Cap-and-trade system takes shape in US Congress

The US House of Representatives’ Committee on Energy and Commerce is arguing for a reduction of US greenhouse gas emissions by up to 80% by 2050, and has put forward a White Paper outlining a future domestic emissions trading scheme to reach the ambitious target.

The White Paper, released on 3 October, calls for the introduction of a CO2 cap-and-trade programme similar to the EU Emissions Trading Scheme (EU-ETS) with “increasingly stringent caps on greenhouse gas emissions, eventually reaching a level that reduces emissions by 60 to 80 percent in 2050”, the White Paper says.

While all sectors of the economy should be covered by the scheme, the paper cites “practical limits to the number and type of entities that can be directly regulated”, particularly with respect to the transport sector. The carbon content of fuels should be the focus of regulation rather than individual vehicles or vessels, it argues. 

An early mention of a derogation for the transport sector may have come at the behest of the Chairman of the Energy and Commerce Committee, Michigan Congressman John Dingell. 

Dingell is a powerful Congressman and the Detroit automotive industry’s ‘man in Washington’, according to MIT economics professor Paul Joskow, who spoke on American energy policy during a 17 October conference in Brussels. Joskow even speculated that Dingell may ultimately try to undermine a future carbon trading scheme.

Despite potential political manoeuvring by powerful Washington insiders, Joskow foresees the implementation of a US carbon trading system by 2013, following proposals expected in 2009 or 2010. Public pressure has been increasing on US lawmakers, particularly following visible changes in the climate and increasingly violent storms along the American coastline, according to Joskow.

Such a scheme would probably feature a gradual phasing-out of CO2 permit allocations and aim towards full auctioning, accompanied by mechanisms for ‘clean’ technology transfers to rapidly-developing economies such as India and China, he said.

To what extent a US scheme could be linked up with the EU-ETS and possibly a wider global emissions trading regime will likely be among the topics discussed during the December UN climate change negotiations in Bali.  

Joskow confirmed the widely-held prediction that the current US administration under President George Bush is against any global – or domestic – emissions trading scheme with legally-binding CO2 caps. But a tentative timeline for a post-Bush US scheme may give added clout to the negotiating position of the EU during the Bali talks, which is pushing for a global emissions trading framework to replace the Kyoto Protocol upon its expiry in 2013.

The White Paper is the first in a series of papers to be released by the House of Representatives on the issue of climate change. Future white papers are to deal with the specifics of a CO2 trading mechanism, and will deal with issues such as cap levels and timetables, cost containment mechanisms, carbon sequestration, the role of developing countries and the distribution of emissions allowances.

Read more with Euractiv

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