Extended markets ran into resistance where expected this week, within the Sept. S&P 2810-2820 (S...
While everybody is watching Copenhagen, U.S. gets a climate change policy
12/08/2009 10:30 am EST
It gives President Barack Obama something concrete in hand to take to the global summit on climate change in Copenhagen.
But yesterday’s decision by the U.S. Environmental Protection Agency (EPA) to declare carbon dioxide a health hazard is also a real game changer. Now no matter what does or doesn’t get decided in Copenhagen, the U.S. has a carbon emissions policy.
Some business executives will cheer. What their companies have been arguing for is certainty. Tell us what the rules are so we know where to put our capital to work, said the companies that have broken with knee-jerk climate change opponent the U.S. Chamber of Commerce.
And those industries opposed to any kind of regulation of carbon emissions, which once had the option of trying to kill any legislation in the U.S. Congress, now face a stark choice: face relatively painful regulation by the EPA or hope to get a bill through the legislature that heads off the toughest part of the EPA rules. (I’m sure there will be legal challenges to the EPA rules but the court rulings so far have upheld the agency’s power to regulate carbon dioxide.) Or at least creates a chance to profit from the rules through a program of cap and trade that awards a juicy pot of trading credits to everybody from Jack’s pig farm to Jill’s steel mill.
Right now they’ve got a horrible deal, all stick and no carrot.
Here’s what the EPA has said it will do.
The first regulations, those that cover carbon emissions from cars and trucks beginning with the 2012 model year, will be finalized in March. These aren’t especially contentious since the industry signed off on them when they were first announced in May.
A second wave of regulations governing stationary sources such as factories and power plants could go into effect as soon as next spring. The rules would require stationary sources to begin using best available emissions control technology—the standard in the Clean Air Act--when they build new plants or expand existing facilities. The EPA has said that it will regulate only power plants and factories that produce 25,000 tons or more of CO2 a year.
Lisa Jackson, EPA administrator, has pretty clearly spelled out the route that business can pursue. Only Congress, she notes, has the power to set up a policy of incentives for limiting carbon emissions. EPA, however, she said, has an obligation to regulate carbon emissions whether or not Congress acts.
Copenhagen, if delegates are lucky will manage to produce a framework for a future glob al agreement on limiting carbon emissions and global climate change. Negotiating a binding treaty and then getting it ratified will be the work of years.
But as of Monday December 7, the U.S. has a national policy on controlling carbon emissions. It just remains uncertain what the final balance of carrots and sticks will be.
The most interesting companies for investors will be those who figure out most quickly how to win on the new playing field.
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