The End of Carbon Cap and Trade? Think Again

Cap and trade legislation to regulate carbon emissions was waylaid after the mid-term elections, but experts warn manufacturers to prepare for sustainability regulation to come.

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Posted on Dec 11, 2010

After the midterm elections gave Republicans control of the House of Representatives and brought the Senate closer to political parity, some may have thought they heard the death knell for a cap-and-trade system for regulating carbon emissions.

One day after the elections, President Obama, yielding to a Congress that had already failed to enact cap-and-trade legislation and an international community that had shown similar reluctance at the United Nations summit in Copenhagen in late 2009, abandoned his push for such a system, which would have imposed a limit on carbon emissions and allowed carbon-emitting companies to buy and sell their allowances on the open market. Republicans have been staunch opponents of such regulation.

To some, the retreat was both a victory and a reprieve. “If you look at [cap and trade] as an exercise in compliance and reporting and taxation, then sure, you can breathe out and say, ‘We’ve won ourselves some breathing space,’ ” said Stephen Stokes, vice president in the Supply Chain Leaders practice at researcher Gartner.

But for manufacturers eager for more certainty on how their carbon emissions will be regulated, the cap-and-trade retreat only adds to the opaque outlook. “Cap-and-trade was just one way of skinning the cat; it was not the only way,” Obama said at a news conference the day after Democrats lost control of the House. “I’m going to be looking for other means to address this problem.”

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