Senate Energy Panel Weighs Alternatives to Cap-and-Trade

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"This is Enron, Part II; another Wall Street Ponzi scheme dreamed up by bankers and brokers"

U.S. Senate Energy and Natural Resources Committee members appeared ready to consider cap-and-trade alternatives as they began their 2009 climate-change hearings on Sept. 15.

"The search for effective legislative proposals for avoiding climate change involves avoiding the costs of global warming without imposing other unintended costs that would have few benefits and could even have negative impacts on society,” committee chairman Jeff Bingaman (D-NM) said in his opening statement. “We need to provide assurances that the costs of a cap-and-trade system will not go out of control, either through excessive prices or excessive volatility."

Republicans criticized a climate-change bill, which included a cap-and-trade program, that the US House passed on June 26. “Having done something on climate change is not the same thing as having done it right,” said Lisa Murkowski (R-Alas.), the ranking minority member.

Other GOP members said the committee should be wary of the House bill cosponsored by Reps. Henry G. Waxman (D-Calif.) and Edward J. Markey (D-Mass.). John Barrasso (Wyo.) said after the hearing that it could result in a "green collar" crime wave. "This is Enron, Part II; another Wall Street Ponzi scheme dreamed up by bankers and brokers," Barrasso said.

Five witnesses discussed cap-and-trade and alternatives including a carbon tax and price floors and ceilings, or collars, for carbon emissions commodities. They generally suggested that federal lawmakers will need to consider both environmental and economic aspects as they develop final legislation.

Referring to the Waxman-Markey bill, Joseph R. Mason, a finance professor at Louisiana State University, said, "Inappropriate auditor behavior is all too familiar. There are considerable holes in any 1,400-page document. I believe there’s a risk in climbing into any cap-and-trade system without closing those holes."

Other committee members and witnesses suggested that it will be equally important to establish a price floor as well as a ceiling in any new carbon market.

"Part of setting up a cap-and-trade system is establishing a market, which is the best mechanism for setting prices," said Jeanne Shaheen (D-NH). "The question then becomes how to avoid volatility and interference."

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