Hill Heat

On Wednesday, Sen. Olympia Snowe (R-Maine) announced her support for S. 3036, saying it “mirrors closely” the Kerry-Snowe Global Reduction Act (S. 485), which calls for a 65 percent reduction from 2000 levels of greenhouse gases by 2050. Snowe also noted that language from the Feinstein-Snowe Emission Allowance Market Transparency Act (S. 2423) was included in the manager’s mark.

Unlike Lieberman-Warner, Kerry-Snowe also sets a goal of achieving a greenhouse gas stabilization target of 450 ppm, and calls for the establishment of vehicle emissions standards. In Snowe’s press release, she states that Lieberman-Warner “would reduce greenhouse gas emissions by at least 66 percent by 2050,” although NRDC analysis of the bill finds that Lieberman-Warner would only achieve reductions between 60 to 65 percent from 2000 levels.

On Wednesday, Senate Majority Leader Harry Reid (D-Nev.) introduced Sen. Barbara Boxer’s (D-Calif.) manager’s mark of the Lieberman-Warner Climate Security Act (S. 2191) as a new bill, numbered S. 3036. S. 3036 will be the vehicle for the floor debate of the cap-and-trade legislation. On Thursday, Reid filed for cloture on a motion to proceed onto the bill, setting the stage for a 5:30 p.m. vote on June 2, one week from Monday. According to E&E News, “Few expect the vote to be contentious.”

“It may even end up being 99-0,” said Andrew Wheeler, staff director for Senate Environment and Public Works Committee ranking member James Inhofe (R-Okla.). Inhofe plans to back this procedural step as a gateway to a bigger debate over the merits of the legislation, Wheeler said.

Reid, Boxer, and the bill’s co-sponsors, Joe Lieberman (I-Conn.) and John Warner (R-Va.), have not determined what terms they will seek for the debate and amendment process. Reid has the option of exerting privilege to block unwanted amendments by “filling the tree” with his own.

Download the Full document. Titles are after the break.

Representatives from CRS, EIA, EPA, and CBO discuss their economic analyses of Lieberman-Warner (S. 2191) and other emissions-controlling climate legislative proposals.

Witnesses

• Brent Yacobucci, Congressional Research Service
• Dr. Larry Parker, Congressional Research Service
• Dr. Howard Gruenspecht, Deputy Administrator, Energy Information Administration
• Dr. Brian McLean, U.S. Environmental Protection Agency
• Dr. Peter Orszag, Congressional Budget Office

20/05/2008 at 10:00AM

Sen. Barbara Boxer (D-Calif.) has released an overview of the “global warming substitute amendment” to the Lieberman-Warner Climate Security Act (S. 2191) that will be the subject of debate during the first week of June.

Changes from the version of Lieberman-Warner that was passed out of the Committee on Environment and Public Works last year include:

• Title V, Subtitle C: Emergency Off-Ramps. “If the price of carbon allowances reaches a certain price range, there is a mechanism that will automatically release additional emission allowances onto the market to lower the price. The additional allowances are borrowed so that the environmental integrity of the caps over the long term is protected.”
• Title V, Subtitle I: Financial Relief for Consumers. “The bill sets aside a nearly $800 billion tax relief fund through 2050, which will help consumers in need of assistance related to energy costs. The precise details of the relief will be developed by the Finance committee.”
• Title XIV: Deficit Neutrality. “This section auctions allowances and transfers the proceeds to the Treasury to ensure that the bill is deficit-neutral.”

Full document.

Darren Samuelson of E&E News reports that Sen. George Voinovich (R-Ohio), with assistance from the White House, is working on a legislative alternative to the Lieberman-Warner Climate Security Act (S. 2191). The version of the plan that E&E News acquired included:

• Voluntary goals of 2006-level emissions by 2020 and 1990 levels by 2030
• Tax incentives for advanced coal and nuclear power
• A “backstop” cap-and-trade program

The IPCC Fourth Assessment Report outlined the need for industrialized nations to achieve reductions of 25-40% below 1990 levels by 2020, targets the Annex I Kyoto signatories recognized in Bali.

From E&E News:

On the other side of the climate debate, Sen. George Voinovich (R-Ohio) is taking the lead in writing his own climate change bill that could come up as an alternative to the Lieberman-Warner measure.

Sources on and off Capitol Hill started circulating details of Voinovich’s proposal last week. An executive summary of the Voinovich plan obtained yesterday by E&E Daily shows a plan heavy on tax incentives for new energy technologies such as “clean coal” and nuclear power, with a cap-and-trade program used as a backstop if the low- and zero-carbon energy sources do not meet certain milestones.

The summary said those milestones would be to reduce U.S. emissions to 2006 levels by 2020 and 1990 levels by 2030. Voinovich spokesman Chris Paulitz said yesterday that the summary was “well outdated,” though he did confirm the senator was working on alternatives.

“He’s trying to figure out a way to make the environment cleaner that doesn’t kill our economy,” Paulitz said. “Right now, there’s not a bill in the Senate that does those two things.”

Voinovich is getting help from the Bush administration on his climate proposal, as well as others. “We’re working with everybody who we can humanly think of,” Paulitz said. Of the White House, he added, “It’d be silly to exclude a branch of government that would play a key role.”

Witnesses

• Peter R. Orszag, Director, Congressional Budget Office
• Robert Greenstein, Executive Director, Center on Budget and Policy Priorities
• Henry Derwent CB, President and CEO, International Emissions Trading Association

24/04/2008 at 10:00AM

Yesterday, Rep. Henry A. Waxman (D-CA), Rep. Ed Markey (D-MA) and Rep. Jay Inslee (D-WA) released a document entitled “Principles for Global Warming Legislation,” saying they “are designed to provide a framework for Congress as it produces legislation to establish an economy-wide mandatory program to cut global warming emissions” and that they “will meet the United States’ obligations to curb greenhouse gas emissions and also will provide a pathway to the international cooperation that is necessary to solve the global warming problem.”

The principles are summarized:

The principles include the following elements: strong science-based targets for near-term and long-term emissions reductions; auctioning emissions allowances rather than giving them to polluting industries; investing auction revenues in clean energy technologies; returning auction proceeds to consumers, workers, and communities to offset any economic impacts; and dedicating a portion of auction proceeds to help states, communities, vulnerable developing countries, and ecosystems address harm from the degree of global warming that is now unavoidable.

The specific 14-point elements provide specific language that is more complicated than the above summary. For example:

• The document recognizes that an increase in global temperatures greater than 2°C above pre-industrial levels will bring about “dangerous and irreversible changes to the Earth’s climate” and that the IPCC calls for an industrialized-nation minimum target of 25% below 1990 levels by 2020, but calls for a U.S. target of 100% of 1990 levels.
• The language for scientific lookback provisions would be technically satisfied by Lieberman-Warner’s current provisions (Sec. 7001-7004), which only mandate action by 2020.
• The document does not actually call for full auction of allowances, saying: “If any allocations are given to polluters, they must be provided only to existing facilities for a brief transition period and the quantity must be limited to avoid windfall profits”; no definition of “brief” or “windfall profits” is given
• “Significant” auction revenue should be dedicated to “clean energy and efficiency measures” – “clean energy” is defined as “technologies and practices that are cleaner, cheaper, safer, and faster than conventional technologies.” The document does not distinguish between renewable and non-renewable technologies
• Only clean technology, a priority of Rep. Inslee, is recommended to receive a “significant” portion of auction revenues; however, the document says that auction revenues “sufficient to offset higher energy costs” should go to low- and middle-income households.

The document is written with an eye to the Lieberman-Warner Climate Security Act (S. 2191), the cap-and-trade legislation expected to reach the Senate floor in June. In part, this is because the document is expressly focused on cap-and-trade legislation; questions of broader policy (agriculture, transportation, architecture, urban planning, health) are only touched on. Many of the provisions are written in such a way that the language in Lieberman-Warner satisfies them (such as the 2020 target, lookback provisions, call for complementary policies, and most of the auction proceeds language).

Points of difference include the document’s call for 80% reductions from current levels by 2050 (Lieberman-Warner’s 2050 target is estimated to achieve a 62-66% reduction from current levels) and the emphasis on auction rather than allowance giveaways. Lieberman-Warner allocates a significant percentage of allowances for public purposes, giving them to states, tribal governments, federal agencies, and load-serving entities who would then sell the allowances to emitters to use their value; this document emphasizes instead using auction revenues.

In general, the House document is in line with the Sanders-Lautenberg principles, though Sanders-Lautenberg is stronger on the scientific language. However, it is considerably less aggressive than the progressive 1Sky principles. For example, there is no language even hinting at a coal plant moratorium, which has been called for by Reps. Waxman and Markey (H.R. 5575).

The full document of principles is after the jump.

On Thursday, the Congressional Budget Office issued its cost estimate of the Lieberman-Warner Climate Security Act, finding it would create a $1.2 trillion cap-and-trade market through 2018 in carbon allowances, $946 billion of which in the form of corporate giveaways that would become windfall profits. Because of the failure of the legislation to account for the effect of the system on receipts from income and payroll taxes, the CBO estimated that the bill would generate a $15 billion budget deficit over the first ten years, with greater than $5 billion in deficits each decade following.

Because ownership of the allowances is not limited to emitters, the CBO interpreted the emissions allowances as the equivalent of a revenue-generating tax. Allowances given away are interpreted as “direct spending” – that is, revenues lost (“CBO considers the distribution of such allowances at no charge to be functionally equivalent to distributing cash”). Assuming enactment of the bill at the end of 2008,

CBO estimates that implementing this legislation would result in additional revenues, net of income and payroll tax offsets, of $304 billion over the 2009-2013 period, and about $1.19 trillion over the 2009-2018 period. We estimate that direct spending would increase by $281 billion and about $1.21 trillion over the same periods, respectively. Those changes in revenues and direct spending would stem almost entirely from the process of auctioning and freely distributing allowances under the cap-and-trade programs established under this legislation.

Over 78% of Market’s Value Dedicated to Polluter Giveaways Of the $1.2 trillion market, $260 billion is auctioned and $946 billion freely given to covered emitters. Because the CBO estimates that most of the cost of emissions reduction “would ultimately be passed on to consumers in the form of higher prices for energy and energy-intensive goods and services,” the $946 billion in emitter giveaways would become windfall profits. The effect on consumers is the same whether the allowances are given away or auctioned.

Banking’s Effect – Faster Reductions Up Front, Higher Allowance Value Furthermore, the CBO estimates that the unrestricted ability to “bank” emissions allowances (allowances distributed in one year may be redeemed at any time in the future) would encourage companies to attempt to “undertake significantly more mitigation than necessary to meet their annual emission caps” in early years because of the initially low allowance price and an expected rate of return “significantly greater than CBO’s estimate of the expected long-run inflation-adjusted rate of return to capital in the U.S. nonfinancial corporate sector,” raising the price by about 27 percent higher than a no-banking policy over ten years.

Lion’s Share of Auction Revenues Go to Privately Controlled R&D The CBO estimates that in the first decade $123 billion, 47% of auction revenues, would go to the Climate Change Credit Corporation to allocate as it sees fit within its mission of funding industrial research and development – the corporation is set up as a private entity with a board selected by Presidential appointees.

At the A&WMA conference yesterday, Sen. Joe Lieberman (I-CT) spoke optimistically about getting the sixty votes necessary to forestall any filibuster against his cap-and-trade bill, the Lieberman-Warner Climate Security Act (S. 2191). According to Darren Samuelson of E&E News, he told attendees that 45 senators are “heavily with us” and 15 more have a “heavy tilt in our direction, if we can do some small things.”

“We can find only 20 we can put in the category of hopeless, that is with regard to this particular bill.”

Because Sen. McCain (R-Ariz.) has criticized Lieberman-Warner’s lack of explicit nuclear subsidies, Sen. Lieberman acknowledged McCain is not an “aye” vote, saying “Just out of respect, I’d have to put him in the middle category. A heavy lean.”

Samuelson also reports:

Senate Majority Leader Harry Reid (D-Nev.) has given Lieberman and his allies a green light to take the bill to the Senate floor during the week of June 2-6, the first week back from Congress’ Memorial Day recess, a Reid spokeswoman said today.