Just about everyone seems to agree that the US needs climate legislation to curb carbon emissions in the hopes of preventing global warming. The problem is how best to get there. Both the House and the Senate have come up with their versions of the way forward. But industry analysts and energy companies themselves make some good points that Congress should consider before drafting any final legislation.

David Johnson, a managing director at Protiviti, the risk consultancy, says the exemptions, extensions and allowances offered under climate legislation being debated by Congress could drive prices of carbon credits below the cost of reducing emissions. This, he notes, would defeat the purpose of the Boxer-Kerry bill being debated in the Senate and the Waxman-Markey bill passed by the House. The bills also  would allow companies to shift emissions produced domestically to their international quotas. In his own words:

You could get price spikes with higher volatility, driven by bets on whether regulators will allow extensions, deferrals, accelerations, etc. But it could end up significantly cheaper to buy allowances than install scrubbers or any other equipment to reduce emissions.

And while few outside the industry want to take on concerns expressed by ExxonMobil, Rex Tillerson, chief executive of the world’s biggest publicly listed oil company, makes a good point when he says a carbon tax would be far more efficient, easier to regulate and, therefore, cheaper in the long run. He also believes cap-and-trade will lead to volatile prices for emission allowances, undermining the ability of businesses to invest in advanced technologies, creating economic inefficiencies and inviting manipulation in the markets for allowances.