A "Utility Only" Cap on Emissions?

There’s been a lot of chatter of late about the Senate designing a greenhouse gas (GHG) reduction program for the electric power sector – so called “utility only” – as opposed to a broader program like the one passed by the House last year that covers most sectors of the U.S. economy. If the Senate goes this route, there are important issues that must be considered if the U.S. is going to come anywhere close to cutting total emissions by 17 percent below 2005 levels by 2020, President Obama’s commitment to the international community, and set the foundation for deeper cuts in the future. Here are three key points to keep in mind:

  • Reducing U.S. emissions at least to 17 percent below 2005 levels by 2020 and more than 80 percent below 2005 levels by 2050 will almost certainly require a combination of an emissions trading program, federal and state regulatory authority already in place, and new policies and measures.

  • Emissions from electric power account for about a third of total U.S. GHG emissions.1 The fewer sectors covered under an emissions trading program such as utility only, the more important it will be to preserve existing state and federal authorities (such as EPA regulations) and to use complementary policies (such as appliance and vehicle standards) to achieve overall national emissions reduction goals.

  • The design of an electric power-only emissions trading program must be ambitious and environmentally robust to play a meaningful role in meeting reduction targets and in establishing a solid foundation for a national GHG reduction framework that can be ramped up over time.

This post will focus on what is required to achieve meaningful near- and long-term national GHG emissions reductions. This is just one area that matters in the construction of a comprehensive approach to the energy and climate challenges the country faces. There are other important issues to consider in the design of an electric power-only cap, such as how to distribute allowances, how to protect consumers, whether to allow non-electric power sources to opt in to the program, and how to manage the oversight of the emissions trading market.

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