Carbon tax more acceptable than cap-and-trade?

(Photo of coal-burning plant near Kenosha, Wisc., from Flickr and photographer James Jordan )


Who'da thunk it? Cap-and-trade was the way to go the past few years because a carbon tax was politically impossible. Now, suddenly, that's turned on its head. A carbon tax -- or at least "a price on carbon" -- seems to have the best chance.

Climate legislation may not be dead after all, but cap-and-trade is. The odd triad – Sens. John Kerry (D-Mass.), Joe Lieberman (I-Conn.) and Lindsey Graham (R-S.C.) – are preparing to release the main points of their “compromise” legislation to the Senate sometime this week or next -- and it doesn't include cap-and-trade.

They don’t have the 60 votes yet, haven’t even drafted the language yet, but are ready to work the crowd of uncertain senators and interested lobbyists to see if they can reach consensus.

President Obama says he’s willing to be flexible as long as the plan puts a price on greenhouse gas emissions and cuts them about 17% (below 2005 levels) by 2020, as he promised the rest of the world.

The three say their plan can do that.

Other important points:
• Three different mechanisms will be used for three different sectors.
• Power plants will go first and their emissions will be priced and capped and made more stringent over time.
• Industries, such as chemicals, cement and paper, will be able to wait several years, but will eventually be included.
• Motor fuel will have a price attached to carbon (that's right, a carbon tax) with at least some of the revenue going to transportation projects and helping auto companies becom more fuel-efficient.
• Nuclear power will be supported – Obama already took a step in that direction, announcing $8.3 billion in loan guarantees for two reactors in Georgia.
• R & D for carbon capture and sequestration will get support too.
• With emphasis on reducing dependence on foreign oil, plans for offshore drilling for oil and gas here are included.

Cap-and-trade a non-starter
The GOP has tagged cap-and-trade as “cap-and-tax” and has scared people into thinking energy costs will rise. The term is now political poison. Not to mention distrust of Wall Street and any trading mechanism.

What seems to be taking its place is “cap-and-dividend,” in which proceeds from a “price” on carbon (whatever form it takes) would go back to consumers to help them pay higher utility costs. The advantages are two:
• Voters won’t blame their Senators for sticking them with higher costs in a bum economy,
• Utilities will be able to raise prices to pay for the changes they have to make.

Can it pass?
It’s impossible to satisfy every politician, voter and interest group, but the triad is sure trying. Graham said even climate change skeptics can support this bill, which will provide jobs and reduce dependence on oil from unstable parts of the world. It's also a way for the GOP to appeal to young voters, he told Tom Friedman of the New York Times.

The three are running up against a serious time crunch in a Senate still preoccupied with health reform and jobs -- and an election that has incumbents very nervous. (Note that John McCain is very much absent from this effort by his two amigos.) And Graham suggested if the Dems pass health reform by reconciliation, all bets are off.

Once the bill's details are worked out, the EPA would need about a month to do its analysis, and other departments would have to weigh in. If it is in fact possible to get 60 votes, we still have a problem – similar to the one in health care.

The House has already passed a bill, HR 2454 (last June – did you forget about that?) and it is based on cap-and-trade. So, will the two chambers be able to reconcile their differences before election season heats up?

It seems like a tall order.

(Sources: Reuters, E&E Daily, PlanetArk , New York Times)

Senate climate bill going nowhere soon, if ever; will Obama, EPA and states be the back-up

(Photo of Capitol engulfed in emissions from Flickr and Capitol Climate Action.)

Don’t hold your breath for the Senate to act on climate change. It won’t happen until next spring –- at least.

Sen. John Kerry (D-Mass.), lead sponsor of the strongest bill in the Senate, told reporters Monday that Dem leadership won’t start climate debate until after both health reform and financial regulatory reform are disposed of – likely around March.

Meanwhile Kerry is working with Sens. Lindsey Graham (R-S.C.) and Joe Lieberman (I-Conn.) in an effort to craft a bipartisan bill that can garner 60 votes. (Why am I not thrilled about that?) They plan to have an outline ready within three weeks, before the international conference in Copenhagen.

A lot of moderate Democrats and most Republicans in the Senate are finding reasons to oppose climate legislation.

Two of them, Sens. James Webb (D-Va.) and Lamar Alexander (R-Tenn.) have offered an alternative that would emphasize new technology. It would provide $750 million each of the next 10 years for R&D on carbon capture, advanced biofuels, solar power, advanced batteries and recycling of used nuclear fuel. It would also give $1 billion to the Nuclear Regulatory Commission to review advanced and small nuclear designs. The two said they did not support the Kerry-Boxer bill because it relies on cap-and-trade. (What they didn’t say is it will hurt coal.)

If climate action doesn’t happen by spring, conventional wisdom is that it will be stalled until after the 2010 elections. That doesn’t bode well. If Democrats lose one Senate seat, power will switch to the GOP, and climate change denier Sen. James Inhofe (D-Okla.) will replace Sen. Barbara Boxer (D-Calif.) as Environment Committee chair. We’ll be back to “drill, baby, drill.”

Many Dems in the House, who voted for the climate bill that passed their chamber in June, are now under fire from more conservative Republicans in their districts. It’s unsure how that will play out in the voting booth.

If we can’t get something passed by early spring, it may be left to the president, the EPA and the states to provide the impetus for change. Obama made a pact with China this week for cooperation on renewable energy, the EPA is working on rules to regulate large CO2 emitters, and states in the East, West Coast and Midwest are likely to merge the cap-and-trade markets they have been working on regionally.

(Souces: E&E Daily, E&E News PM)

Follow the $$ that influenced climate change bill

(Picture of money from Flickr and photographer Tracy O.)

There are 2 ways for industry to gain access to congressman considering global warming (or any other) legislation. Both involve money. There are paid lobbyists and contributions to campaign funds.

And Big Energy was busy trying both ways in the House this spring as the American Clean and Energy Security Act (ACES) was heatedly debated and narrowly passed with some concessions to electric utilities and coal.

As Tyson Slocum of Public Citizen told Greenwire, “The more you spend the better chance you’ve got at influencing legislation.”

Lobbyists
In the second quarter alone (April-June, when the bill was debated in committee), the 10 industries with the biggest stake in the results spent $122 million. Oil and gas spent the most, at $37.7 million. Chevron alone spent $6 million. Environmental groups spent just $5.2M.

In the whole first half of 2009, oil and gas spent $82.2M and electric utilities spent $35.9 million on lobbyists, while Exxon Mobil by itself spent $15M, slightly more than all clean energy combined.

Campaign contributions
In the same quarter, coal-fired electric utilities, with potentially the most to lose, were busy contributing to Congressmen’s campaign funds. Especially those on the Energy and Commerce Committee, which was debating the climate change bill.

Employee PACS at American Electric Power, Southern Co. and Duke Energy together donated $165,000 to 70 house members, many on the Energy Committee. The largest donation, $11,500, went to Minority Leader John Boener (R-Ohio).

Those who received these contributions voted 2-1 against the bill. This despite the fact that the three companies ended up supported it – and why not? They got a pretty good deal, with 35% of the free credits allocated to electric utilities. Plus the EPA lost some of is power to regulate coal-fired utility plants under the Clean Air Act. And research money for carbon capture and sequestration was included.

Eight Republicans ended up voting for the bill. Of those, 7 got little or no money from the utilities. An industry rep explained to E&E Daily they only contribute to those with whom they see eye-to-eye on issues. The wavering Mary Bono Mack (R-Calif.), who ended up voting for the bill, was wooed with contributions by both sides.

More money for Democrats
Because they now have the majority (and some hail from oil patch and coal states), Democrats in the House and Senate got a bigger share of energy money than before. In the first half of the 2009 utilities gave 59% of their cash to Democrats, and the nuclear industry gave 65% of theirs.

But oil and gas, and coal, continued to favor the GOP. Oil and gas gave less than 25% to Dems, among them Sens. Rick Boucher (D-Va.), Blanche Lincoln (D-Ark.) and Evan Bayh (D-Ind.), while the National Mining Assn. gave 40%. Exxon Mobil gave just 17% to Democrats.

Both sides (corporations and lawmakers), of course, deny this money buys votes. Industry sources say they tend to give money to those who see issues as they do. They said they donate when lawmakers hold fundraisers, not when a key bill is being considered.

Senators must not have been holding as many fund-raisers this spring, because they got considerably less from the electric utilities than House members.

As action on the climate bill moves to the Senate, look for a rise in “fund raising” there this fall.

(Sources: E&E Daily, Greenwire)