EPA proposes GHG reporting as first step toward carbon tax

Moving toward a low-carbon economy is a long and arduous process, but the new EPA under the Obama administration is determined to jump-start the process and get the different sectors of industry to report their yearly emission as the first step in establishing some sort of carbon market.  Whether that market is a cap-and-trade or a flat carbon tax is still up in the air, but the EPA is determined to begin the process.

__________________

Advocates of the carbon tax argue that their path is transparent for Americans to see; whether citizens want to pay higher energy prices in exchange for environmental stewardship will be laid on the proverbial table for all to see.  A cap-and-trade system will encourage market forces to overtake the dispersal of carbon credits, and therefore, will be subject to the same conditions that led us into financial crisis we are currently wallowing through.  In addition, a cap-and-trade requires the set-up of a whole new regulating body to oversee the trading, whereby a carbon tax has provisions in place to allow it to hit the ground running.  Regardless of which Congress ultimately decides upon, the EPA has set the process in motion.

The EPA’s plans to have businesses start reporting carbon emissions as part of the overall transition to a low-carbon economy is just in the proposal phase, but if businesses’ long-term planning is any indication of where it is going, an established federal carbon marlet is likely within the next few years.  In order to begin imposing a tax upon industry, the process “must be guided by the best possible information”, said EPA administrator Lisa Jackson, and gathering useful information to implement the plan is a rational first step.

Not all businesses will be mandated to report emissions to the EPA; only those ones that meet the required threshold will be responsible for reporting.  This includes “about 13,000 facilities, accounting for about 85-90% of U.S. GHG emissions emitted, would be covered under the proposal. The new reporting requirements would apply to suppliers of fossil fuel and industrial chemicals, manufacturers of motor vehicles and engines, as well as large direct emitters with emissions equal to or greater than 25,000 metric tons per year.  The EPA added that the direct emission sources covered under the reporting requirement would include energy intensive sectors such as cement production, iron and steel production, and electricity generation, among others”.  The reporting process will cost taxpayers roughly $150 million or less per year.

No direct changes to business operations were proposed, but the reporting process can be seen as a first step toward creating a market in which to regulate carbon.

This step by the EPA can be seen as a responsible one; instead of taking these heavy-emitting industries by surprise, the EPA is giving them time to adjust to the new measures.  “The first annual report would be submitted to the EPA in 2011 for the calendar year 2010, except for vehicle and engine manufacturers, which would begin reporting for model year 2011”.

This has to make one wonder whether the UNFCCC meeting in Copenhagen later this year in December bears any relevance to the American trajectory toward a low-carbon economy.  If reporting is not set to begin until 2010 then the December meeting will have to take place without any existing carbon market in America.  This might be just the circumstance that countries like China and India are looking for to use their ‘developing nation’ card at the conference and sidestep any internationally binding regulations on emissions.

Most small businesses would not be affected, as the new rule would only affect heavy industry and transportation sectors.  “The new plan would affect fossil fuel suppliers, automakers and companies that emit at least 25,000 metric tons of climate-warming greenhouse gases a year.”

President Obama has voiced his support for establishing a carbon market.  He has been vocal in his “plan to limit carbon emissions to try to stem global warming; and members of Congress have already begun working on legislation to make this happen”.  The information-gathering proposal by the EPA is the necessary first step to make this transition in a responsible manner.

Lisa Jackson stated that “through this new reporting, we will have comprehensive and accurate data about the production of greenhouse gases. This is a critical step toward helping us better protect our health and environment, all without placing an onerous burden on our nation's small businesses".  …but what kind of burden will be placed upon the nation’s large businesses?  Will higher costs of production at American refineries and electrical power producers and automobile manufacturers result in higher prices for American consumers?  If so, there might be considerable backlash toward an implementation of a carbon market.

There are numerous bills in Congress dealing with the current greenhouse gas problem. The Greenhouse Gas Accountability Act of 2007 is a bill that “directs the Administrator of the Environmental Protection Agency to establish a greenhouse gas reporting program. The act would require annual reports of emissions from firms that directly or indirectly emit over 10,000 metric tons of carbon dioxide equivalent at any one facility”.  This bill is still in the proposal phase, but it could get fast-tracked considering the EPA’s new direction.  The current proposal of 25,000 metric tons per year exhibits signs of lobbyist pressure to raise the threshold, and the Obama’s willingness to compromise in order to bring together partisan interests.

Exactly what kind of carbon market will be established in the future in the U.S. is still up in the air.  Those that argue in favor of a cap-and-trade or in favor of a carbon tax might well be...

__________________

Read the full article at:

http://www.examiner.com/x-2903-Energy-Examiner
~y2009m3d10-EPA-proposes-GHG-reporting-as-first-step-toward-carbon-tax