So you want to have greenhouse gas standards with teeth, but you want to minimize the risk they take too big a bite from the economy. And, of course, like me, you don’t like the safety valve idea. What do you do? Banking and borrowing, of course.
With "banking," the right to emit carbon can be saved for future use. With "borrowing," current emissions are extended against future abatement.
What is fascinating is that today a detailed banking and borrowing proposal, "Cost-Containment for the Carbon Market," was put forward by four moderate senators — Mary Landrieu (D-La.), Lindsey Graham (R-S.C.), Blanche Lincoln (D-Ark.) and John Warner (R-Va.) — with the help of Duke University’s environmental program.
A Greenwire piece (sub. req) notes "a top environmental group also didn’t shy away from the latest idea":
"This is an interesting proposal to help address cost concerns while maintaining the integrity of the emissions cap," said David Doniger, an attorney at the Natural Resources Defense Council. "Borrowing and repayment is far preferable to the safety valve, which breaks the cap by allowing firms to increase emissions with no payback requirement.
I agree. Kudos to the Senators for moving the debate forward. Here are more excerpts from the piece:
In a telephone press conference, aides to Landrieu and Lincoln said they hope to win support from industries concerned about the price of a climate program, as well as environmental groups who want a bill that includes the promise of steep cuts in U.S. greenhouse gas pollution. The bill also is written with the goal of allowing the new U.S. market to link up with other international cap-and-trade programs in place to deal with global warming.
On first blush, officials at a top environmental group and the National Commission on Energy Policy said they were open to the latest cost proposal.
Under the senators’ bill, companies faced with mandatory pollution cuts could borrow with interest against their future requirements should the carbon price persist beyond Congressional Budget Office estimates. If the borrowing does not work, more allowances would be temporarily released into the market with the caveat that future pollution requirements get tougher.
The legislation also would establish a new seven-member Carbon Market Efficiency Board that would have direct oversight of the system. Bill supporters said the presidentially appointed board would operate in many ways like the Federal Reserve monitors inflation, interest rates and the overall U.S. economy.
Sponsors explained their legislation is not a cap-and-trade bill but was written with such a climate package in mind as it moves through Congress looking for additions. Warner and Sen. Joe Lieberman (I-Conn.) hope to introduce a cap-and-trade effort before Congress breaks for the August recess.
A Landrieu aide said the senator’s role in writing the legislation doesn’t mean she will back the global warming bill that emerges from Congress.
"We do not necessarily support what is going to come out of the Lieberman-Warner office," the aide said. "We have not signed onto any of the Senate proposals thus far. We haven’t seen yet one we’d like to sign on it. From our perspective, we want to ensure that if climate change legislation is going to move, we want to ensure it doesn’t put Louisiana industries out of business" and increase energy costs on Louisiana consumers.
The proposal offers a different approach for dealing with cost issues compared with the "safety valve" concept Sens. Jeff Bingaman (D-N.M.) and Arlen Specter (R-Pa.) introduced earlier this month.
Under the Bingaman-Specter approach, industries participating in the cap-and-trade program would know in 2012 — the first year of the program — that they do not have to pay more than $12 for emitting one ton of carbon dioxide pollution. The safety valve rises 5 percent per year over inflation, and advocates of the plan think the price level is high enough that new energy technologies will develop in such a rapid fashion that the clause won’t get triggered.
The Bingaman-Specter approach marks a "good start at addressing cost containment, but it has flaws," according to a question-and-answer sheet prepared by Duke University’s Nicholas Institute for Environmental Policy Solutions. "It could, in short, impose an extra cost of doing business without either the environmental benefit or development of lower-carbon alternatives."
One leading advocate for the safety valve said today he welcomed the Landrieu-Warner bill.
"This is a valuable proposal," said Paul Bledsoe, a spokesman at the National Commission on Energy Policy. "It shows the increasing seriousness of congressional efforts to create legislation that both cuts emissions and protects against high costs, the formula probably needed for mandatory measures to become law."