Report says cap and trade legislation may be running out of time

WASHINGTON—The concept of “cap and trade” as a cornerstone of a United States climate change policy appears to be losing steam, according to a recentNew York Timesreport.

TheTimesreport makes note of how opponents of cap and trade—a form of emissions trading used to control pollution by offering economic incentives—maintain it will be costly, adding that it’s not even mentioned in President Obama’s current budget.

The report added that Senator Lindsey Graham (R-S.C.), who is working on a climate change bill with Senators John Kerry (D-Mass.) and Joseph Lieberman (I-Conn.), pronounced cap and trade as “dead” last month. Graham and Kerry are working to draft a bill “that satisfies the diverse economic, regional, and ideological interests of the Senate,” according to the report.

Graham has previously said that the current cap and trade bills in the House and Senate are “going nowhere” and are not business-friendly enough and do not lead to meaningful energy independence.

Instead of cap and trade being used as a form of emissions trading to reduce emissions pollutants, the bill would initially include a cap on greenhouse gas emissions for utilities, with other industries potentially phased in later. The bill would also include a modest tax on gasoline, diesel fuel, and aviation fuel, accompanied by new incentives for oil and gas drilling, nuclear power plant construction, carbon capture and storage, and renewable energy sources like wind and solar.

Late last year, the White House introduced its U.S. emissions target, calling for an emissions reduction of 17 percent below 2005 levels in 2020 and an 83 percent reduction by 2050—as well as being in line with final U.S. energy and climate legislation. The Senate version calls for a 20 percent reduction below 2005 levels, and the House version calls for a 17 percent reduction below 2005 levels.

Both bills, like the White House, calls for an 83 percent reduction by 2050.

The notion that cap and trade’s future is decidedly murky has been kicking around for months. At a recent transportation conference, Patrick Larkin, partner at Strasburg & Price LLP in Washington, D.C., said that if the climate change bill does not pass by June 1, it could very well be dead for 2010.

If this ends up being the case, many freight transportation and logistics industry stakeholders maintain it will be for the best as they contend that cap and trade will raise taxes for all businesses and consumers and increase fuel costs by nearly $1.00 per gallon and cost taxpayers more than $840 billion.

David Miller, vice president of global policy and economic sustainability at Con-way, said that if cap and trade were to ever become law, freight transportation companies would have no chance at all to get the fuel and gasoline taxes needed to support critical infrastructure.

“What’s bizarre about this is that those of us that are huge energy consumers who move freight throughout the entire country are not going to be given any credits [in this legislation], but those that are supposed to be paying the taxes are being given all the credits,” said Miller. “It is entirely possible we could see a 30 percent to 40 percent increase in fuel costs should this be passed.”