Greenhouse-Gas Limits Touted by Industry to Congress
Jan. 14 (Bloomberg) -- The most detailed proposal yet by industry and environmentalists to reduce U.S. greenhouse-gas emissions will call for raising the costs of new coal plants and rewarding nations for protecting forests.
Rio Tinto Group, General Electric Co. and U.S. electricity producers will present the proposal tomorrow to a congressional committee and recommend “urgent” action, according to a copy of the report by the 32-member coalition obtained by Bloomberg News.
Congress will hear the plan five days before President-elect Barack Obama takes office on a promise to cut the amount of greenhouse gases released in the U.S. by 80 percent from 1990 levels in 2050. The U.S. Climate Action Partnership’s proposal aims to strike a balance between the interests of industrial polluters and environmental activists, Duke Energy Corp. Chief Executive Officer Jim Rogers said in prepared testimony.
“No one got everything they wanted, but we all got what we feel is needed to ensure a sound climate-change policy is created,” Rogers said in testimony to be delivered before the House Energy and Commerce Committee tomorrow.
The group proposes slashing emissions of carbon dioxide and other heat-trapping gases 42 percent below 2005 levels by 2030.
Emissions from power plants, manufacturers and oil refiners will be capped, and polluters must obtain a permit for every ton of greenhouse gases pumped into the atmosphere, under the plan. Those that exceed their caps will have to buy permits from emitters who reduce their output of greenhouse gases, under a so- called cap-and-trade program.
CEOs Line Up
New power plants that burn coal or natural gas will have to buy all credits required to meet emissions caps, under the group’s proposal. That will raise their production costs compared with existing facilities, which will get “a significant portion” of credits for free at the start of the program.
Chief executives from Fairfield, Connecticut-based GE, the world’s biggest maker of power-plant turbines, and other companies are expected to testify to the Energy and Commerce committee tomorrow, aides to that panel said. It will be the first hearing held by the new committee chairman, Representative Henry Waxman, a California Democrat.
Other companies sending CEOs are London-based Rio Tinto, the third-largest mining company, Charlotte, North Carolina-based Duke, the third-biggest U.S. electricity producer from coal, as well as PG&E Corp., Siemens AG and ConocoPhillips.
Congress may be too focused on ending the recession to pass cap-and-trade legislation this year, said James Lucier, energy and climate analyst with Capital Alpha Partners LLC in Washington. He said a cap-and-trade plan will be seen in farming and manufacturing states as leading to higher energy costs.
East Versus Farms
“There is a disjunction between the more metropolitan states on the West Coast and in the east, and those other sections in the farm belt and the rust belt,” Lucier said in an interview today. “I don’t think we’ve reached an agreement where you have a consensus in the Senate on how to move forward.”
To spur investment in pollution-cutting technology, a floor for the price of carbon permits should be set at $10 for a ton of emissions at the start of the program, the group proposed. Emissions credits in Europe’s greenhouse gas program, the largest in the world, traded at 13.34 euros ($17.54) a metric ton on the European Climate Exchange in London today.
Europe’s program, which began in 2005 with a two-year trial phase, has so far failed to reduce overall global warming gases. After permit prices plunged during the trial, emissions targets were lowered for the first compliance phase of the program, which runs from 2008 to 2012.
Act First
The U.S. should not wait for other countries to take action on global warming, according to the report. President George W. Bush opposed emissions limits throughout his eight years in office in part out of concern that regulations would raise costs for U.S. manufacturers.
U.S. emissions rules “should not be contingent on simultaneous action by other countries,” the group proposed. “Adoption of mandatory U.S. climate policy is an essential precondition for a full and effective international framework.”
To help keep U.S. carbon permit prices stable, the Climate Action Partnership recommends creating a reserve of credits. These would be generated by projects that preserve tropical forests, which absorb CO2. The loss of rainforests contributes about 20 percent of global carbon-dioxide emissions, the largest source of greenhouse gases in the developing world.
Pollution-cutting projects in foreign countries that generate emissions credits may be used by U.S. companies to help meet greenhouse-gas targets, the group recommended. So-called offsets from countries such as China or India should be capped at 1.5 billion metric tons a year. An equal amount of offsets created in the U.S. would be allowed.
‘Bringing Industry Along’
Environmental advocates said the proposals may provide a way for them to work with industrial polluters.
“We can’t do it without bringing industry along with us,” Janet Peace, vice president of markets and business strategy for the Pew Center on Global Climate Change, a coalition member, said in an interview. Pew is an Arlington, Virginia-based consultant on climate change.
GE spokesman Peter O’Toole declined to comment, as did Tom Williams, a spokesman for Duke Energy.
To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net
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