NEW YORK (Reuters) - U.S. federal climate legislation may still pass this year even though a Republican who opposes the bill won a seat in the Senate this week, a carbon markets executive said on Thursday.
“Our view is that it’s not dead,” Abyd Karmali, managing director and global head of carbon emissions at Bank of America-Merrill Lynch, told Reuters in an interview.
A climate bill passed the House last year, but the legislation has been bogged down in the Senate and its future is uncertain after Republican Scott Brown, who has opposed capping emissions, won the seat held by Ted Kennedy.
The prospect of Environmental Protection Agency regulation as well as a growing threat of nuisance torts may be enough to garner support for the bill among emitters, Karmali said.
The cap-and-trade bill, expected to create a trillion-dollar carbon trading market, would cap carbon emissions and allow pollution permits to be traded.
If the bill does not pass, the U.S. Environmental Protection Agency may begin regulating carbon emissions for the first time.
“Right now, companies have a stark choice in front of them. One path is a market-based approach through cap and trade, another is EPA regulation... In terms of trying to steer things toward a positive outcome, clearly, the Senate would be a more manageable forum,” Karmali said.
In addition, a recent raft of climate-related tort suits which cite greenhouse gas emissions as a public nuisance may give some emitters additional incentive to support carbon control.
“Without any action taking place to reduce emissions, large emitters are more likely to face tort suits from environmental and civil groups and we’ve seen that already,” Karmali said.
In September, for instance, a U.S. Appeals Court reinstated a lawsuit by eight states and the city of New York against five of the largest U.S. utilities over their carbon dioxide emissions.
Some emitting companies, including some major U.S. power companies, are already in favor of cap and trade legislation in the interest of having a more definite regulatory outlook.
“Companies are trying to make long-term investment decisions with assets that have 20-30 year time frames and the uncertainty can act as an impediment to investing or lending,” according to Karmali.
However, the window for passing the bill this year may be limited.
“If it doesn’t happen by May, it’s not going to happen this year,” Karmali said.
Delay in the world’s top industrial emitter to regulate has could further delay a global warming agreement.
But if federal climate control legislation does not pass, individual states may continue to develop their own carbon trading frameworks.
Already, 10 states in the eastern United States regulate carbon dioxide in the Regional Greenhouse Gas Initiative, and a western U.S. and Canadian initiative led by California.
Although a state-by-state approach to carbon legislation is less desirable for development of a carbon-trading market than a federal one, states may eventually form networks of carbon markets.
“It’s easy to envision a scenario where to try to make the patchwork quilt as manageable as possible, those efforts begin to link up so there would be a coordinating mechanism that’s almost acting like a federal coordinating mechanism,” Karmali said.
Editing by David Gregorio
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