Hill Heat

Visit Hill Heat’s continuing coverage of. S 2191.

The initial draft.

Witnesses

• Kevin Anton – president, Alcoa Materials Management
• Frances Beinecke – president, Natural Resources Defense Council
• William R. Moomaw – director, Institute for the Environment, Tufts University
• Will Roehm – vice president, Montana Grain Growers Association
• Paul Cicio – executive director, Industrial Energy Consumers of America

Excerpts from Beinecke’s testimony:

In order to assure that we get on, and stay on, the necessary emission reduction pathway, NRDC believes the coverage of the bill and the total amount of emissions reductions should be increased. . . . Scientists are telling us that we will need reductions in total U.S emissions on the order of 80% by 2050 in order to do our proportional part in a global program of preventing catastrophic impacts. Our calculations indicate that the bill will result in reducing total U.S. emissions by approximately 51-63 percent by 2050. In order to ensure that overall reductions keep pace with the science, NRDC believes that the bill’s coverage should be increased. The most important source of emissions that is not covered is the commercial and residential use of natural gas.

It is important to distinguish between the abatement cost of a cap and trade system and its distributional implications. The abatement cost will be significant, but far less than the cost of inaction. At the same time, the value of the pollution allowances created by the law will be much higher: some estimates place their value between $30 and $100 billion per year.

The bill should be revised to allow EPA to take all necessary actions to avoid dangerous global warming by requiring additional reductions, including by changing applicable targets or through increasing the coverage of the bill.

The Sanders-Boxer bill contains two complementary performance standards for coal plants and we recommend the Subcommittee and Committee incorporate these concepts into S. 2191.

NRDC believes these pollution allowances are a public trust. They represent permission to use the atmosphere, which belongs to all of us, to dispose of global warming pollution. As such, they are not a private resource owned by historical emitters and such emitters do not have a permanent right to free allowances. The value of the allowances should be used for public purposes including promoting clean energy solutions, protecting the poor and other consumers, ensuring a just transition for workers in affected industries, and preventing human and ecosystem impacts both here and abroad, especially where they can lead to conflicts and threats to security.

The current bill’s allocation to electric power and industrial emitters, however, is still much higher than justified under “hold-harmless” principles and will result in windfall profits to the shareholders of emitters. For example, an economic analysis by Larry Goulder of Stanford University suggests that in an economy-wide upstream cap and trade program, only 13% of the allowances will be needed to cover the costs that fossil-fuel providers would not be able to pass on to their customers. Similar analyses, with similar results, have been conducted by Resources for The Future and the Congressional Budget Office.

As a result, NRDC believes that the bill should be improved substantially by reducing the starting percentage of free allowances to emitters and phasing them out faster – within 10-15 years of enactment.