Here is a guest post by LEVI, a regular commenter on this blog.

There’s a lot of rhetoric floating around regarding climate change and the solutions being proposed to address the problem.  I wrote this piece to give readers a starting point from which to consider the problem and the mitigation programs under consideration.

This article is meant to provide a brief discussion of Climate Change and the two major proposals being advanced in the US congress.  It is meant to provide a starting point for those trying to understand the global warming problem and the two proposals under serious consideration as possible solutions.  The intricacies and likely effectiveness of the respective proposals are beyond the scope of this writing

Global warming is a reality and the consensus of every major scientific academy and society in the world is that global warming is being accelerated by human production of Green House Gasses (GHG’s), primarily carbon dioxide.  GHGs are a by-product of fossil fuel combustion (petroleum, coal and natural gas).  These gasses are emitted into the atmosphere and act like a green house for the entire planet, preventing energy from being reflected away from the earth.  This results in rising global temperatures. 

Data models suggest that global temperature may rise as much as 5 degrees Fahrenheit by the end of the century.  Although this doesn’t sound like much from the perspective of the thermostat in your living room, such a change will result in major economic, meteorological and environmental effects.  The scientific and economic consensus is that these effects will have a detrimental impact on global economies and many species of life on the planet.  Scientists and world leaders agree that we need to do something to curtail global warming or we may face devastating environmental and economic consequences by the end of this century.   

The two solutions that have been discussed in the US Congress are the imposition of a carbon tax or implementation of a cap & trade system.  A carbon tax would tax the source of the GHG’s at some point in the supply chain.  Presumably, the revenues generated by the tax would be used to develop cleaner energy sources or technologies to “clean up” the emissions associated with fossil fuels.  The carbon tax has the advantage of being relatively simple to administrate.  We know how much GHG’s are emitted by burning particular fuels.  As such, the tax could be imposed anywhere between the well-head or mine and the final consumer.  The problem with a flat carbon tax is that it will be passed on to the consumer and therefore tends to be regressive in that it impacts lower income earners more severely.  Further, a tax does not impose any hard cap on emissions.  As such, an tax on green house gasses may not serve to actually reduce emissions.   

A Cap & Trade system by comparison would set a GHG reduction target for major GHG emitters ( such as power plants and large industries like steel, glass and concrete) to be accomplished by a certain date.  This is the CAP portion of cap & trade.  Emitters would then be required to reduce their emissions by a certain percentage over time. The specific reduction target for each emitter would be established by reference to a baseline.  If the EU (European Union) model is followed, at the beginning of the program, large emitters would be granted a number of carbon credits (equivalent to 1 ton of Co2) equivalent to their baseline GHG production.  Emitters could also earn credits by funding approved carbon reduction projects.  Some examples include developing carbon sinks through re-forestation, sequestration projects or development of non-fossil fuel energy sources.  The idea is to establish a carbon credit trading system that allows emitters to buy or sell carbon credits on an exchange.  This is the Trade portion of cap & trade.  To the extent that emitters fail to meet their Cap, they could be faced with having to pay large fines or having to buy carbon credits on the open market sufficient to bring them into compliance.  Cap & Trade is premised on the idea that the market will reward those who develop clean energy technologies or otherwise reduce their GHG output and penalize those who don’t.                     

The proposed solutions above are discussed in their simplest terms and this article is by no means meant to be a comprehensive discussion of the intricacies or merits of either proposal.  That said, the ultimate conclusion is that both will result in higher energy costs to the consumer.     

The problem we face as a country and a planet is the conflict between doing the right thing by reducing global GHG emissions and coming to terms with fact that doing so will result in higher energy prices and tend to reduce our standard of living, at least in the short term.  As we are all painfully aware, higher energy prices impact virtually every aspect of the economy and result in higher costs of production.  These costs are ultimately passed on to the consumer.  These consequences are not likely to be politically popular with industrial concerns or consumers.  Addressing global warming creates a unique problem from a political perspective as the real impact of our current behaviors may not be realized for years.  Furthermore, the impact of reducing emissions in this country may have little or no impact if other major producers don’t follow suit.  As such, the problem really calls out for a global solution.  Unfortunately, barring an imminent catastrophe, it seems probable that the US and other major producers of GHGs lack the political will to change their behavior sufficiently to have a major impact the problem.  It is our duty as citizens of the world to support our political representatives such that they have courage to enact a meaningful GHG reduction program that can be emulated by and participated in by the rest of the world.