"Technology based on science is the only thing to help us repair the damage," says Uriel Sharef, CEO of Siemens AG. "We have to employ all known mechanisms to reduce greenhouse gases to acceptable levels."

Population growth combined with energy usage is a reality. But tools exist today to curb those heat trapping emissions that are tied to global warming. And better tools are a hop, skip and jump away while even more effective ones will be eventually commercialized.

Right now, manufacturers are building better generators that are more energy efficient while utilities are offering demand side management to shed load during peak times. Within a decade, there may be new nuclear plants that do not emit any greenhouse gases while the technologies to facilitate green energy will be better and cheaper. And, ultimately, industry will be able to sequester and bury carbon emissions as well as retrofit older electric plants to do the same.

Advancing the technologies to accomplish all that won't be simple. Years of underinvestment have taken a toll. At present, the utility sector relies heavily on the U.S. Department of Energy to help it buy down some of the risks. Power companies are risk averse and don't want to saddle either their shareholders or their customers with bad investments. To get these processes out of the garage and into the market, government has to participate through direct allocations or tax incentives.

That's the case with the commercialization of the equipment needed to help fight global warming. And the continuous test is how to assure a consistent level of funding so that the utility sector can stay ahead of the curve. "Climate change has been on our screen for a long time," says Jeff Sterba, CEO of PNM Resources. "But we need to understand and translate the consequences of any solution. There are no silver bullets."

Advancing technology is one component. Writing a regulatory scheme is another. Any future rules will be phased in so as to not create economic disruptions. Beyond that, the ideas vary. To minimize greenhouse gas emissions, policymakers are considering everything from a cap-and-trade system to a carbon tax to crediting utilities for implementing greater efficiencies and providing more renewable energy options.

Various Approaches

Cap-and-trade is a free market approach that has had success with other emissions trading schemes. Simply, government sets pollution limits. Then, it either auctions or allocates to industry a share of credits. Those companies that are able to exceed the expectations can either bank their credits for future use or sell them to other businesses that are unable to meet their obligations.

Companies such as American Electric Power like the concept. It already participates in the Chicago Climate Exchange program that trades CO2. It favors the allocation of credits -- essentially giving them away -- until the market matures to the level when they can be auctioned off. An allocation is a better way to start, the utility believes, because industry can take the money it would be spending buying credits and instead put that into new technologies to control pollution levels. AEP, for example, is investing billions of its money in coal gasification and post combustion technologies.

"If we approach this with logic, there is an achievable goal," says Mike Morris, CEO of the Columbus, Ohio-based utility. Over time, he says that the price of credits would rise to $30 a ton, which would be an optimal level to achieve the desired results.

Other utilities are critical of the cap-and-trade approach and particularly of any free allocation processes. They point to the European experience where credits were given out. The market became flooded with them and they were essentially devalued. At the same time, the price of those credits were factored into the electric rates that customers paid even though the utilities didn't have to buy them while some enterprises were being given credits for meager steps to cut pollution.

That's why Florida Power & Light favors a carbon tax. Basically, under such a regime, government would tax utilities according to their carbon footprints that can be readily measured in the power sector. FP&L says that it is a fairer way to measure results and that it is easier to administer than a cap-and-trade system. The proceeds from the carbon fee would then be targeted directly to an account that would help fund the development of new technologies.

"We know this is controversial," says Armando Olivera, President of FP&L. "But it is picking up steam because others have seen the European experience." Like AEP, he believes that an eventual tax equating to $30 a ton would get the right response.

Still, other companies say that most of the proposals on the table would impose direct costs on fossil fuel usage and they therefore favor less invasive alternatives. Xcel Energy, for example, would like to see voluntary clean energy portfolios rewarded. No credits would be auctioned or allocated, which would encourage fuel switching and add costs to both utilities and customers. Instead, credits -- that could be traded or banked -- would be earned by investing in green energy, carbon controls and energy conservation.

"There are options beside a carbon tax and cap-and-trade that can work and will do so at reasonable costs," says Dick Kelly, CEO of Xcel.