Cap and Trade Changing Everything

This article is from the New Mexico Center for Energy Policy.

It is a brilliant piece of analysis on cap and trade by a national expert on Energy issues which should be read by all…

The author examines the legislative background and process of cap and trade and why Nuclear Energy should be included in any final Bill…

Cap and Trade Changing Everything

From the Lovington Leader by John Graham–Cap and trade legislation may be one of the biggest issues facing the oil and gas industry according to Dr. Daniel Fine, Associate of Policy, Strategy and Development at New Mexico Tech. He also serves on the New Mexico Center for Energy Policy which is hosting the presentation by former Shell Oil executive, John Hofmeister tonight.

“What is the purpose to cap and trade?” asks Fine. “Is the purpose to raise revenue? Is the purpose to lower CO2? Or both?” The bill (Waxman-Markey) coming out of the U.S. House of Representatives claims both purposes without a clear policy declaration.

The bill is now in the hands of the U.S. Senate.

Fine says determining the price or cost for one metric ton of carbon dioxide is the biggest omission in the bill that needs to be addressed before moving forward.

“What is the trigger price which would affect an investment from the utilities and others to move towards low carbon technology? How much should CO2 cost before it triggers a corporate strategic decision to invest in technology which would lower the greenhouse gas emissions?” asks Fine.

Without the price per ton of CO2, nothing can be implemented.

The house version has been worked over in the Senate with many changes. Fine says in the House bill, only 2% of the allowances (or credits) have been awarded to the oil and gas industry as opposed to 37% to the utility industry. “The Senate is currently looking at that in terms of equity,” said Fine.

Also there is no reference in that bill in support of nuclear energy.

“Nuclear energy, in terns of cap and trade, is a central part of the issue because it is emissions free,” added Fine.

Recognition of that in terms of allowances and credits would put nuclear energy in the forefront of greenhouse gas emissions reduction.

It would also assist the nuclear energy industry in rewards to financing new reactors. They could capitalize the credits to assist the bottom line.

The omission of nuclear energy in the House should be subject to discussion and debate in the Senate, says Fine.

Fine thinks a cap and trade bill, in some form, will be out soon and will probably be a moderate or reasonable version of the House bill. It will be less costly, more reasonable and an adjusted timeline for the implementation of it.

Fine says the focus on cap and trade creates a “a potential to reexamine the oil and gas industry, particularly the gas production.”

“There is growing recognition that the discovery, exploration and production of new gas, particularly shale gas, has changed supply and demand and put natural gas in a surplus position in the United States. In that way, the gas producers would be qualified as a low carbon or lower carbon emissions source than coal. So I think there is a changing dynamic of recognition of the gas industry based on the new surplus expected from shale gas,” Fine added.