In a story today (See top story in Leads – Senate climate bill to set utility cap-trade: senator) which featured an anonymous US Senator, Reuters reported that the current Senate bill being worked on will include carbon cap-and-trade for the utility sector only. We can narrow down the list of possible sources here to 50, of course, but the fact that this Senator did not have the gumption to be named in the short piece shows just how politically charged this issue has become in Washington.

In the interest of special interests and political pandering, Washington is now angling for the weaker approach to a carbon market. (The weakest approach would be nothing at all, which is still a possibility.) A sector-based approach is certainly not the best as the Economists: Graham-Kerry’s Sector-Specific Approach to Carbon Limits is Less Efficient story spells out in the Solve Climate Blog. The story quotes James Boyce, from the University of Massachusetts, Amherst as testifying that all carbon emissions should be covered the same, be they from utilities or manufacturers. “If you favor one, you’re doing that to please your lobbyists, but there’s an efficiency cost in doing so. And that efficiency cost gets passed along to the American public,” Boyce says.

Indeed, Congress was already headed toward a less than effective cap-and-trade model under the House ACES bill, passed last June. The amount of give-aways and concessions to big industry meant that prices would have been low and ineffective anyway. The long-term hope was that carbon cap-and-trade would have  strengthened over time and lead to a stronger market with more buoyant prices. We’ve yet to see what Sens. Kerry, Graham and Lieberman will come up with. Maybe a hybrid cap-and-trade, cap-and-dividend model.

But if Senators aren’t willing to go on the record about it, I’m not optimistic that it will be the type of legislation anyone would be proud to put their name on.

Jim Kharouf

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