Issues

Climate Change

Carbon dioxide emissions and climate change rank near the top of the public policy agenda for policymakers in Washington and Michigan and the rest of the country.

The Coalition supports common sense federal legislation to reduce emissions of carbon dioxide (CO2) and other greenhouse gases. Such legislation would bring certainty to energy producers, job providers and business and residential customers. The Coalition is working with Michigan policymakers and the members of Michigan’s congressional delegation to protect the state’s families and businesses from a federal regulatory scheme that would impose high – and unnecessary costs – on the state’s electric customers. We believe federal climate change legislation should:

Create a cap-and-trade system to reduce emissions over time.
Provide affected industries with all or most of their required emissions allowances in a cost-free allocation in the first decade of the program while they make the transition to low- and no-carbon technologies.
Establish reduction targets and deadlines that allow for the cost-effective development and deployment of new technologies to reduce greenhouse gas emissions.
Provide full credit for actions that offset carbon emissions and full credit for emission reductions already achieved. Activities that offset carbon emissions include large-scale tree-planting initiatives and methane recovery from landfills.

Cap and Trade: An Overview

Cap-and-trade is a proven strategy to reduce emissions. The cap is a maximum emission level for an industry. That cap is set and then lowered over time for each company within an industry. The quantity of emissions allowed is the amount below the cap. These are allowances.

Companies that can reduce emissions to a point that’s less than their cap have excess emission allowances. These allowances may be sold to another company--one that hasn’t made as much progress in reducing emissions and is still exceeding its cap, or a company for which the cost of reduction action may be prohibitively expensive. That’s the trade. Either way, emissions are reduced while the overall cost of meeting the requirements also is reduced.

Under the wrong kind of cap-and-trade mechanism, industrial states, such as Michigan, that currently generate most of their electricity with coal will be penalized and have to pay large amounts for the allowances they need. That means customers in Michigan and other industrial states will end up paying sharply higher electric bills. States on the East and West coasts rely far less on coal, meaning a much lighter financial impact on their customers. The bottom line is customers in Michigan, and other Midwest states, could end up paying far more for their power and all the dollars from that hidden “energy tax” would go to Washington. The sad part is this high hidden energy tax wouldn’t produce any noticeable environmental benefit.

Say "No" to an auction for allowances

Some policymakers favor an approach that would require utilities and other companies that emit carbon dioxide to buy all of their required allowances from a government pool in an auction. This would force businesses that produce energy or use large amounts of fossil fuels to spend billions of dollars on the allowances they need just to stay in business and serve their customers. This approach wouldn’t help the environment. It would just send billions of dollars to Washington each year. Business and customers would be pay for the allowances, then incur additional costs to buy and install the technologies to reduce their emissions.

These illustrations explain the drastic financial implications of such an auction and the reduced impact of an allocation structure on Michigan residents.

Support a cost-free distribution of allowances

To avoid an additional increase in electricity rates for residential, commercial and industrial customers, Congress should support a policy that provides electricity generators and other GHG emitters with allowances without cost for a sufficient period of time to enable them to equip their facilities with proven emission-reduction technologies.

Utility customers would benefit from that public policy approach because the allocation of emissions allowances would help hold down electric prices.