'09
By Joseph Dobrian
Environmental groups are lobbying New Jersey’s congressional delegation to support legislation setting market-based caps on the emissions of carbon gases. The specific legislation in question is the American Clean Energy and Security Act of 2009, part of which is known as “cap-and-trade” legislation, which has been released in discussion draft form by Reps. Henry A. Waxman (D-California), chairman of the House Energy and Commerce Committee, and Edward J. Markey (D-Massachusetts). Cap-and-trade legislation would set an upper limit on the amount of pollutants that businesses (mainly power plants) can put into the environment, with heavier polluters having to buy credits—permits to pollute more, in effect—from lesser polluters. The bill’s supporters claim that the legislation will create jobs, help end American dependence on foreign oil, and combat global warming.
“Cap-and-trade is a policy that proposes to do something significant to control global warming, as well as to stimulate the economy through reinvestment in our manufacturing base,” explains Mark Brownstein, managing director of business partnerships in the climate and air program of the Environmental Defense Fund (EDF). “It will lead to redevelopment of our energy infrastructure, making it cleaner, bringing in the low-carbon technologies of tomorrow.
New Jersey’s congressional delegation “has a long track record of strong support for environmental legislation, and this bill has strong support from President Obama, while at the same time many republicans in Congress have come out strongly against such legislation,” he says. “A vote for this bill will reinforce the leadership that New Jersey has been showing on energy and the environment.”
Brownstein believes cap-and-trade legislation will create opportunities for New Jersey businesses to get involved in alternative energy initiatives, such as developing solar and offshore wind resources. “That’s not to mention that one of New Jersey’s largest industries is tourism,” he adds. “It’s a coastal state with a strong vested interest in avoiding the worst consequences of climate change.”
The most controversial provisions of the proposed legislation call for establishing tradable federal permits (“allowances”) for various electric utilities, oil companies, and industrial sources that, combined, are allegedly responsible for 85 percent of the nation’s global warming emissions. Entities emitting more than 25,000 tons of CO2 equivalents annually would be subject to these allowances, which would get progressively stricter for the next 40 years. Entities that failed to meet the standards would be penalized. (Some companies, in sectors that consume large amounts of energy and provide globally traded commodities, would receive rebates for costs incurred in complying with the new regulations.)
In the New Jersey business and legal communities, opinions are mixed as to whether federal cap-and-trade legislation will benefit the state. New Jersey, of course, already has such legislation in place, on a regional basis, in cooperation with nine other Northeastern states. The Regional Greenhouse Gas Initiative (RGGI) has been selling emissions credits to power plants at auction, and while many observers report positive results, questions remain as to whether such a program should be rolled out nationally—and if it were, how it would affect regional programs such as RGGI.
Don McCloskey, director of environmental strategy and policy at Public Service Enterprise Group (PSEG), a Newark-based diversified energy company, believes federal cap-and-trade legislation could negatively impact New Jersey business in the short term, but be beneficial in the long run.
“Under any of the proposed approaches at the national level, there will be a cost placed on carbon generation that will be factored into the prices of electricity,” he says. “However, we take the long view that this will drive innovation, leading to other forms of electric generation, more energy efficiency—and ultimately result in new jobs, green jobs, jobs associated with renewable energy production.”
McCloskey says that while he supports RGGI, he believes that a national approach to emissions control will go farther to level the playing field and ensure that New Jersey businesses aren’t penalized disproportionately. “Regional programs create inequities in the marketplace,” he explains. “Businesses in participating states pay a carbon fee that businesses in other states don’t have to pay. We need a national program that creates one market for carbon trading, one price, one set of rules.”
“Other cap-and-trade programs have gotten mixed reviews,” observes James Rhatican, partner at the law firm Connell Foley (Roseland). “They tend to be difficult to regulate, and burdensome. States are ill-served by regional programs like RGGI because they raise utility costs, which discourages businesses from coming into the state. Federal legislation could also lead to more research of renewable energy.”
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