Florida Governor Charlie Crist (R) signed an executive order last summer to develop a carbon market in the state, and has been making other good strides in the renewable energy department. Now, the governor, lawmakers, and Florida-based companies are debating the two main methods of carbon control: A carbon tax or a cap-and-trade system.
A cap-and-trade policy to limit carbon dioxide (CO2) – a major contributor to global warming – is a market-based system that creates a financial incentive by assigning a cost to polluting. First, a “cap” is established that limits how much CO2 can be released into the atmosphere (limits are often determined by industry, like power plants). That amount is divided up into permits that represent the right to emit that amount. Companies buy and sell permits based on how much pollution they have to emit. Those companies that cut emissions or make their operations more efficient are able to sell their extra permits and make money. The ones who don’t cut emissions have to buy more permits.
Former British Prime Minister Tony Blair was in the Sunshine State last week to discuss the intricacies of a cap-and-trade policy with Crist and others. Emissions trading has been happening in Europe for some time, but Florida officials – like the rest of America – are just becoming acquainted with the idea. Florida’s State Chief Financial Officer, Alex Sink, told 100 business leaders at a recent conference on carbon markets:
If we make Florida a hub for developing international carbon trade, we’ll be able to energize Florida’s economy. We have to change the way we do business and explore what opportunities clean energy offers to Floridians.
On the other hand, Florida Power & Light, – one of the largest renewable energy providers in the nation – favors a carbon tax. Rather than relying on the market to set the price of carbon, the utility favors a price set by the government. Specifically, $10 per ton of carbon and with an eventual increase of $2 each year. Politicians, though, have found a carbon tax to an unpopular idea and an FP&L representative noted “We also are political realists and realize that it’s much more likely that this country will have some sort of cap and trade.” It never hurts to ask, I guess.
Palm Beach Post
South Florida Business Journal
Union of Concerned Scientists
Good to see that individual States are moving to do something about climate change, even if the White House continues to drag its feet.
I read with interest your summary of the debate on tax vs carbon trading. The devil is in the detail with both proposals. I am actually not surprised that Florida Power & Light favors a tax, as the price they want to put on carbon seems quite low. Of course, in the end the government does have a say over the initial carbon price, no matter what model they choose – if they set the cap too low or give away too many permits under a cap-and-trade system (which is what happened in Europe from what I understand), industry does not get the incentive to do much to fix their carbon pollution, and it all just becomes a giant exercise in seeing to be doing something while continuing with business as usual.
Unless we price carbon high enough, not much action will be taken early enough by industry players. Unfortunately, that will initially hurt everybody’s hip pockets, at least until we have moved to a more climate friendly post-carbon industrial world. Politicians will need the support of their constituents to be bold enough to move in the right direction. However, I can also see many opportunities here, and I hope these will be taken up and create a whole new market of ideas and technologies.
Maria Surma Manka
All good points, Chervil. Especially about setting a price too low on carbon. It has to be an amount that will spur real change.