Bingaman: National carbon cap-and-trade system would be best

Washington (Platts)--13Mar2007

A single national cap-and-trade program to reduce greenhouse emissions would
benefit the power industry by reducing the complexity associated with a
patchwork of similar regulations at the state level, the chairman of the
Senate Energy and Natural Resources Committee said.

"I feel it makes a lot more sense to have one federal cap-and-trade system,"
said Senator Jeff Bingaman, New Mexico Democrat, at the Platts Energy Podium
on March 12. He added that the power industry is "warming up" to the idea of a
national cap-and-trade system because ultimately it would be better for the
industry than having to comply with a series of differing state-level
programs.

The recent move by California and several other states to rein in greenhouse
emissions is a positive sign because it could give the federal government the
stimulus to push for its own action on global warming. Ultimately, he said, it
will be the federal government that will need to address the issue of global
warming nationwide.

"I think there are very substantial reasons to adopt a national cap-and-trade
system," Bingaman said, but at the same time he cautioned that any legislation
advancing a cap-and-trade system would need to balance the need to reduce
greenhouse emissions with the risks posed to the overall economy.

Next month, he is planning to unveil a proposal he has been working on with
Senator Arlen Specter, Pennsylvania Republican, on reducing greenhouse
emissions.

Bingaman has been circulating a draft of the proposal that calls for cutting
carbon dioxide intensity, which is defined as dividing greenhouse gas
emissions by the gross domestic product forecasted by the EIA for that
calendar year, through a national emissions allowance cap-and-trade system.
The proposal seeks an annual reduction in carbon intensity beginning at 2.6%
between 2012 and 2021, and then increasing to 3% in 2022.

The senator said that he is considering a stronger GHG reduction limit than
what will be included in his proposal in April. Right now, Bingaman's GHG
reduction targets are less steep than those included in four bills already
introduced in the Senate.

Bingaman said that any efforts to curb global warming will likely have an
effect on the mix of energy sources used in generating electricity. Coal-fired
generation is now dominating the electric power landscape, making up roughly
half of the generation mix in the US. Depending on how steep the GHG
reductions are, coal-fired generation may well decline as part of the overall
electricity generation mix. EIA analysis shows that nuclear energy would grow
as part of the overall energy mix if any mechanism to reduce carbon emissions
is put in place.

"I think if we are able to pass global warming legislation, it'd give more
impetus for nuclear power," he said.

An increased momentum for regulating carbon in Congress is demonstrated by the
numerous hearings this year on Capitol Hill, and the American public is more
interested in tackling global warming, he said. But he also underscored the
challenges ahead for regulating carbon, saying that there would be no
meaningful progress on the issue at the federal level without the support of
the Bush administration.

The podcast of the entire event can be accessed at: For more news, request a
free trial to Platts Coal Trader at http://www.energypodium.platts.com

--Marcin Skomial, marcin_skomial@platts.com