Cap-and-trade effort goes national

Last year, Washington state legislators proposed a cap-and-trade system that would limit greenhouse-gas emissions. The bill didn’t go anywhere, and this year, cap-and-trade legislation isn’t even on the table. But some kind of cap-and-trade regulation remains on the horizon, and appears to be the preferred method for controlling pollution. In a cap-and-trade system, companies that produce greenhouse gases—carbon dioxide and a handful or others—above a certain threshold would be required to buy a permit to allow them to continue emitting those gases. A finite number of permits would be issued, and they could be sold or traded on the free market to other producers of greenhouse gases. Advocates of greenhouse-gas reduction say they are watching carefully what happens with national cap-and-trade legislation, with the expectation that some sort of cap on greenhouse-gas emissions will pass through Congress. “We’ve always said a national program is a better approach,” said Janice Adair, a special assistant to the director of the Washington state Department of Ecology. Eli Levitt, an analyst with the Washington state Department of Ecology who works in the climate policy group, likens cap and trade to a game of musical chairs, in which there are more players than chairs. The permit is the figurative chair in this analogy. A coal-powered power plant holds a permit and gets to discharge greenhouse gases freely, but that power producer might choose to give up its permit—its chair in the game—if another company comes along that’s willing to pay a premium for such a permit. In theory, the power plant could make enough on the permit sale to upgrade its facility so that it produces fewer greenhouse gases, or the power company could switch to a cleaner energy source and ramp down production at the coal-powered plant so it produces less—and falls below the greenhouse-gas threshold. Federal regulations, as presently written, wouldn’t affect nearly as many companies as the state’s proposals last year. Under the unsuccessful state law, companies that annually produce 10,000 metric tons or more of greenhouse gases would have been required to have a permit. Under the proposed federal legislation, companies that produce 25,000 metric tons of the greenhouse gases annually would be required to garner permits. Ecology estimates that 65 facilities in Washington produce 25,000-plus metric tons of greenhouse gases a year. Of those, four are located in the Spokane area: the B.F. Goodrich Aerospace plant, on the West Plains; the Kaiser Aluminum Trentwood Works plant, in Spokane Valley; the Wheelabrator waste-to-energy plant, on the West Plains; and the Inland Empire Paper mill, in Millwood. (Inland Empire Paper is owned by the Cowles Company, which owns The Spokesman-Review and Down to Earth NW) On the state list, facilities that produce power head up the list. In all, 17 power producers—10 electricity plants and seven steam plants—would be subject to cap-and-trade regulations. Food processing is next, with eight facilities that would be subject to regulation, followed by pulp and paper mills (7), natural-gas transmission (6), and oil refineries (5). For an idea of the volume of greenhouse gases produced by these facilities, consider the amount of greenhouse gases generated by the average car in a typical year. A Toyota Prius produces an average of 2.4 metric tons of greenhouse gases a year, and a Hummer generates 11 metric tons of greenhouse gases a year. The average car produces 5.2 metric tons of greenhouse gases a year. Consequently, the facilities on Ecology’s list each produce at least as much as 4,800 cars do in a given year. While the state isn’t pushing its own cap-and-trade initiative this session in anticipation of federal regulation, a bill is in play would streamline state greenhouse gas reporting so it matches federal greenhouse gas reporting. At both the state and the national level, the philosophy behind cap-and-trade regulations is that they should be applied “upstream” by and large, Levitt said. In other words, a typical company or consumer won’t have to worry about how cap-and-trade affects their ability to operate vehicles or use electricity, because the greenhouse gases are regulated “upstream” when the power is generated or oil is refined. However, in all likelihood, everybody would be affected by rising prices for fossil fuels California and four Canadian provinces have passed their own cap-and-trade legislation already, and the Western Climate Initiative, of which Washington State is a member, has committed to reducing greenhouse gases and is an advocate for cap and trade. While cap and trade appears to be the option of choice for advocates of pollution control, two other options have been explored and all but dismissed. They include a tax, such as a carbon tax or a pollution fee, or direct regulation, which simply would be a restriction on emissions. Direct regulation would require some sort of control technology, which is difficult to attain, and the American public isn’t receptive to a carbon tax, which leaves cap and trade as the most viable option. In any of those scenarios, the cost of fossil fuels will increase, Levitt said. Ecology’s Adair said the biggest concern among operators that would be subject to cap-and-trade regulations is what that does to them from a competitive standpoint. In other words, if a plant in Washington essentially has to pay for emissions and one in another state doesn’t incur that cost, it puts the company here at a competitive disadvantage. “They have serious and legitimate concerns,” Adair said. While all states will be operating on a level playing field if a national cap-and-trade system is introduced, many companies compete for business with those who are located overseas or contracts to have goods made overseas in places where cap-and-trade systems aren’t in place. However, in general, having a national plan in place would make a cap-and-trade system more palatable for some of the concerned industries. “Most of them say, ‘Align with the EPA and it will make our lives simpler,’” Levitt said.