Viewpoint: Learn from the E.U.'s mistake


Published April 12, 2007

Talk about environmental policy reform is all the rage in Washington these days. Congress has successfully narrowed its proposed solutions to two main areas of progress: cutting carbon emissions from industries and enacting steeper regulations for automobile fuel standards. As they prepare to tackle these issues, however, it would be wise for lawmakers to first take a look at the European Union's current woes with these very same environmental policies. They will discover that there are significant market-related problems with both the carbon emissions scheme and fuel emission standards.

Automobile mileage standards strike a chord with Democrats and Republicans alike. It's something Congress can fix in the next few years in an effort to save the Big Three. And both sides already have a starting place right under their noses. In 1975, then-President Gerald Ford penned the first compulsory mileage standard in America with the Energy Policy Conservation Act. Auto companies have repeatedly dodged enforcement of these standards and higher standards were once again left out when the bill was renewed just a few days ago.

Across the pond, the European Union recently announced new CO2 limits for all cars produced in its member countries. The new regulations establish a maximum emission of 130g/km of CO2 for every car, which translates to a 39.2 mpg here in America. The problem? The regulations are too strict.

Porsche Motor Company will be forced to move production of its popular models out of the E.U. because complying with the regulations is just too expensive. The situation for America and its Big Three is not all that different.

In addition to these higher mileage standards, the government's plan for carbon credit cap-and-trade system is ambitious, yet ultimately flawed. The cap-and-trade system only works if there is a cap. Carbon emissions will never decrease without one, which the E.U. is slowly finding out. America did effectively use a cap system to eliminate sulfur dioxide emissions entirely from industries to stop acid rain. It was only successfully, however, because it was a clear-cut cap.

Carbon credits are the main form of currency in the energy market. They are particularly big right now among carbon-spewing factories, CEOs and celebrities who want to reduce carbon emissions without conservation. For example, Al Gore's mansion consumes 20 times the amount of energy as the average home, and carbon credits are his way to offset his electric bill and placate the public.

The carbon credit market, at least right now, is also very friendly to big polluters. The massive companies and owners of mansions buy carbon credits to offset their own emissions, but these big spenders are by no means altruistic. The purchase diverts the cuts to factories in the Third World while the original polluters make a profit off of the credits they bought. When the government puts the cap-and-trade in place, lawmakers have make sure that it is enforced, via the Clean Air Act, at the source (the power companies), in order to produce a trickle-down effect to individual consumers.

The big European power companies with outdated facilities buy the credits to compensate for their inefficient plants. The E.U., however, is struggling to strike a compromise between all of its member nations, which all use different types of energy, to fix the problem. The inconsistencies in price as well as caps for carbon emission allowances have produced huge increases in electricity rates across the continent, too - something America is already fighting.

American power companies are in the same situation as European companies, with parts of the country using nuclear power, coal or natural gas. Congress can avoid the E.U.'s mistakes by carefully choosing a cap that all power companies have to meet. A cap of a 20 percent reduction in emissions can encompass most of the big polluters, who will be forced to either buy expensive allowances off the carbon market or meet the cap. Instead of allowing the credits to go to waste, America should put them back on the market, where smaller companies can buy them.

Congress can get the nation's environmental reforms started off on the right foot while avoiding the problems of the E.U. by simply committing to enforcing regulations. A competitive carbon market coupled with the passage of federal mileage standards and a national cap on credit trading and monitoring emissions can begin the long road to turning the nation's emissions green.

Kevin Bunkley is an LSA junior and a member of the Daily's editorial board.