways and Means subcommittee on trade held the other hearing to discuss trade implications of climate change legislation.
“The legislation must not only strive to reduce emissions to the level that the best science believes is necessary,but it must do so in a way that minimizes costs to businesses and consumers as much as possible,” said Leo Gerard,international president of United Steelworkers.
If the U.S. takes the lead in enacting stringent emissions restrictions,and other large manufacturing countries,including China and India,do not follow,jobs could be “leaked” to other countries with lower costs of doing business.
Robert Clay,chief executive officer of Pridgeon & Clay,a Grand Rapids,Mich.-based parts supplier for the automotive industry said his company has laid off nearly 400 people. “While some will return as our industry recovers,many will not,and it is important that Congress not take actions that would further threaten our remaining jobs,” he said.
Particularly vulnerable to such job losses are companies the steel,aluminum,cement,glass,chemicals,paper and similar industries. While some industries unavoidably create carbon,Gerard said it's important to note that steel produced in China creates three times the carbon of steel produced in the U.S.
Witnesses supported a global agreement to reduce emissions,with an emphasis on the United States' role.
“In order for a global climate deal to succeed,the U.S. must resume a leadership role in tackling climate change and demonstrate a significant commitment to actually reducing our own emissions,” said David Hamilton,director of the Sierra Club's global warming and energy programs.
Legislators and environmentalists will have some questions answered Tuesday,when Energy and Commerce Committee Chairman,Rep. Henry Waxman,D-Calif.,is expected to introduce the first draft of a climate change bill.