Delaware | January 25, 2009 - DuPont, partners back plan to cut carbon emissions

By ANDREW EDER
The News Journal

Lawmakers plan to tackle a daunting task in the coming months: putting a price on the right to emit greenhouse gases.

Those gases -- primarily carbon dioxide -- are linked to warming temperatures and changing climate patterns across the globe. President Barack Obama and key members of Congress see emissions reductions as a necessary step after years of inaction.

Earlier this month, a coalition of corporations and environmental groups that includes the DuPont Co. offered its own input: a 24-page proposal outlining a model regulatory scheme. The document describes a "cap-and-trade" program, in which emissions from greenhouse gas-intensive sectors would be capped at a certain level and companies would receive allowances to release the gases.

Companies who cut emissions below the capped level could sell their allowances on an open market. The goal would be to slash emissions 80 percent by 2050, compared with 2005 levels.

"We're quite confident that it's something that the U.S. and global economies can do in a very manageable way, and if done carefully, create some new market opportunities," said Michael Parr, senior manager of government affairs for DuPont, a founding member of the U.S. Climate Action Partnership.

The group's 31 members comprise utilities, manufacturers, oil and chemical companies, automakers and environmental and public interest groups.

Other members with local connections include American International Group, Exelon, NRG Energy and General Motors.

The group hopes its plan, hammered out after two years of negotiations, can inform the debate in Congress. Sen. Barbara Boxer, D-Calif., has made climate-change legislation a top priority. She chairs the Senate Committee on Environment and Public Works, of which Sen. Tom Carper, D-Del., is a member and chairman of a key subcommittee.

Carper said Boxer has asked him to play a lead role in developing climate-change legislation, which he hopes to introduce by the end of spring. The Delaware senator said he has worked with the climate partnership since the group formed, and the approach laid out in the blueprint largely mirrors his own favored approach.

"It's very difficult to build consensus around an issue as complicated and as contentious as climate change," Carper said. "Having a very broad coalition, like USCAP, is a huge help."

Rep. Mike Castle, R-Del., said several developments bode well for climate-change legislation: the arrival of a new president and new chairman of the House Energy and Commerce Committee, the growing cooperation of businesses and the realization that such legislation will open up new market opportunities.

"I think all these things combined will give us the opportunity to see something happen in the course of this year," said Castle, who supports a cap-and-trade program.

The newest member of Delaware's delegation, Democratic Sen. Ted Kaufman, also supports a cap-and-trade scheme: "Cap-and-trade, designed carefully, is the best way to make pollution expensive -- and it gives businesses the incentive to find new products and processes, to cut costs by cutting emissions," he said.

Already here

The concept is not new: Ten Northeast and mid-Atlantic states, including Delaware, participate in the Regional Greenhouse Gas Initiative, a cap-and-trade program targeting electric utilities, the country's largest source of greenhouse gas emissions. The European Union instituted a carbon-trading system in 2005.

DuPont and others already participate in trading on the Chicago Climate Exchange, a voluntary cap-and-trade system. On the federal level, a cap-and-trade program enacted in the 1990s helped reduce emissions of sulfur dioxide.

But the scale of a federal cap-and-trade program for greenhouse gases would likely dwarf other efforts and affect the price of electricity, gasoline and consumer goods.

Some experts predict the market for carbon will become the largest commodity market in the world.

The climate partnership's plan would cover large greenhouse gas-emitting facilities and carbon emissions from other fossil-fuel users.

The program would set limits for emissions at 2005 levels, cutting greenhouse gases as much as 20 percent by 2020, 42 percent by 2030, and 80 percent by 2050.

Under USCAP's plan, a "significant" amount of emission allowances would be given away free at the program's beginning, with the goal of phasing out free allowances as low-carbon technologies gain traction.

The partnership's plan recommends permitting up to 3 billion tons a year of carbon offsets, overseen by a Carbon Market Board. Carbon offsets represent emissions that are reduced or avoided through third-party projects.

The blueprint calls for federal investments in low-carbon technologies to help ensure that emissions are reduced. John Byrne, director of the Center for Energy and Environmental Policy at the University of Delaware, said such spending is vital to help reduce carbon emissions.

But he said it's an open question whether such efforts should come before a cap-and-trade program, or run simultaneously with such a program.

"The real way to tackle this problem in the near term may be to emphasize ... energy efficiency, conservation and renewables," said Byrne, a member of a working group of the 2007 Nobel Prize-winning Intergovernmental Panel on Climate Change. "These will lower carbon emissions, and can be more effective than trying to cap the emissions of the auto industry and the power sector."

Some environmental groups have taken aim at provisions of the climate partnership's blueprint, including its reduction targets, the use of carbon offsets and its proposal to give away, rather than auction off, many of the initial allowances.

"Were such a proposal to be enacted into law, it would fail to achieve the emission reductions we need in the U.S. and would undermine our ability to meaningfully and credibly engage in international climate negotiations," said Brent Blackwelder, president of Friends of the Earth.

Tax alternative

Another debate centers on the best approach to greenhouse gas regulation: a cap-and-trade scheme or a straight tax on emissions. The CEO of oil giant Exxon Mobil has come out in favor of a carbon tax, as have several members of Congress and economists.

"Every approach to climate change necessarily will involve higher energy prices," says a recent report from a group called the U.S. Climate Task Force. "By capturing those price increases in a tax, this program can rebate its revenues and sharply reduce both the direct costs of the tax for most businesses and people, as well as most of the indirect costs."

DuPont's Parr said a carbon tax would offer no guarantee of any environmental benefits.

"The beauty of cap-and-trade it that it provides environmental certainty -- you know what reductions you're going to get," Parr said.

Another strike against a carbon tax: It's probably a non-starter in Congress.

"As a political matter, I think it's not likely that we could get 60 votes, or even 51 votes, for a carbon tax," Carper said.

Carper agreed that the economic downturn was likely to color the political debate on greenhouse gas regulations. But the senator and others think a carbon-constrained world will open up new market opportunities that could counter any economic injury.

"Over time," Byrne said, "I think a carbon cap-and-trade will help our economy, not harm our economy -- if it's done properly."