By Paul Baker

WASHINGTON D.C. - The cap-and-trade approach to greenhouse gas reduction is gathering significant moment from surprising sources, including major oil and gas players active in the Rocky Mountains.

You may have missed the story last week but a consortium of business and environmental leaders have asked Congress to enact a mandatory timeline for slowing and eventually reversing the growth of greenhouse gas emissions.

The U.S. Climate Action Partnership advanced a blueprint that includes a mandatory cap-and-trade system, under which oil refineries, power plants and other industrial operations
could stay within federal limits for greenhouse gas emissions by buying and selling allowances to release pollutants blamed for global warming.

The group hopes the approach will help remove some of the regulatory anxiety currently in the marketplace. “Regulatory uncertainty is postponing investment,” said James Rogers, chief executive of Duke Energy Corp., a major electricity distributor. Polluters would have to meet new limits for greenhouse gas emissions, which would be capped at 58 percent of 2005 levels by 2030 and 20 percent of 2005 levels by 2050.

The Obama administration backs a cap-and-trade approach and Democratic leaders in Congress have promised to fast-track energy legislation. Corporate leaders who believe stepped-up greenhouse gas regulation is inevitable are eager to play a role in shaping it.

The coalition, which consists of five environmental groups and 26 businesses, outlined the proposal in testimony before the House Energy and Commerce Committee. BP America, Shell and ConocoPhillips are the major oil companies involved in the consortium. Some other oil companies, including Irving-based Exxon Mobil Corp., favor a carbon tax over cap-and-trade.

Rep. Henry Waxman, D-Calif., the powerful Energy and Commerce
Committee chairman, said the companies face a dilemma. “They
are reluctant to invest in old, polluting technologies because
they know that tougher regulations are inevitable, but they
can’t invest in new, cleaner technologies until they know what
Congress is going to require,” Waxman said.

The consortium envisions a new Carbon Market Board that would
be tasked with setting annual limits on the amount of emissions
allowances companies could use.

Higher Costs Seen

Not surprisingly, the plan drew criticism from conservatives,
who said it would lead to slower economic growth and higher
energy costs. Rep. Joe Barton, R-Ennis, predicted that any move
to clamp down on emissions during a recession would lead to
further economic declines. Some Democrats also questioned the
plan, including Houston Democratic Rep. Gene Green who said he
has concerns that the prices for emissions allowances would be
too volatile under a cap-and-trade program.

Some environmentalists said the proposed greenhouse gas limits
would be undermined by the USCAP’s proposal for a “safety
valve” that would kick in whenever the price for emission
allowances spiked. Then, under the coalition’s plan, the
government could allow companies to use more offsets to meet
the emissions limits.