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Published July 21, 2009, 05:53 AM

Reduce CO2 yes ... but cap and trade, no

I’m in favor of taking action to reduce CO2 emissions and to protect our environment. But I don’t support the “cap and trade” plan now being debated in the Congress.

By: Sen. Byron Dorgan, The Jamestown Sun

I’m in favor of taking action to reduce CO2 emissions and to protect our environment. But I don’t support the “cap and trade” plan now being debated in the Congress.

“Cap and trade” is an approach that would have the government set caps on carbon emissions from certain sources, and then establishes a market in which allowances for CO2 emissions would be bought and sold on a financial exchange. Supporters call it a “market-based solution.” 

I think it is the wrong solution and I don’t support it.

I support capping carbon emissions. But it has to be done the right way with targets and timelines that allow us to accomplish our goals without driving the cost of energy for homeowners and businesses out of sight. The cap and trade plan does not meet that test for me.

I know the Wall Street crowd can’t wait to sink their teeth into a new trillion-dollar trading market in which hedge funds and investment banks would trade and speculate on carbon credits and securities. In no time they’ll create derivatives, swaps and more in that new market. In fact most of the investment banks have already created carbon trading departments. They are ready to go. I’m not.

For those who like the wild price swings in the oil futures market, or the unseemly speculation in mortgage backed securities, or the exotic and risky financial products like credit default swaps that pushed our economy into the ditch, this cap and trade plan will be the answer to their prayers.

Just last year speculators overwhelmed the oil futures market, and every day they were trading 20 to 25 times more oil than was being produced. That speculation drove the price of oil from $60 to $147 a barrel and gasoline to more than $4 a gallon. Then the same speculators forced the price back down and made money in both directions. The American public paid the price for it.

And remember the financiers who wallpapered America with risky derivatives and credit default swaps that they traded in dark markets before the financial collapse last year? We shouldn’t need a second expensive lesson in how manipulation in financial markets can hurt our country.

Don’t’ get me wrong. I like free markets. But given recent history, I have little confidence that the large financial markets are free or fair enough to trust them with a new, large cap and trade carbon securities market.

So, I’m willing to cap carbon to address the threat to our environment. But it has to be done the right way. I will support a plan that establishes workable caps, invests in the technology we need to decarbonize fossil fuels, and sends the majority of the revenue raised to consumers to offset increases in the price of electricity resulting from the caps. 

Energy is an important part of our lives. We need to work aggressively on the technology to decarbonize the use of coal so that we can continue to use our most abundant fossil energy resource. But even as we do that, we have to move aggressively to maximize our development of renewable energy. The development of green, renewable energy protects our environment and it also makes us less dependent on foreign oil (seventy percent of our oil comes from other countries). 

Here’s what I believe we need to do to protect our environment and make us less dependent on foreign oil:

We should establish caps on carbon that are accompanied by both adequate research and development funding and reasonable timelines for implementation so that we can develop and commercialize technologies that will greatly reduce the CO2 emissions from the burning of fossil fuels.

I propose we use the majority of the revenue from a plan that caps CO2 to provide refund payments to those who would otherwise experience increased energy costs.

Even as we continue to decarbonize the use of fossil energy, we should move aggressively to maximize the production of renewable energy from wind, solar, geothermal, biomass, and other sources. 

We need to set an ambitious Renewable Electricity Standard along with longer term tax incentives for the production of wind, solar, biomass and other renewable energy.

To move all of that new energy, we need to build a transmission system that will allow us to produce renewable energy where we can and move it to the load centers where it is needed.

To fully reap the benefits of cleaner energy and reduced dependence on foreign oil, we need to move toward using electricity to fuel our transportation fleet.

North Dakota and the nation have a lot at stake in this debate. We are a major energy producing state. We have the ability to produce large quantities of oil. We have the greatest wind energy potential of any state in America. We have the ability to produce a large quantity of biofuels. And we have large deposits of coal, which is our country’s most abundant form of energy. 

However, it’s clear we are going to have to use energy differently in the future to protect our planet. And to do that I will support a plan that puts achievable caps on CO2 emissions — if it is done the right way. 

But I’m not signing up to create a new financial market to trade carbon securities. In my judgment it is exactly the wrong way to address this issue.

(Dorgan is one of two U.S. senators representing North Dakota in Washington, D.C.)