Fairness In Allocating Greenhouse Gas Allowances: A Difficult Balancing Act
“Fairness” is a relative, not an absolute, concept. If this was not the case, lawyers would be out of a job. Apparently, this truism can also apply to senators.
With Copenhagen fast approaching, climate change legislation will again be the topic of the day. Cap-and-trade language, as currently proposed in both the House and the Senate, allocates free CO2 allowances to electrical distributors based on a 50/50 formula; that is, 50% on total emissions and 50% on total energy sales. Under this formula, utilities that are more coal dependent will need to purchase more allowances than they would if the allowances were allocated based only on emissions, and those higher costs will be passed on to their customers.
Fourteen Democratic senators, from coal-dependent, Midwestern states, have written a letter to Senate Democratic leaders requesting that the 50/50 formula be changed to base the allowances solely on emissions.
The effect of using the 50/50 formula is that those states that have historically relied more heavily on coal-fired electrical generation, such as Iowa, North Dakota, Wisconsin, Minnesota, Illinois and Colorado, will pay significantly more for future power, during the transition period to cleaner energy, than under a 100% emissions formula. The fourteen senators argue that legislation must equitably distribute transition assistance across individuals, states and regions. Put another way, they are saying that in this transition period, we should not penalize one group or geographic area, so the 100% emission formula is the "fair" thing to do.
There are, of course, those who disagree. They argue that the purpose of the legislation is to create financial incentives to switch to lower-carbon fuel sources, so causing higher costs to higher polluting states, is, in fact, “fair” and appropriate. It is, in their view, not proper to let one group be bailed out for relying so heavily on coal-fired energy in the past.
So who's right? Like most arguments that address fairness, it all depends on where you stand.
If you believe that cleaner energy is something that had to happen last week and that we must mandate an immediate change, then it would be “fair” to force the higher expense of cleaner energy on one group. If you believe that it will take some time to wean ourselves away from using coal as the primary form of electrical generation (which we have used for more than 125 years), then it would be “fair” to attempt to make the transition less painful as proposed by the senators.
Which view should prevail? That's for you to decide, but let me add two pragmatic considerations to the mix.
First, despite the best efforts of all concerned, coal will be with us for a long time. It will likely get cleaner but, due to cost and increases in demand for electricity, it will be a significant part of the mix, along with increasing use of solar, wind, geothermal and hydro. In fact, the U.S. Energy Administration expects coal to account for 47% of U.S. electricity in 2030, which is a 2% decrease from the present.
Second, in this age when a Senate majority requires 60 votes, can 14 votes be ignored?
