Cap and Trade Bill Passes Both House and Senate

April fool 2011 :-)

After years, if not decades of bickering, both the U.S. House of Representatives, and the U.S. Senate have finally passed a bill to cap and trade carbon emissions.  But with a House led by Republican majority, and a Senate where Democrats are in control, how did the Cap and Trade finally make it through?  What does this mean for us as producers and/or consumers of carbon?

The Carbon Cap and Trade Act, (nicknamed the CCAT Act) started life in the House as H.R. 401.BS. It was stalled by House Republicans because the party viewed it as an additional tax on the producers of the nation.

A parallel bill, S.401.BS, the Senate’s version of CCAT, flew trough the Democratically controlled Senate.

Over the last 2 months, both versions of the the CCAT Act were reconciled over a bi-partisan committee.  A concession was made by Democrats.  Rather than the Carbon Cap and Trade taking part at the point of production of goods and services, Carbon Cap and Trade would take part at the point of consumption.

Strangely enough, this agreement was pushed forward by Senator Jim Inhofe, an adamant denier of global warming.  To show his personal pledge towards lowering his carbon footprint, Inhofe stated he will now start driving a Prius.

Republicans further upped the challenge to show their fanatical support for CCAT, advocating the use of mass public transportation for all public officials, both at the Capitol and their home districts.

With the compromises from both parties, the House and Senate merged H.R.401.BS and S.401.BS into H.R. 401.AF, where it passed both legislatures with majority vote.

The American average carbon output is about 20 tons per year.  Compare that to the world average of about 4.25 metric tons per year.  The CCAT bill starts us off slow, allotting 18 tons per year per person in 2012, dwindling down to 9 tons per year per person in 5 years, to 5 tons per year in 10 years.

The rational for the gradual carbon reduction is that politicians suggested that Americans did not want this to interfere too much with our way of life.  (Check your carbon footprint from one of these sources.)

What does this mean for you and me?  It means that the amount of goods and services we buy and/or utilize will be capped by the amount of carbon the particular good and service takes up.  Let’s say with all your driving, eating, tv watching, internet surfing, clothing, etc… must be limited to 18 tons per year, lowering every year for the next 10 years.

What if you need more credits?  The good news (or bad news, depending on how you look at it) is that if we need or use more carbon, we can buy carbon credits from our neighbors or other folks whose lifestyle utilizes little carbon.  It can actually pay to have a minimum impact on the planet!

The bill also creates the Department of Carbon Management (DCM) to manage the process of carbon permitting and regulation from the Federal level.

President Obama is expected to sign this bill into law this afternoon.

What do you think?  Is this a good move to limit carbon output?  Is pushing the cap and trade down to the consumer level, as opposed to the producer level, the best compromise?  How will this bill impact your life and lifestyle?

Jonathan Mariano is an MBA candidate with the Presidio Graduate School in San Francisco, CA. His interests include the convergence between lean & green and pursuing free-market based sustainable solutions.