Carbon Pricing and Regulatory Uncertainty

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Bloomberg writes today about the months-long effort by utility companies to get Congress to pass a climate bill that includes a cap-and-trade component. Industry lobbyist Ralph Izzo is discouraged:

“I don’t know what more you can do,” Izzo said. “We are essentially volunteering to be the first to be regulated and people don’t want to do it.”

….“The odds are still very long,” said David Brown, senior Vice President for Federal Government Affairs at the Chicago- based utility Exelon Corp., who estimates he’s held hundreds of meetings with senators and staff on the issue. “Everybody’s just exhausted.”

Utility companies anticipate Congress will eventually pass legislation that mandates reductions in greenhouse gases and favors renewable sources of energy, rather than letting the U.S. Environmental Protection Agency decide how best to regulate.

Still, not knowing when Congress will step in makes planning investment difficult. “There’s a lot of capital sitting on the sidelines just waiting for more regulatory clarity,” said Lewis Hay, CEO of Juno-Beach, Florida-Based NextEra Energy Resources LLC.

Italics mine. Conservatives keep complaining that the recession isn’t really the fault of weak demand, it’s the fault of businesses holding back on investment because of uncertainty over new regulations. This is about 90% bogus, but to the extent it’s true, one solution is simply to pass regulations that make the investment picture clearer. A cap-and-trade bill would have done that. But now that it’s been killed, no one knows what will happen next. Regulations from the EPA based on the Clean Air Act? A carbon tax sometime in the future? Or what?

You want regulatory certainty? Pass a cap-and-trade bill. This makes it clear what the primary regulatory tool will be; it makes it mostly clear what the future price of carbon emissions will be; and those who want even more clarity can largely hedge away the remaining uncertainty in the futures market if they want to. But now, none of that can be done. And the planet will continue to heat up. And we run the risk of the EPA being forced to make things worse by applying a badly-constructed law to the problem. Nice work, conservatives.

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THE BIG PICTURE

You expect the big picture, and it's our job at Mother Jones to give it to you. And right now, so many of the troubles we face are the making not of a virus, but of the quest for profit, political or economic (and not just from the man in the White House who could have offered leadership and comfort but instead gave us bleach).

In "News Is Just Like Waste Management," we unpack what the coronavirus crisis has meant for journalism, including Mother Jones’, and how we can rise to the challenge. If you're able to, this is a critical moment to support our nonprofit journalism with a donation: We've scoured our budget and made the cuts we can without impairing our mission, and we hope to raise $400,000 from our community of online readers to help keep our big reporting projects going because this extraordinary pandemic-plus-election year is no time to pull back.

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