Carbon Emissions: Regulation Versus Cap-and-Trade

John Kerry kicked off the conference at a panel on the politics of global climate change. The panel was a study in contrast: five cap-and-trade wonks talking about the niceties of auction versus allocation, and John Kerry, who knows all those niceties as well as anybody, insisting on bringing the conversation back to the effects of climate change on species and cities and people.

In his opening remarks, indeed, Kerry said that he wanted to ban TXU (you know, the energy company in the process of being bought by Blackstone KKR and Texas Pacific) from building any coal-fired plants in the United States which don't capture or sequester carbon. "Why? Because China is about to build one or two plants a week, and that means Katie bar the door on this issue."

Of course, that kind of thinking flies directly in the face of the kind of thinking behind cap-and-trade (and Kerry himself has a cap-and-trade bill in Congress). Under a cap-and-trade system, TXU should be allowed to build as many coal-fired plants as it likes, assuming it buys the right to build those plants in the open market. And it should, essentially, be able to capture and sequester carbon in China to offset its own emissions in Texas.

But Kerry is a realist, and he knows that for the time being, no cap-and-trade system will exist in the US. So he's regulating for the time being.