In his State of the Union speech a few nights ago, President Obama, as expected, declared that it was time to confront “Climate Change”, citing Hurricane Sandy, record high temperatures, droughts, and other evidence. And he implied that he would plan to use a Presidential executive order for a program that would reduce atmospheric carbon pollution. Without specifically using the term, it seems clear that he is considering a type of Cap and Trade program, which would be implemented without Congressional action.
In 2007, the U.S. Supreme Court gave the EPA authority, based on the Clean Air Act, to reduce greenhouse gases by regulating emissions from power plants. It used this authority to set new standards for coal-fired plants, which has led to a series of shutdowns of highly polluting plants, with emphasis not on carbon but on toxic particulars, such as arsenic. We can now surmise that Obama, through executive action, might now set a limit for carbon emissions. Those plants not meeting the limit could buy permits from plants that are or can be modified to be well below the set limit. Or they could buy such permits from the government through an auction, creating an income stream of billions of dollars. This cost would, of course, be passed on to consumers in the state where the utility purchases the permits and would amount to a “tax” even though it would not be termed that. Poor people might get some relief by receiving part of the funds collected by the government.
If such a program goes ahead, it will, of course, be strongly challenged in the courts and would undoubtedly eventually reach the Supreme Court. It’s hard to tell whether the court would then strike it down.
The program would not be a classical cap and trade system, since in the latter, the government would set national total emissions standards and would lower them every year to achieve a desired lower total carbon emission level. But it would most certainly result in lower carbon levels. Let’s see whether Obama will go ahead with this!