Key US senators issue paper discussing GHG-reduction options

Washington (Platts)--2Feb2006

Two key US senators Thursday issued a 14-page "white paper" discussing
options for a mandatory, nation-wide program to reduce emissions of carbon
dioxide and other "greenhouse" gases blamed for global warming. 

     Sens Pete Domenici (Republican-New Mexico) and Jeff Bingaman
(Democrat-New Mexico), the chairman and ranking member respectively of the
Senate Energy and Natural Resources Committee, said the document lays out the
"key questions and design elements" and provides the "basic framework" for
congressional legislation to address global warming. 

     Congress must address the phenomenon, Domenici and Bingaman said in the
paper, "to move our energy system into a sustainable and predictable future,
to avoid destructive interference with the world climate system, and to
maintain long-term US competitiveness and economic prosperity." 

     Domenici and Bingaman did not explicitly say in the paper how they would
design a global-warming bill, but they did offer hints to their thinking on
several key issues. For example, they appear to prefer an economy-wide rather
than a sectoral approach, saying, "if a key design feature is fairness, then
no one [industrial] sector should be singled out." They also appear to favor
an "upstream" regulatory approach, where the point of regulation is placed
closer to energy producers such as coal-mining companies rather than
"smokestack entities" such as electric utilities.

     Under such an approach, the paper said a "requirement to acquire permits
or allowances for emissions associated with fossil fuel use would apply to
coal mining companies, petroleum refiners, and natural gas shippers or
pipelines" rather than those that buy and consume the fuels. Such an approach,
the paper acknowledged, would raise the cost of fuels.

     The pair also said that the other option, known as a "downstream"
approach, could not effectively be used to reduce GHG emissions from cars and
trucks. "Failing to address transportation would leave out one-third of total
US carbon emissions," the lawmakers wrote. 

     The paper also takes on the thorny question of how to allocate emissions
"allowances" in a mandatory GHG-reduction scheme. Domenici and Bingaman are
harder to read on this question, as they largely restate the key points of
debate on the allocation issue. 

     If the government were to simply auction off all of the available
emissions allowances, there would be no need to develop and administer any
allocation rules, they noted. The lawmakers also explore how government could
allocate allowance to specific industries. Such a scheme could include
"offset" programs, special incentives for technology r&d, and special
consideration for fossil-fuel producers, among other things, the lawmakers
said. 

     Domenici and Bingaman said they will hold a "climate change conference"
this spring to "identify the challenges to implementing an effective national
program" for reducing GHG emissions.

                       ---Brian Hansen, brian_hansen@platts.com

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