Financial Reform Expected to Affect Climate Legislation

Financial regulatory reform, which the Senate will consider before climate change legislation, is likely to impact the type of trade mechanism as the "vehicle of choice to meet emission targets," ClimateWire reported via the New York Times. Sen. Maria Cantwell, D-Wash., said: "People are moving more toward something that's much more streamlined. The bottom line is you don't want to have added volatility to the market when trying to solve [the emissions] problem. And that's clearly what the futures trading does. It adds volatility. What you want is a predictable price so that people can move forward and diversify."

Cantwell suggested that a "greater understanding of the derivatives markets from a financial reform debate could even push policymakers toward 'cap and dividend,' which would auction a majority of the emission permits and return the revenue to American taxpayers," wrote the newswire.

Carol Browner, director of the White House Office of Energy and Climate Change, said "depending on what happens with the financial regulatory reform legislation, that may resolve some of the issues of concern looking across a whole variety of markets. If not, there are probably things that can be done within the bill that can answer a lot of those questions."

The general public may be sounding a cautionary note and oppose cap-and-trade legislation because of the large role Wall Street would play in the developing market. Tyson Slocum, director of energy at Public Citizen, said: "There are big implications for climate if we go this cap-and-trade route with derivatives reform because in public opinion it would be a bad idea to introduce a new multitrillion market overlaid on the derivatives market."

Friends of the Earth's Nick Berning said closer examination of proposed carbon trading systems has led to bi-partisan opposition. "There is a lot more going on than whether just the Senate takes up derivatives reform. Whether they do that or not, the more people look at cap and trade the more problems they are seeing. It's not only just folks inside of Washington, but also activists. We've been hearing this from the right, but now we are hearing more and more concerns from the left as well."