Senate Democrats Wrestle over Climate Change Cap and Trade

Jun 23, 2010

By Kristen Friend, staff U.S. Supreme Court writer – June 23, 2010

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Senate Democrats are causing as many headaches for themselves in the debate over climate change legislation as is their Republican opposition.

President Obama hopes to reinvigorate the push for comprehensive climate change legislation in a meeting with Senate lawmakers today.

Climate change legislation has succumbed to the familiar fate of many recent Democratic measures: a perceived failure to be able to hit the 60-vote threshold needed to overcome a Republican filibuster in the Senate. While the House answered Obama’s call for climate chance legislation in 2009 with the passage of the House American Clean Energy and Security Act, the conventional wisdom moving into the summer of 2010 is that climate change legislation in the Senate is now dead on arrival. Several bills are competing for primacy, none of which seem to have the support they need to pass anytime soon.

In an apparent attempt to prove cliché that (recent) history is destined to repeat itself, Senate Democrats are causing as many headaches for themselves in the debate over climate change legislation as is their Republican opposition. Two Democratic bills, the Kerry-Lieberman American Power Act and the Cantwell-Collins CLEAR Act offer competing views on how emissions should be regulated. Liberal-leaning Senators, having already been snubbed on the issues of the public option in Health Insurance Reform and tougher regulation of banks and financial institutions during the financial reform debate, are threatening to walk and pull support for any bill that does not include strong incentives to limit carbon emissions. [1] And, Senator Jay Rockefeller (D-W.Va.), has gone so far as to call for the Senate to abandon efforts to enact comprehensive climate change legislation altogether, urging lawmakers instead to focus on preventing the EPA from regulating greenhouse gases. [2]

Democrats are currently trying to regroup and produce a new summer strategy that reconciles some of the opposing viewpoints within the caucus. But efforts to enact energy and climate legislation did not have such a muddled beginning.

President Obama introduced his New Energy for America plan during the campaign in 2008. The plan laid out several initiatives, including an increase in fuel economy standards, ensuring that 25 percent of U.S. electricity comes from renewable sources by 2025, the development of green jobs through investment and, notably, an economy wide cap and trade program. The cap and trade program proposed in then candidate Obama’s initial plan aimed to reduce greenhouse gas emissions 80 percent by 2050. [3]

In his inaugural address, President Obama reasserted his goals of increasing the use of renewable energy, and, immediately upon taking office in January of 2009, the President issued two memorandum addressing energy policy: one calling for an increase in fuel economy standards beginning in model year 2011, and one asking the EPA to revisit California’s request that the state be able to implement their own fuel economy standards. (The request that was initially declined by the EPA would have set California’s fuel economy standards higher than national standards). The President also praised cap and trade in his first budget proposal. [4]

The House took up the subject shortly after passing its version of Health Insurance Reform, narrowly passing the Clean Energy and Security Act with a vote of 219-212 in June of 2009. It was unclear up to the time of voting how the critical “yeas” and “nays” would be cast, but pressure from the Obama Administration and House leadership managed to keep Democrats united enough to pass the bill. The legislation puts forth some of the most sweeping changes in energy policy in decades, and would significantly change the way the U.S. handles regulation of carbon emissions. The centerpiece of the bill is a new economy wide cap and trade system aimed at cutting carbon emissions 17 percent by 2020 and 83 percent by 2050. [5]

In the Senate, however, June of 2009 was only the beginning of the infamous summer of Health Insurance Reform, with heated town hall meetings across the country and a more in-depth look at the painful sausage making process that is emblematic of the creation of complex legislation than some care to remember. Instead of leading on the issue, President Obama let Congress set the terms of the debate, which soon blossomed out of control, taking the focus off of all other legislative priorities.

The President appears to be taking the same cautious approach to climate change legislation; even after the BP gulf oil spill thrust the stark need for concrete action on energy policy back into the spotlight. In a prime time speech last Tuesday that has been widely criticized as short on actual policy suggestions, President Obama failed to call for any big changes to current energy strategy. While he did stress the need to double down on efforts to pass climate change legislation in the Senate, the President did not mention cap and trade at all, a move that is being considered a political blow to the idea and an indication that he may be backing away from support for the program. [6]

In response to the President’s most recent call for a “national mission” to find alternative sources of energy, Senate Democrats met last Thursday in an attempt to solidify thinking on several climate change bills that are currently languishing on the Senate floor. Senate Majority Leader Harry Reid (D-NV) emerged from the meeting without having achieved a consensus within his caucus, but still voiced his goal of voting on an energy bill that addresses greenhouse gas emissions and the BP oil spill before the August recess. Reid stated, “One of the many lessons of the BP disaster is we can’t afford to continue business as usual,” and added that “stalling for political purposes” will not be tolerated. [7]

Senator Reid has his work cut out for him with several competing proposals already vying for support. Senators Kerry (D-MA) and Lieberman (I-CT) have introduced the American Power Act. The Kerry-Lieberman proposal, initially supported by Senator Graham, is the most aggressive measure under consideration. It would place a cap on carbon emissions and set up a market-based system for buying and selling credits.

Senator Cantwell (D-Wash.) with support from Senator Collins (R-Maine) is promoting her CLEAR (Carbon Limits and Energy for America’s Renewal) Act, which establishes a “cap and dividend” system for regulating carbon emissions. Under this system, permits would be auctioned (not granted) to polluters and 75 percent of any profits gleaned from the system would be returned directly to consumers.

A bill introduced by Senator Bingaman (D-N.M.) last year, which cleared the Energy and Natural Resources Committee 15-8, is getting little attention. It would establish a new national renewable energy standard but does not address cap and trade.

Republicans have also thrown their hat in the ring with a bill brought to the floor by Senator Lugar (R-IN) that offers loan guarantees as incentives for new nuclear energy production, new standards for energy-efficient building construction and expands domestic oil production. The bill also does not mention cap and trade.

Cap and trade is arguably the most contentious aspect of President Obama’s original energy plan, and it is considered to be a critical part of any new energy strategy by many environmental groups and Democrats. The idea of cap and trade is not new to American political thought, nor is it something originally envisioned by liberals or even Democrats. The policy originally gained favor in the 1980s under the first Bush administration in order to control the pollutants primarily responsible for acid rain. [8]

According to supporters of a cap and trade system, two important ideas factor into the working of a market based emissions regulation system. First, pollutants have a “cost” that is not being factored into the cost of doing business. Polluters get to release pollutants for free, the cost of which is then absorbed by the public in the form of externalities like rising health care costs due to pollution based illnesses. A market based system places these costs onto the market players who are actually producing the pollution, in effect forcing the market to realize the full cost of pollutants.

Second, the best way to regulate emissions is through an economy-wide approach rather than regulation of individual polluters on a plant-by-plant basis. To this end, an overall cap is set for emissions across the board that declines slowly over time, forcing polluters to find the most cost effective means of lowering emissions to meet the lower market cap. [9]

A provision of the 1990 Clean Air Act aimed at reducing acid rain established such a market system with a decreasing cap placed on sulfur dioxide emissions. The provision also gave utility companies the ability to buy and sell permits in order to comply with the new caps. The EPA, environmental groups and economists have recognized the program as a success; hailing it as one of the most effective pollution control measures enacted in the U.S. to date. According to the Pacific Research institute, emissions of sulfur dioxide in 2007 were down 40 percent from 1990 levels. [8]

The current arguments against an economy wide cap and trade market for carbon emissions are taking the same shape as those voiced in the 1980s preceding the enactment of the Acid Rain Program: the system will kill jobs and crash the economy. The White House Chief of Staff at the time, John Sununu insisted the cap on emissions “was going to shut the economy down,” an eventuality that did not come to be. Even in the face of such opposition from within his own White House, President Bush still pushed for a cap and trade program with a strong ten million-ton cut in acid rain emissions favored by environmentalists. [10]

Republicans have also expressed recent bipartisan support for a cap and trade program to regulate greenhouse gas emissions. Senator Lindsey Graham (R-S.C.) supported the idea before he opposed it. Newt Gingrich, who, as a potential Republican presidential candidate has taken the obligatory anti-cap and trade stance, said in 2007, “I think if you have mandatory carbon caps combined with a trading system, much like we did with sulfur, and if you have a tax-incentive program for investing in the solutions, that there’s a package there that’s very, very good. And frankly, it’s something I would strongly support.” And in 2008, now California Senate candidate and cap and trade opponent Carly Fiorina said that such a system would “both create jobs and lower the cost of energy.” [9]

How did the push for comprehensive climate change legislation, and in particular cap and trade, fall from favor? Like many ideas that have to meet the approval of a diverse group of interests, some of President Obama’s original goals predictably ran into a wall of opposition from entrenched industries. Regardless of historical bipartisan support, groups opposed to cap and trade systems have successfully demonized the approach as a “tax” rather than a comprehensive market based strategy.

Fred Krupp, president of the Environmental Defense Fund, says that the decline is typical of the current political climate. “Economywide cap and trade died of what amounts to natural causes in Washington,” he said, continuing, “The term itself became too polarizing and too paralyzing in the effort to win over conservative Democrats and moderate Republicans to try to do something about climate change and our oil dependency.” [6]

Democrats floated a trial balloon on Monday in advance of today’s meeting, calling for a cap and trade system limited exclusively to electric utility companies. Manufacturing and transportation sectors would not be subject to caps, kicking the controversial economy wide emissions caps down the road to be dealt with by some future Congress.

The response to such an idea has been mixed. Both the White House and Senator Leiberman have indicated they could consider such a compromise. Other Senate Democrats and some Environmental groups worry that a limited power plant only approach would not come close to addressing the daunting problem of carbon emissions and climate change. Power companies are split with some, including Duke Energy Corp. and Constellation Energy, expressing tentative support for the idea as a last resort and others, like American Electric Power Corp., expressing support for an economy wide cap and trade program but objecting to being singled out for unique regulation. [11]

President Obama will once again try to conjure up bipartisan support for some sort of climate change legislation in his meeting with senators today. Members from both parties have been invited. Regardless of the outcome, Senate Democrats must come together behind one strategy if they hope to meet the ambitious goal of passing climate change legislation before the August recess. Lawmakers have a chance to address the challenges of climate change and continued dependence on fossil fuels with real change and new thinking, as Republicans did under the first Bush administration in the 1990s. Polls indicate that the country is ready for new energy policy. [12] Congress may or may not catch up to such thinking this year.














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