Clean Energy: Cap and Trade Lite

COMMENTARY Environment

Clean Energy: Cap and Trade Lite

Feb 2, 2012 1 min read

Former Senior Research Fellow, Labor Markets and Trade

David Kreutzer researched and wrote about labor markets and trade.

In his State of the Union address last month, President Obama requested that Congress pass legislation mandating a national clean energy standard (CES). A CES targets the CO2 emissions from the electric power industry by setting minimum percentages of total power (electricity) generation that must come from sources that emit no CO2. (It should be noted that CO2 is colorless, odorless, and non-toxic. Therefore, it is a misnomer to call CO2 dirty.) Though this sounds less threatening than cap-and-trade legislation, it can end up being pretty much the same thing.

One of the little-known aspects of cap-and-trade policies is that the vast majority of CO2 cuts come from the power industry. For instance, under the Waxman–Markey legislation, the CO2 emissions reductions from the power industry amounted to 87 percent of the total cuts for the year 2030. Marlo Lewis of the Competitive Enterprise Institute analyzed the clean-energy target suggested by Obama in his 2011 State of the Union address and showed that it would lead to an impact on the power industry nearly identical to the Waxman–Markey cap-and-trade bill.

Last year, Senator Jeff Bingaman (D–NM) requested the Energy Information Administration provide an analysis of a draft for a CES. Just as with the Obama CES of a year ago, Bingaman’s CES includes provisions for both partial clean-energy credits for some fossil fuels and for trading the clean-energy credits. With these two provisions, a CES mimics the major features of a cap-and-trade regime—the lower the carbon intensity of an energy source, the smaller the penalty (or greater the reward) under the legislation, and surplus credits can be sold to help other producers meet targets.

This is cross-posted at National Journal. You can read the rest here.

This piece originally appeared in The Daily Signal