What a compromise on cap-and-trade might look like

WHAT A COMPROMISE ON CAP-AND-TRADE MIGHT LOOK LIKE…. For many environmentalists, there’s strong desire to see policymakers approve an ambitious cap-and-trade proposal, with broad, strict caps and minimal exemptions. There’s no political support for that. The next best move would be something along the lines of the American Power Act, with a still-worthwhile cap-and-trade, which would at least be a step in the right direction. Political support appears insufficient on this, too.

But there’s yet another possible compromise. White House Chief of Staff Rahm Emanuel sent a big hint to the political world last week, raising the specter of a “utilities only” approach to cap-and-trade. Sen. Joe Lieberman (I-Conn.), one of the leaders on the American Power Act, had a rather positive reaction to the proposal when talking to CNN yesterday.

So, what’s this all about? In practice, a “utilities only” cap-and-trade would impose emissions limits on the electric utility sector — and not on the economy at large. It’s at least step in the right direction.

A handful of utility industry officials have also signaled they won’t knock down the idea of a power plant-only emissions cap.

Electric utilities emit about a third of U.S. greenhouse gases per year. The industry has been involved for about 15 years in a similar market-based mechanism that has successfully reduced acid rain, and the sector is seeking regulatory certainty as companies look to make significant new investments over the next several decades.

Sen. Lisa Murkowski (R-Alaska), the ranking member of the Senate Energy and Natural Resources Committee, reiterated Republican opposition to any compromise on regulating carbon emissions, and said no bill with any kind of cap-and-trade, no matter how weak, can get an up-or-down vote.

But Murkowski’s assessment isn’t necessarily the final word on the subject.

Dave Roberts did a nice job today reviewing this compromise approach, and he had a generally positive take: “If you’re going to single out one sector for cap-and-trade, electricity is the right choice. For one thing, it’s the biggest emitter…. For another, most of the lowest-cost carbon reductions are expected to come from electricity.” Roberts conditionally concluded that “a bill with a utility-only carbon price could be a credible step forward.”

Something to keep in mind in advance of Wednesday’s White House meeting.