WisBusiness: Wisconsin input has been key to cap-and-trade changes

By Brian E. Clark

For WisBusiness.com

MADISON — Wisconsin advocates have played a key role in shaping federal cap-and-trade energy legislation aimed at reducing greenhouse gases, according to Dan Ebert, former chairman of the state’s Public Service Commission.He left the commission in May of 2008 and joined Sun Prairie-based WPPI utility in February as vice president of policy and external affairs.

Ebert made his comments during a brown bag lunch he appeared at Wednesday with Keith Reopelle, senior policy director for the Madison-based environmental group Clean Wisconsin.

The pair discussed issues surrounding cap-and-trade policy, which officials hope will go a long way toward stemming climate change by setting a cap on pollution and limiting the amount of greenhouse gases companies can release.

The government then can issue credits, which allow companies to release a set amount of carbon. If they pollute less they can sell or trade the amount that is under the cap, similar to a system used to control acid rain from sulfur dioxide.

Ebert said Wisconsin — which generates 70 percent of its electricity from coal and has a large manufacturing base — would have suffered financially under a plan put forward by the Obama administration that would have auctioned carbon credits.

But he said efforts by Wisconsin and other Midwestern states were successful in getting the House of Representatives to pass legislation in which nearly all the credits are given out – at least initially – as free “allowances.” The bill has now moved to the Senate, where Ebert predicted “significant debate.”

“The 100 percent auction plan was absolutely the wrong design for Wisconsin,” he said. “It would have harmed consumers. But we believe we have made significant progress to help utilities manage and mitigate costs.”

Reopelle, however, said he believes some of the credits should be auctioned to pay for what he hopes would be a Midwest-based research and development center focused on energy efficiency technologies and conservation.

“This region is where an R&D center should be placed,” he said. “Investing in low-cost greenhouse gas reductions right away would result in lower costs for everyone in the long run.

“The longer we wait, the more it will cost to deal the climate change and its impacts such as floods, hurricanes and droughts,” he said.

Reopelle and Ebert said they believe many states — including Wisconsin — will push through their own climate change legislation, if only to keep heat on the federal government to act.


Sen. Mark Miller, D-Monona, who attended the meeting, agreed and said the state would need to reconcile any differences with federal legislation. Miller chairs the Wisconsin Senate’s environment committee.

All three men said, however, that no state cap-and-trade legislation would be enacted because it would be too difficult to manage and too expensive for Wisconsin.

Both the federal legislation and the Governor’s Global Task Force recommendations call for reducing carbon emissions by 22 percent of 2005 levels by 2022, and 75 percent by the year 2050. In addition, renewable generational would rise to 25 percent by 2025, according to the Wisconsin plan.

Ebert said he hopes any legislation that makes it to President Obama’s desk includes a so-called “cost collar” that would dampen market volatility by limiting price swings for carbon credits.

“The markets are not perfectly designed,” he said. “This would help protect the market’s integrity.”

Ebert said he also remains concerned that if Congress does not act, the federal Environmental Protection Agency would step in to regulate greenhouse gases. He said the EPA might not act in what he believes is Wisconsin’s best interests.

Todd Stuart, executive director of the Wisconsin Industrial Energy Group, said he does not believe federal climate change legislation will be enacted this year, though he predicted passage in 2010.

Regardless, he said he believes any kind of cap-and-trade program will be costly for WIEG members and consumers.

“This could really hurt Wisconsin industry,” he said. “It could add millions to the cost to produce electricity. If a carbon credit costs between $15 and $35 per ton and a utility has to pay for 5 million tons, that could add $75 million to its costs.

“That’s like the equivalent of 7.5 percent rate increase for consumers and that’s a lot,” he said.