Sydney Morning Herald
Friday 27/2/2009 Page: 14
A MANDATORY cap on greenhouse gas emissions in the United States, which the President, Barack Obama, has made central to his domestic agenda, would be designed to generate revenue for the Government while addressing arguably the world's most pressing environmental issue.
As debate rages in Australia about Kevin Rudd's proposed emissions trading scheme, the White House will unveil a budget that assumes revenue from a cap-and-trade system by 2012. A source familiar with the document said it would direct $US15 billion ($23 billion) of that revenue to clean energy projects, $US60 billion to aid the working poor and additional money to help offset higher energy costs for families and small businesses. But a system that limits emissions, puts a price on carbon and allows industries to trade pollution allowances will be a difficult sell on Capitol Hill, especially in the current economic crisis.
The political battle on Capitol Hill is largely divided along regional lines. Politicians from coastal states see a carbon cap as a critical goal whose public and long-term economic benefits would outweigh its costs. Most Republicans and some Democrats from the middle of the country fear it would hurt their states' economies, dependent as they are on fossil fuels and manufacturing.
The implications of a cap-and-trade system could be far reaching. It would create a new commodity and a market to trade it worth tens of billions of dollars. It would create property rights where none exist now. "Emission allowances could be the greatest creation of property rights since the 19th-century settlement of the West," said Dallas Burtraw, a senior fellow at Resources for the Future. Carl Pope, executive director of the advocacy group Sierra Club, said he has been surprised at the extent to which Mr Obama has made green energy a priority.
"Obama's talking about this as the economic equivalent of war. His Administration sees that the green economy is the only train leaving the station and they are eager to hitch on to it to pull its out of this crisis." The cost of carbon emissions - and hence the revenue the Government would receive from auctioning carbon allowances or permits - remains uncertain.
In Europe, which has a cap-and-trade system, the price of carbon has fluctuated between about 10 and 30 ($20-$60) a tonne. But with economies in recession, prices have slumped by up to two-thirds. US estimates are based on such unknowable factors as whether industry will cone up with an affordable way to capture and store carbon dioxide emissions.
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