America's Climate Security Act of 2007 - Part 1
Stern Opportunity
Issue date: 4/1/08 Section: Voices
As of today, at the US Congress there are eleven bills that aim to deal with the climate change problem. Of those, the Lieberman-Warner bill, entitled 'America's Climate Security Act of 2007', is the one considered by most to be more likely to be voted into law. In the following paragraphs, I will present some of the most interesting aspects I found in the bill.
Cap-and-Trade Plus: the bill proposes a cap-and-trade scheme to achieve greenhouse gases emission reductions. Moreover, the proposal acknowledges certain sectors are difficult to deal with in such a scheme, and thus will deserve special attention. These sectors are transportation and the built environment (buildings, appliances, lighting, among others.
Cap on the Facility/Entity, not the Emitter: the climate security act proposes the cap to be imposed at covered facilities or entities that may not be directly linked to the GHG production, but are ultimately responsible for the emissions. For instance, instead of capping the transportation sector directly, the bill imposes the cap on the oil refineries that produce gasoline, diesel and other transportation fuels. Other covered facilities that produce non-fuel substances that are linked to GHG emissions will also be subject to similar caps. Examples include facilities producing fluorocarbons (used in refrigeration and fluorescent lamps). This approach is laudable because it makes capping and monitoring emissions much easier, and has the advantage of reaching a much larger proportion of the emissions through the inspection of relatively few facilities. The obvious disadvantage is that any extra costs incurred at the top of this chain will be almost automatically transferred to customers and consumers, potentially leading to overall higher fuel and energy prices.
Banking: banking in the carbon market means the allowance or carbon credit can be carried from one period to another, i.e., the allowance or credit do not expire. In the case of the Lieberman-Warner bill, allowances from any year can be used to offset emissions from any other posterior year. Moreover, the passage of time, by itself, will not cause the allowance to expire.
Borrowing: another interesting concept. Facilities may borrow allowances from the Administrator (the Administrator will be the entity responsible for governing the market, issuing allowances, and to which facilities and entities must report emissions and reductions) in order to fulfill emissions compliance of up to 15% of each facility of entity requirements. Furthermore, those borrowed allowances must be paid back with interest, which will be proportional to the number of years between the year the allowance is being used for compliance and the year the allowance would be issued to the facility (say the facility borrows from its next year allowance quota to comply with this year's emissions - a 1 year difference).
These were just a few of the interesting concepts in the bill. Since I found many other things to talk about, I decided to limit the content here and will bring more in my next article. Check it again in 2-weeks time!
Cap-and-Trade Plus: the bill proposes a cap-and-trade scheme to achieve greenhouse gases emission reductions. Moreover, the proposal acknowledges certain sectors are difficult to deal with in such a scheme, and thus will deserve special attention. These sectors are transportation and the built environment (buildings, appliances, lighting, among others.
Cap on the Facility/Entity, not the Emitter: the climate security act proposes the cap to be imposed at covered facilities or entities that may not be directly linked to the GHG production, but are ultimately responsible for the emissions. For instance, instead of capping the transportation sector directly, the bill imposes the cap on the oil refineries that produce gasoline, diesel and other transportation fuels. Other covered facilities that produce non-fuel substances that are linked to GHG emissions will also be subject to similar caps. Examples include facilities producing fluorocarbons (used in refrigeration and fluorescent lamps). This approach is laudable because it makes capping and monitoring emissions much easier, and has the advantage of reaching a much larger proportion of the emissions through the inspection of relatively few facilities. The obvious disadvantage is that any extra costs incurred at the top of this chain will be almost automatically transferred to customers and consumers, potentially leading to overall higher fuel and energy prices.
Banking: banking in the carbon market means the allowance or carbon credit can be carried from one period to another, i.e., the allowance or credit do not expire. In the case of the Lieberman-Warner bill, allowances from any year can be used to offset emissions from any other posterior year. Moreover, the passage of time, by itself, will not cause the allowance to expire.
Borrowing: another interesting concept. Facilities may borrow allowances from the Administrator (the Administrator will be the entity responsible for governing the market, issuing allowances, and to which facilities and entities must report emissions and reductions) in order to fulfill emissions compliance of up to 15% of each facility of entity requirements. Furthermore, those borrowed allowances must be paid back with interest, which will be proportional to the number of years between the year the allowance is being used for compliance and the year the allowance would be issued to the facility (say the facility borrows from its next year allowance quota to comply with this year's emissions - a 1 year difference).
These were just a few of the interesting concepts in the bill. Since I found many other things to talk about, I decided to limit the content here and will bring more in my next article. Check it again in 2-weeks time!
Be the first to comment on this story