Legislators’ Bill Based on CCAP’s Safe Markets Development Approach

Washington, D.C. — Center for Clean Air Policy (CCAP) President Ned Helme today congratulated U.S. Reps. Lloyd Doggett (D-Tex.) and Jim Cooper (D-Tenn.) for introducing innovative climate legislation that will meet emission reduction goals while containing costs, avoiding volatility in emission allowance prices and preventing market manipulation or excess speculation that could lead to destructive booms and busts in a U.S. carbon market.  Working closely with CCAP, Congressmen Doggett and Cooper used CCAP’s newly released Safe Markets Development Approach as the basis for the bill.

“The Safe Markets Development Act responds to concerns about the possibility of high costs, market manipulation and speculators interfering with new carbon markets,” said Helme.  “This new approach provides special procedures or training wheels in the early years of a cap-and-trade program that create predictable annual allowance prices while meeting critical 2020 emissions goals. The predictability of the price will also help sustain needed investments in new technologies.” 
 
“Legitimate concern over speculation in fossil fuel and financial markets must not stand in the way of new clean energy policy.  Proper action now will spur both job growth and energy independence.  This Safe Markets approach will avoid carbon allowance price volatility without sacrificing strong science-based limits on carbon pollution,” said Doggett.  “Responding effectively to climate change requires the involvement of everyone willing to work in good faith based on good science.  The more members we bring together, the more successful we will be in enacting a solution.”

“We have to thread the needle very carefully if we’re going to implement a successful carbon cap-and-trade program,” said Cooper.  “An efficient, stable carbon market will produce significant reductions at a steady price. Environmental and business groups alike should welcome the Safe Markets Development Approach because it provides the right amount of protection and certainty in the early years of this important program.”  

Under CCAP’s proposal in each year of Phase I (2012-2019) an independent Board establishes a predicted annual allowance price path for the entire period with the goal of meeting annual and cumulative emissions targets. Four quarterly auctions are held each year and are designed to maintain this price on average. Each year the Board reviews emissions performance for the previous year and adjusts its price projections if needed to ensure that the gradual trend path of emissions reductions is in line to achieve the 2020 emission target.  Beginning in 2020, Phase II reverts to a more traditional cap-and-trade approach with annual emissions caps.