Promoting Low-Carbon Electricity Production: To Encourage Utilities to Emit Less Carbon Dioxide, The Government should Implement--Soon--a Carbon Portfolio Standard with Predictable Requirements and Guarantee Loans for Building Advanced Generating Facilities‪.‬

The electric power industry is the single largest emitter of carbon dioxide in the United States, accounting for 40% of C[O.sub.2] emissions in 2006, up from 36% in 1990 and 25% in 1970. The electricity sector is therefore a natural target as federal and state governments begin to get serious about managing C[O.sub.2] emissions. Moreover, because the marginal cost of reducing emissions in the electricity sector appears to be lower than in other sectors such as transportation, the electricity sector may deliver the largest proportional carbon reductions under an economically efficient climate policy. Several strategies have been proposed to constrain C[O.sub.2] emissions. Many economists argue that an emissions tax is the ideal tool. But although such a tax may be a good idea in theory, in the real world there are a variety of problems. The fact that it is called a "tax" may present political obstacles in some locales, even though revenues might be used to offset less efficient and politically less desirable taxes. And unless its future is clearly and irrevocably specified, an emission tax may not provide sufficient leverage to overcome the risks and encourage private investments in large capital projects that can deliver cost-effective emissions control.