Caterpillar, FedEx Join Debate Over Carbon Tax Vs. Cap and Trade

September 24, 2009

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Industry-leading businesses and associations are locking horns over the merits of a carbon tax versus a cap-and-trade program as passed in the House’s climate legislation in June. Those in favor of a carbon tax include Caterpillar and FedEx. However, globally, shippers prefer a cap-and-trade program.

The chief executives of Caterpillar Inc. and FedEx Corp. said at an energy conference in Washington that they prefer a tax on carbon dioxide emissions and criticized the cap-and-trade measure being debated in Congress, reports Bloomberg News.

Fred Smith, CEO of FedEx, said in the article that the legislation approved by the House in June gives certain industries free pollution permits that would distort the market.

George David, chairman of Hartford, Connecticut-based United Technologies Corp., told Bloomberg that the carbon tax has been revived in part because of the complexities and loopholes in the cap-and-trade legislation. United Technologies owns Carrier, Sikorsky, Otis and Pratt & Witney, among others.

Some executives have said that measure doesn’t create a direct enough disincentive to pollute, reports Bloomberg.

However, five shipping industry associations said in a study that a global cap-and-trade scheme is the most effective way to cut carbon emissions, reports Reuters.

Under cap-and-trade schemes, companies or countries face a carbon limit and if they exceed their limit they can buy allowances from other polluters which stay under their cap.

The national ship industry associations of Australia, Belgium, Norway, Sweden and the UK have jointly released a paper arguing that a cap-and-trade scheme is best for the whole industry, and provides two options for the mechanism, reports Reuters.

Robert Ashdown, head of the UK Chamber of Shipping’s technical division, said in the article that an emission trading scheme would cost the seaborne industry 5 billion euros ($7.39 billion) to 6 billion euros a year, depending on the price of carbon.

The first option treats shipping as a country in its own right which means the sector would be given a specific amount of carbon credits, while the second option allows for the number of credits earmarked to be determined by the number of sales of bunker fuel sold by governments at auction to shipping firms, according to Reuters.

The proposals did not set targets.

UK Chamber of Shipping President Jesper Kjaedegaard told Reuters that some shipping nations and industry associations might have “different ideas” but the industry “can no longer take an ostrich approach.”

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