The election Tuesday of Republican Scott Brown to the US Senate in the Massachusetts likely means there will be no Senate action on "Cap and Trade" legislation in 2010 - and perpaps in the end drive a change of approach.
Meanwhile, the French government is taking aim at a new, reconfigured direct tax on carbon emissions.
While the US House had passed a massive Cap and Trade bill in June of 2009 (Waxman-Markey bill), the Senate has been slow to move. Concerns about the impact of the bill on a still wobbly economy, recent cold whether trends, the "Climate-gate" email scandal, and other factors had already made the prospects for Senate action in the 2010 election year dubious.
Now, Brown's election not only gives Republicans the numbers needed to fillbuster in the Senate to block Cap and Trade action, nervous Senators on both sides of the aisle (some Republicans, such as Lindsey Graham of South Carolina, have come out in favor of some type of legislation to reduce carbon emissions, while some Democrats in oil and coal-rich states have been opposed) are unlikely to want to push for the controversial measure.
"The Republican Party's stunning special election victory in deep-blue Massachusetts has killed any lingering prospect of passing cap-and-trade legislation in 2010, and with it international negotiations to produce a binding climate accord before the end of the year," says John Kemp, a columnist at Reuters.
Carbon emissions rules could come from one of the following sources, or potentiall all three:
- A law coming out of the US Congress
- An international treaty, such as that being pushed by the UN, but which would then have to be approved by the US Senate
- Regulations from EPA, which recently ruled that carbon was a harmful substance, potentially giving it broad powers to regulate its output
Right now, the first two paths seem very unlikely in 2010, and there will be many challenges to EPA action both politically and in the courts.
The changing dynamics have repurcussions beyond the US.
"With no chance of U.S. action in the short term, emerging markets such as China and India are under no pressure to accept mandatory emissions reduction targets," Kemp says.
The issue of Cap and Trade is a fundamental one for Green supply chains. Without such regulations, there is no real cost for carbon emissions by businesses. That in general means companies will only pursue carbon emission reduction programs that also have a positive ROI (such as reducing transportation miles) or that the business feels are going to help them with their customers from a perception perspective.
With Cap and Trade, or a carbon tax, there likely would be a direct cost for carbon emissions or a financial benefit from reducing them (such as by selling excess permits), fundamentally changing the current equation, depending on how such rules are written.
Will US See a Carbon Tax Instead?
One potential result of a delay in any further Cap and Trade action in the Senate for awhile might be a turn away from Cap and Trade, and to a carbon tax. (See TheGreenSupplyChain.com's
report on Understanding Cap and Trade and Carbon Taxes.)
Many experts say that a carbon tax, in which a tax is placed on sources of carton directly (oil, coal, etc.) is more effective and far less complicated than the emission permit trading system that underlies Cap and Trade.
"Recent polls have shown voters prefer a tax as more transparent, easier to understand, and avoiding speculation. There have always been good theoretical reasons to think a carbon tax would be the better option, Reuters Kemp says. "It was abandoned because the environmental NGOs thought a tax would be too controversial and cap-and-trade would be easier to get through Congress. But now that is no longer the case, it might be time to dust off the idea."
That's the direction the French goverment is taking, announcing plans this week to renew a push for a direct carbon tax after a first pass at such a law was sruck down by a French court.
The tax is aimed at encouraging French consumers to stop wasting energy, but the court ruled that too many exemptions created inequalities and unfairly placed the burden of cuts on a minority of consumers.
But French president
Nicolas Sarkozy vows to revamp the legislation in w way that will reduce the impact on French households.
The scenario is a bit confusing, as much of France's industries already operate under Europe's existing Cap and Trade plan, which by most accounts has not had much of an impact on reducing carbon emissions or business cost.
A few Euro countries, mostly in Scandanavia, have also imposed additional carbon taxes. France would be the world's largest economy to do so if Sarkozy gets a bill passed. Lat summer, he also said he would not allow such a tax to reduce the competitiveness of French businesses, saying the country would impose "carbon tariffs" on imported goods to maintain cost equity between French manufacturers and those in countries without carbon costs.
What are your predictions for what will happen with carbon emissions legislation in the US? Dead for 2010 - or longer? Would we be better of changing gears and going for a carbon tax instead of Cap and Trade? Let us know your thoughts at the Feedback button below.
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