Key Democrats on the House Energy and Commerce Committee endorsed a climate bill and Republicans readied more than 400 amendments to the measure May 19. Democrats are supporting a measure that would instate a carbon-trading system, which in theory would spur development of less-polluting energy sources such as wind and solar by regulating emissions caused by energy sources such as oil and coal.
Bloomberg provides details:
The measure would give some US industries a share of free pollution permits under a cap-and-trade plan to cut greenhouse gases. In all, 85 percent of pollution permits would be given away in the early years of the plan’s phase-in.
The electricity sector would be the biggest recipient, getting 35 percent of the permits for free, covering 90 percent of their current carbon dioxide output.
Oil companies would get 2 percent of the free permits, also known as allowances or credits. Refineries and their fuels are responsible for about one-third of U.S. greenhouse-gas emissions. The industry wants more free permits to meet cap-and- trade emission targets.
Friends of the Earth protests this approach in a report cutely dubbed “Subprime Carbon?“:
As policymakers debate Wall Street reform, there is little attention being paid to whether new regulations will be adequate to govern carbon trading and the carbon derivatives markets, which many experts believe could become larger than credit derivatives markets.
Most proposed climate bills rely on cap-and-trade systems to achieve greenhouse gas reductions, and the Obama administration also prefers this approach. But these bills do not seek to regulate carbon trading as a massive new derivatives market, which is, in fact, what it is… [E]xisting financial regulations, as well as those in major cap-and-trade bills, are inadequate to govern carbon trading, creating a potentially huge regulatory gap… [L]essons from the current financial crisis apply to carbon markets. In particular, it raises concerns about “subprime carbon,” risky carbon credits based on uncompleted offset projects (projects designed to sequester or reduce greenhouse gases).
Subprime carbon credits may ultimately fail to reduce greenhouse gases and, like subprime mortgages, could collapse in value, yet they are already being securitized and resold in secondary markets.
[D]ebate today will focus first on a section of the legislation establishing a nationwide renewable electricity standard (RES) requiring utilities to supply escalating amounts of power from sources such as wind, solar and biomass.
Rep. Ed Whitfield (R-Ky.) said he planned to offer an amendment that would open the RES to nuclear power and carbon capture and storage at coal-fired power plants. “We think it’s unfair that basically they’re subsidizing wind and solar, and the government is deciding which sources of energy would be used to produce electricity,” he said.
See our last post on the climate crisis.