Boxer Bill to Include Upper and Lower Limit on Carbon Price
The anticipated climate legislation from Sen. Barbara Boxer (D-Calif.) will include an upper and lower limit on the price of carbon, a significant change from the measure that passed the House that is designed to gather more support for the measure in the Senate.
The measure, often called a “price collar,” is designed to stabilize the price of the credits that polluting entities would need to acquire under a cap-and-trade system. The provision is popular with many swing-vote senators and industries, as it helps lessen worries about price swings and curb market speculation. And setting a floor price is preferable to environmental advocates, who don’t want to see prices drop so low that there is no incentive for businesses to reduce their carbon (see our earlier post on this subject).
Reports The Energy Daily (sub. req’d):
The draft legislation, which Boxer (D-Calif.) plans to introduce at the end of the month, would establish an initial allowance price ceiling of $28 per metric ton of carbon dioxide and a price floor of $11, with the prices adjusted upwards annually thereafter, according to a source familiar with the measure.
Under the provision, if heavy demand pushed allowance market prices above the $28 ceiling, the government would borrow allowances from future years and sell them to regulated entities at the ceiling price, a move that in theory would reduce demand for allowances and lower prices.
The inclusion of a price collar is reflective of Boxer’s drive to keep the costs of a climate bill low.