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The best way to move forward on coal is to price carbon pollution appropriately, at a price that reflects its significant negative impacts on climate and human health. These impacts are not currently taken into account in the decisions of energy companies—or in their bottom lines.

 

Ideally, a carbon-pricing policy would come from Congress, but any sort of comprehensive climate legislation seems a long way off. In the meantime, the most promising tool for reining in emissions is President Obama’s forthcoming regulation of existing power plants.

 

Obama’s EPA is working on the rule now and a proposal will be published in early June. A wise regulation will harness unbiased market forces to determine how much coal America should burn.

 

To do that, the agency should provide each state with an “emissions budget” and allow states to meet those budgets by establishing carbon markets. To create such a market, a state would simply need to auction or freely allocate a limited number of tradable emissions permits and then require power plants to acquire a permit for each unit of carbon they emitted. As with any other commodity, permit prices would be determined by supply and demand.

 

Coal-fired power plants would have an incentive to save money on permits by reducing their emissions—whether by switching from coal to natural gas, capturing some of their carbon, burning coal more efficiently, sponsoring energy conservation projects, or even closing down thereby creating incentives for other sources of energy including renewables. Of course, if the cost of these changes outweighed the cost of the permits, a plant could continue burning coal without changing its practices in any way.

 

The EPA should seize this opportunity to adopt a flexible, market-based solution to carbon pollution. Then the agency can sit back and let companies burn as much coal as they want—because they will be paying an appropriate price for doing so.

 

Richard L. Revesz is dean emeritus and Lawrence King professor of Law at New York University School of Law. He is the director of the Institute for Policy Integrity.

 

 

Source: http://blogs.wsj.com/