Hill Heat

From the Wonk Room.

Ten Democratic senators echoed polluters in a letter sent to Sen. Barbara Boxer (D-CA) about her filibustered climate change legislation last Friday. The senators, nine of whom supported cloture to end debate and vote on amendments, wrote, “We commend your leadership in attempting to address one of the most significant threats to this and future generations; however, we cannot support final passage of the Boxer Substitute in its final form.” Their letter continues:

To that point we have laid out the following principles and concerns that must be considered and fully addressed in any final legislation.

The senators’ letter uses practically the same talking points and specific policy demands as the industry polluters who fought to kill the legislation, in particular the industry lobbying groups American Coalition for Clean Coal Electricity (ACCCE) and the National Association of Manufacturers (NAM). A review of the letter reveals the Boxer substitute (S. Amdt. 4825 to the Lieberman-Warner Climate Security Act, S. 3036) already made concessions to these parochial and fossil-industry demands:

Point #1: “Contain Costs and Prevent Harm to the U.S. Economy.”

Fossil Ten Senators	“While placing a cost on carbon is important, we believe that there must be a balance and a short-term cushion when new technologies may not be available as hoped for or are more expensive than assumed.”
ACCCE	“Protect American consumers and the U.S. economy through effective cost-containment measures.”
NAM	“Include a safety valve or other equally effective and responsive cost-containment mechanism . . . Support economic growth and do no harm to U.S. economy.”

Commentary: Lieberman-Warner already included a significant “transition assistance” in the form of free permits to polluters [Secs. 541 – 572], borrowing (15 percent of obligation) [Sec. 511] and offset provisions (30 percent of obligation) [Title III], and a “cost containment” auction that would contain the price of seven percent of all allowances sold to polluters [Sec. 522]. A “carbon market efficiency board” is given the authority to loosen restrictions on borrowing and offset use—but not to tighten them [Sec. 521]. What’s left is even greater permit giveaways or “safety valves” that would allow polluters to bust the cap.

Point #2: “Invest Aggressively in New Technologies and Deployment of Existing Technologies.”

Senators	“It is critical that we design effective mechanisms to augment and accelerate government-sponsored technology R&D programs and incentives that will motivate rapid deployment of those technologies without picking winners and losers. We also want to include proposals to provide funding for carbon capture and storage and other critical low carbon technologies in advance of resources being available through the auction of emission allowances.”
ACCCE	“Guarantee, through public-private sector partnerships, aggressive, near- and long-term investments in new, advanced technologies that 1) avoid or reduce CO2 emissions, 2) capture, transport, and safely store CO2, and 3) use CO2 in beneficial ways, whenever practical.”
NAM	“Promote advanced, energy efficient and zero-and-low-GHG emission and sequestration technologies as part of a long-term strategy.”

Truth: The Fossil Ten claim they don’t want to pick “winners and losers” but then call for special support for “carbon capture and storage”—an important but experimental coal industry technology that already received special consideration under the Boxer substitute. In fact, the Boxer substitute called for a special “Kick-Start for Carbon Capture and Sequestration” fund that would go into effect within 120 days, years before emissions reductions would have to take place [Sec. 1005]. Evidently that’s not enough.

Point #3: “Treat States Equitably.”

Senators	“The allocation structure of a cap-and-trade bill must be designed to balance these burdens across states and regions and be sufficiently transparent to be understood.”
ACCCE	“For example, if a cap-and-trade program were to be implemented, it would be essential to have fair and equitable allocation of emission allowances.”
NAM	“Be equitable and economy-wide in scope”

Commentary: Lieberman-Warner reserved three to four percent of allowances for states with high manufacturing and coal mining, in an admittedly complex formula [Sec. 602]. Another one percent of allowances would go to Alaska [Sec. 624], and four to seven percent of allowances to the other 49 states, divied up for coastal states, Indian tribes [Sec. 625], and wildlife restoration [Sec. 631], for adaptation efforts in coordination with the Secretary of the Interior. In addition, significant funding is allocated to American automobile manufacturers [Title XI] and the coal industry [Title X]. Of course, “equitable” and “designed to balance” is in the eye of the beholder.

Point #4: “Protect America’s Working Families.”

Senators	“For instance, one way to provide some relief would be to provide additional allowances to utilities whose electricity prices are regulated, which would help to keep electricity prices low.”
American Electric Power Service Corporation	“AEP feels strongly that the electric sector should receive emission allowances commensurate with its pro rata share of the emission caps in the legislation, whether emissions are regulated upstream or downstream.”

Commentary: Even though experts agree allowances should be auctioned, Lieberman-Warner already provided such utilities with free allowances – 18 percent of all initial permits given away for free to fossil-fueled electricity generators [Sec. 551]. Furthermore, the bill already had significant assistance provisions for American families: a tax rebate fund that grows from 3.5 percent of permits to 15 percent in 20 years [Sec. 582], 13 percent of allowances reserved for local distribution companies to provide support to low- and middle-income consumers [Sec. 601], and the aforementioned assistance to states.

Point #5: “Protect U.S. Manufacturing Jobs and Strengthen International Competitiveness.”

Senators	“The final bill must include enhanced safeguards to ensure a truly equitable and effective global effort that minimizes harm to the U.S. economy and protects American jobs. Furthermore, we must adequately help manufacturers transition to a low carbon economy to maintain domestic jobs and production.”
NAM	“Give consideration to industries exposed to foreign competition if a U.S. climate change policy creates competitive disadvantages.”

Commentary: As the senators’ letter recognized, Lieberman-Warner already has a “mechanism to protect U.S. manufacturers from international competitors that do not face the same carbon constraints [Sec. 1306].” And Lieberman-Warner already reserved 11 percent of allowances for the first ten years of the program to be given away for free to carbon-intensive manufacturers [Sec. 541].

Point #6: “Fully Recognize Agriculture and Forestry’s Role.”

Senators	“Strong, aggressive and verifiable offset policies can fully utilize the capabilities of our farmers and forests.”
ACCCE	“Allow broad use of verifiable actions to offset manmade greenhouse gas emissions. Use of verifiable offsets (from domestic or international action), should be unlimited because they help achieve cost-effective reductions in manmade greenhouse gas emissions. . . Programs such as terrestrial carbon sequestration, conservation, and energy efficiency are important domestic and international tools to reduce the carbon footprint of greenhouse gas emitters.”
Edison Electric Institute (EEI)	“Provide for the robust use of a broad range of domestic and international GHG offsets.”

Commentary: Lieberman-Warner already included “strong, aggressive and verifiable” offset policies – 15 percent each for domestic and international projects. Behind the rhetoric of “farmers and forests” lies the reality that the most easily verifiable offsets come from methane emissions from coal mining and industrial agriculture waste ponds – practices that should be dealt with for other safety and health reasons. As the restrictions on offset use are loosened, the regulatory infrastructure needed to verify offsets increases. The pollution industry would like to see offset usage be unlimited, which would require a complex new regulatory bureaucracy that the polluters would oppose tooth and nail.

Point #7: “Clarify Federal/State Authority.”

Senators	“Congress should adopt a mandatory federal cap-and-trade program that will be the single regulatory regime for controlling greenhouse gas emissions.”
ACCCE	“Avoid a patchwork of conflicting standards or duplicative programs through the adoption of a uniform federal program.”
NAM	“Preempt all state climate change laws”
EEI	“Provide certainty and a consistent national policy”

Commentary: Lieberman-Warner would distribute four percent of allowances (growing to ten percent by 2032) to states who “show leadership” on reducing emissions—but only those that do not have a conflicting cap-and-trade program. The senators are joining the Bush administration in the attempt to block and preempt state-level regulation of greenhouse gases.

Point #8: “Provide Accountability for Consumer Dollars.”

Senators

“The cap and trade program developed in the Lieberman-Warner bill has the potential to raise over $7 trillion. Much of these funds will be indirectly paid for by consumers through increased energy prices. The federal government has a fundamental obligation to ensure these funds are being spent in a responsible and wise manner. The development of any cap and trade program must recognize the sensitivity of this obligation and eliminate all possibility of waste, fraud or abuse.”

American Petroleum Institute

“Be transparent and understandable to all consumers and stakeholders.”

Commentary: Considering that these senators are also calling for federal preemption of stronger state regulations, greater subsidies for the coal industry, electric utilities, and manufacturers, and even greater “cost-containment” provisions than those already in Lieberman-Warner, it’s hard to imagine what they consider to be “responsible and wise” spending or the elimination of “waste, fraud or abuse.”

Sen. Boxer’s version of Lieberman-Warner attempted to satisfy these kinds of demands as well as progressive principles espoused by other senators. Download the This letter.