Hill Heat

At this morning’s House Global Warming Committee hearing on Auctions and Revenue Recycling in Cap and Trade, the witnesses presented some of the first Congressional testimony on the economic implications of a greenhouse-emissions cap and trade system such as the one proposed in Lieberman-Warner (S. 2191).

A summary of some of the analysis presented in the written testimony:

1. Power generators will raise prices the same whether allowances are given away for free or are auctioned, because the price is set by the limitation in supply (the cap)
2. Investment in energy efficiency provides greater immediate taxpayer return than technology investment
3. Because power generators are free from competition they don’t need any protection through free allowances
4. A European Commission analysis found no macroeconomic negative impact of moving their cap-and-trade system to full auction
5. Free allocation to load-serving entities is a subsidy to electricity consumption, which leads to an increase in allowance prices and requiring greater decreases from other sectors
6. The “virtual tax” a cap-and-trade system imposes can be greatly alleviated if revenues are used to reduce pre-existing taxes
7. To fully offset the costs on the electricity sector through free allocation of allowances would cost the government 2.5 to ten times the value of the economic harm to the emitters, depending on whether the free allowances are narrowly targeted (15% of sector allowances) or nationally distributed (65% of sector allowances)
8. To fully offset the costs on the poorest 20% of the American public takes about 14% of total revenues of a 100% auction system

Excerpts from the testimony related to the above points are below the jump.

Rep. Edward Markey (D-Mass.) has released the text of legislation which, if enacted, would forbid the sale of off-shore drilling rights in the Chukchi Sea, which includes polar bear habitat, until the U.S. Fish and Wildlife Service makes its long-delayed determination whether the polar bear is endangered and what its critical habitat is.

At today’s hearing, FWS director Dale Hill made it clear that he recognizes that the polar bear is definitely losing habitat and has been delaying his determination to make it “clear”; he also stated, “We need to do something about climate change starting yesterday.”

Minerals Management Service Director Randall Luthi admitted that if the lease auction goes forward, it would be impossible to revoke the leases even if they are found to be in conflict with a later endangerment listing of the polar bear.

Representatives of the coal, oil, and gas lobby met yesterday at the United States Energy Association’s “State of the Energy Industry” conference at the National Press Club in Washington. They agreed that Lieberman-Warner may be the best legislation they can hope for, especially if issues like polar bear habitat set the standard for legislation.

Katherine Ling reports for E&E Daily that David Parker, president and CEO of the American Gas Association, said “Who would you rather have writing a bill in the Senate? I might guess it may set a tone for business to fully work with the Senate this year.” He continued that “the polar bear habitat is going to really drive this [climate change] debate. We all have a big education job to do and I think we need to do it collectively.”

Bill Scher has further commentary at Blog for Our Future.

In a Detroit News piece entitled Dingell tours show; says state-by-state emissions rules would doom carmakers, David Shepardson writes that Dingell fully supported last month’s decision by the EPA to deny the California waiver to regulate tailpipe greenhouse gas emissions.

Dingell, D-Dearborn, chairman of the House Energy and Commerce Committee, said if California got the waiver it could impose conflicting federal and state standards. The California standards could be make automobile production “so expensive that people won’t be able to buy and second of all get so difficult that the companies won’t be able to produce anyhow.”

Dingell said the California system could lead to 50 different standards. He said the EPA decision “makes good sense.”

As has been previously discussed on Hill Heat, the specter of 50 different standards is simply false. Under the Clean Air Act only California has the authority to get waivers from national standards. Other states can then follow California or the federal standards. At most there can be two different standards.

Dingell plans to introduce a climate change bill in his committee “as fast as we can” but wants to exclude the auto industry, arguing that the CAFE standards in the 2007 energy bill are sufficient regulation: “We’ve had everybody else get practically a free ride and auto industry has to come up with a 40 percent increase in fuel efficiency,” Dingell said. “We’re going to try to see that the pain is shared equally all around.”

Update: Dingell has issued a clarification of his remarks, stating that he considers CAFE standards to be a “carbon constraint” and that the CAFE standard increase “tightens the cap on automobiles by 40 percent by 2020.” Any carbon cap would entail “further reductions” that would be have to matched by “comparable contributions” by other industries.

Shepardson also reports on an interview with Margo Oge, director of the EPA’s office of transportation and air quality. She didn’t expect the agency to issue a formal written denial “until next month at the earliest.” The EPA may be trying to argue that its the EPA press release announcing the denial isn’t actually grounds for a suit to overturn the decision. She also said that the EPA “completed its draft of its own new regulations to reduce greenhouse gas emissions” but didn’t provide details.

The Washington Post and DCist cover the City of the Future design challenge held yesterday at Union Station. From DCist:

Beyer Blinder Belle Architects & Planners LLP won yesterday’s City of the Future design challenge to imagine what Washington would look like in the year 2108. The winning team went green, envisioning a self-sustaining city with soaring towers built on the sites of former forts that once defended Washington, transforming them into centers for wind and solar energy production, hydroponic farming and defensive security systems. In this environmentally friendly city, cars have no place. Metro has been drastically expanded. The diagonal streets designed long ago by Pierre L’Enfant have been turned into pedestrian-friendly green belts, or the “lungs of the city,” as described by Hanny Hassan, partner at BBB. Above-ground public transportation runs on the square street grid of the city.

National Security David Sassoon at Solve Climate notes that Michael McConnell, the Director of National Intelligence, had this to say in a New Yorker profile when asked if Al Qaeda is the greatest threat America faces:

No, no, no, not at all. Terrorism can kill a lot of people, but it can’t fundamentally challenge the ability of the nation to exist. Fascism could have done that. Communism could have. I think our issue going forward is more engagement with the world in terms of keeping it on a reasonable path, so another ism doesn’t come along and drive it to one extreme or another.

And we have to some balance in terms of equitable distribution of wealth, containment of contagious disease, access to energy supplies, and development of free markets. There are national security ramifications to global warming.

Biofuels Technology Review has an extensive piece on the Price of Biofuels, covering the ramifications of America’s heavy investment in corn ethanol and the uncertain future of cellulosic ethanol. The New York Times reports Europe May Ban Imports of Some Biofuel Crops as it recognizes the drastic environmental harm and negative global-warming consequences of replacing rainforest with palm-oil plantations.

China In Dealing with the Dragon, Paul Krugman argues that China should be the U.S.’s primary foreign policy concern, in large part because of climate change, “which will eventually be recognized as the most crucial problem facing America and the world — maybe not today, and maybe not tomorrow, but soon, and for the rest of our lives.”

Coal Heather Moyer at Sierra Club’s Clean Energy Watch points to another New York Times piece that reports:

A justice of the West Virginia Supreme Court and a powerful coal-company executive met in Monte Carlo in the summer of 2006, sharing several meals even as the executive’s companies were appealing a $50 million jury verdict against them to the court.

California Democrat and House Oversight Committee chair Henry Waxman has turned up the heat in his investigation into EPA’s denial of the California waiver request to regulate tailpipe greenhouse gases, calling for depositions of numerous EPA officials and criticizing the delay in document production. He expects a mutual schedule for production and interviews to be worked out by January 16. Waxman noted that althought EPA counsel had accompanied officials in previous interviews, because EPA administrator Stephen Johnson’s “own conduct is being examined, this accommodation would not be appropriate.”

When he opened the investigation in December, Waxman set deadlines of January 10th, 17th, and 23rd for various EPA offices to deliver responsive documents.

The EPA’s associate administrator Christopher Bliley sent a letter on January 4 saying the EPA would try to deliver documents by January 11, a day after Waxman had requested. On the 11th he wrote that the first documents might be ready by January 18.

Waxman’s full response is after the jump.

(Cross-posted from Warming Law)

Anticipation has been high that Senator Barbara Boxer (D-CA) would use her platform running the Senate Environment and Public Works Commitee to pressure the EPA regarding its denial of California’s waiver application, and a committee field hearing yesterday did not disappoint. Responding to Administrator Stephen Johnson’s no-show and failure to provide documentation of how he reached his decision, Boxer threatened to use the committee’s subpoena power and generally pledged to step up congressional pressure:

“This outrageous decision . . . is completely contrary to the law and science,” Boxer said in a briefing with state officials at Los Angeles City Hall. She held up an empty cardboard box as a symbol of the Environmental Protection Agency’s refusal so far to provide the hefty technical and legal backup that normally accompanies air pollution waiver decisions and are usually published in the Federal Register.

[…]

Johnson is scheduled to testify before the Senate committee in Washington on Jan. 24. An EPA spokesman said, “The official decision documents are being prepared, and they will be released soon.”

California Attorney General Jerry Brown praised Boxer’s subpoena threat, at one point calling Johnson a “stooge in a really pathetic drama that hopefully will not play out much longer.” Brown used his written testimony to document the state’s legal case against the waiver decision, and specifically honed in on EPA’s central assertion that the waiver request did not meet “compelling and extraordinary” conditions due to global warming’s wide-ranging impact.

In addition to reiterating this logic’s departure from the text of the law and the Supreme Court’s rejection of a similar argument in Mass. v. EPA, various testimony directly cited the way in which past waiver decisions have interpreted the law. Former Assembleywoman Fran Pavley—who authored the clean cars law—pointed to a 1984 waiver determination by then-EPA-Administrator William Ruckelshaus deeming that California’s plight need not be “unique” in order to be “compelling and extraordinary.” Brown, meanwhile, cited a 1975 waiver determination’s assessment of the Clean Air Act, which noted that:

[I]n the light of their unusually detailed and explicit legislative history. . .Congress meant to ensure by the language it adopted that the Federal government would not second-guess the wisdom of state policy here. . . . Sponsors of the language eventually adopted referred repeatedly to their intent to make sure that no “Federal bureaucrat” would be able to tell the people of California what auto emission standards were good for them, as long as they were stricter than Federal standards.

On Monday the U.S. Fish and Wildlife Service announced it would miss today’s deadline on determining whether to list the polar bear as an endangered species due to global warming-induced polar sea ice loss. As noted in Hill Heat, last week the administration announced its intent to sell off-shore drilling rights in polar bear habitat off Alaska.

Today the Center for Biological Diversity, NRDC, and Greenpeace announced they have filed a notice of intent to sue the administration.

This would be the second lawsuit filed over FWS delays; in 2005 the Center for Biological Diversity v. Kempthorne lawsuit to compel the FWS to respond to the request to start the polar bear listing process (the FWS ended up taking two years instead of the Endangered Species Act-mandated 90 days).

The Sierra Club has an interesting interview on global warming with four pundits of very different persuasions (though joined by their white Ivy League maleness): progressive blogger Matt Stoller, Democratic consultant Michael Bocian, Oberlin professor David Orr, and former Republican Speaker Newt Gingrich.

Stoller usually gives the most original answers to the questions, as typified by the responses to the first:

Q: How will global warming figure in the 2008 presidential election?

Newt Gingrich: Whoever wins will have a sound and realistic approach to climate change. Democrats have an advantage in developing solutions because their primary voters care more about the issue and because they are more comfortable dealing with environmental issues, which have been largely a liberal area of dialogue for the past generation. Republicans have to play catch-up in developing answers other than no. Our research at American Solutions indicates that, by a very substantial margin, Americans prefer entrepreneurship to bureaucracy and innovation to litigation. The Republican nominee should be able to develop strong solutions to climate change that emphasize science, technology, innovation, and incentives. These will prove surprisingly popular compared with the tax increase-government control-bureaucracy and litigation model that has dominated for the past 30 years.

Michael Bocian: Mr. Gingrich is correct that the public clamors for innovation. Our polling shows that Americans feel our country is failing to lead on energy and global-warming solutions, yet they believe we have the technological know-how to lead, and we must harness it. Mr. Gingrich is also correct on the importance of incentives. But any purely voluntary solution fails to address the seriousness of the problem. Americans believe we need strong standards if we are to succeed. Setting strong standards and enforcing them require real accountability.

David Orr: The Republican Party has not done its homework on the biggest issue of our time and has persistently chosen ideology over science, even going along with the Bush administration’s crude attempts to quash the evidence. The time to avert the worst is very short. To do so, we will have to create something akin to the government-business-public partnership in WWII. This will necessarily include lots of things Mr. Gingrich has opposed in the past: government regulation, taxation to change market incentives, and lots of R&D on renewables and efficiency. It will also require attention and money—so no more wars fought for phony reasons.

Matt Stoller: Global warming may not figure directly in the 2008 race. Consider that Al Gore received only a small bump in approval ratings for his Nobel prize and continues to have high disapproval ratings. He is the political figure most closely associated with climate change, yet according to some polls, almost half of Democrats don’t want him to run for president. I’m using Gore as a proxy, but there are other obvious signposts. There was no climate-change backlash from Katrina in 2005, and no candidates are making the issue the centerpiece of their campaign. Even with wildfires in the West and drought in the Southeast, I’m seeing most action take place at the local level disconnected from the federal government.

Global warming is one in a bucket of issues, along with Iraq, civil liberties, executive overreach, economic inequality, global financial instability, and corporate corruption. They are all of deep concern to a newly energized progressive movement and must be solved together. Climate change isn’t a major political issue yet, but it will hit the national radar in a few years, ferociously.