April 17, 2009
Carbon legislation is sweeping through the House. But the passage of any such bill must still climb a long way before it would become law.
Most House Democrats favor mandatory greenhouse gas reductions. And while key committee chairs want a fully hashed out bill by Memorial Day, it is unlikely to happen given critical differences that need time to mend. The U.S. Senate, meanwhile, must still debate the issue. Its proposal will be far more tempered than that of the House given that any measure it produces will require 60 votes and Republican support. Any climate bill that is introduced to the full Congress would therefore be subdued.
House Republicans, conversely, oppose the Democratic agenda and maintain that such aggressive laws would burden consumers and result in millions of fewer jobs -- exactly the wrong strategy at a time of economic hardship. The Democratic leadership counters that its comprehensive approach would spawn investment in next-generation energy technologies while creating millions of new jobs.
The debate transpiring in the House Energy and Commerce Committee over carbon legislation centers on whether to auction or to initially give away carbon allowances. A similar discussion is taking place in the House Ways and Means Committee where advocates of reform say that a carbon tax is a more efficient way to achieve results.
Specifically, the notable draft now floating on the Hill has been authored by House Energy and Commerce Committee Chairman Henry Waxman of California and his environmental subcommittee chair, Edward Markey of Massachusetts. Their joint measure would cut greenhouse gas emissions by 20 percent from 2005 levels by 2020 and by 83 percent by 2050.
That's the basic threshold and timeframe that the United Nation's climate panel has said are necessary to prevent catastrophic consequences. The measure, meantime, is slightly more aggressive in the short run than that of President Obama, although it is in keeping with his long-range objectives. The Waxman-Markey bill endorses cap-and-trade but is silent on the issue of whether the credits should be auctioned.
The bill furthermore requires each utility to meet a renewable portfolio standard of 25 percent by 2025. Such a mandate is necessary if the country is to set out on a path to reverse warming trends, the bill's sponsors say. In an effort to placate lawmakers from coal states, the measure would also give $10 billion in financing to commercialize carbon capture and sequestration technologies.
"This legislation will create millions of clean energy jobs, put America on the path to energy independence, and cut global warming pollution," says Chairman Waxman. "Our goal is to strengthen our economy by making America the world leader in new clean energy and energy efficiency technologies."
Tempered Approach
It would appear that the cap-and-trade advocates have an early advantage over those espousing a carbon tax. Not only does House Speaker Nancy Pelosi, D-Calif., support such a tack but so does President Obama.
The Congressional Budget Office has said that the sale of credits would generate revenues of $50 billion to $300 billion in year one. That money, under any future law, would probably be split between new investments in technology and rebates to ratepayers, all to appease those critics who say consumers would be hardest hit.
Cap-and-trade is a free market approach that has had success with other emissions trading schemes. Simply, government sets pollution limits and over time, it will lower them. Then, it either auctions or allocates to industry a share of credits. Those companies that are able to exceed the expectations can either bank their credits for future use or sell them to other businesses that are unable to meet their obligations.
Environmental groups laud the Democratic energy bill, saying that it is a good first step, but caution that industry must be held to account. In the end, though, they are likely to coalesce around any compromise measure. Greenpeace, for instance, says that if the carbon credits are initially given away then it would take an additional 20 years to achieve emissions reductions goals. It also says that coal industry should not receive billions in "handouts for the false promise of carbon capture and sequestration."
While they have reservations, utilities by-and-large acknowledge that climate change legislation is eventually inevitable. As such, many have chosen to join the discussion in an effort to influence its outcome. Some, such as the Electric Reliability Coordinating Council, are skeptical of the current proposals, noting that "an across-the-board increase in energy prices makes recovery all the more difficult."
However, others like FPL Group, Duke Energy, Exelon, NRG and PNM Resources are participating in the United States Climate Action Partnership and are advocating for the passage this year of climate legislation with cost-containment provisions. They generally favor the allocation of credits until the market matures and they can be auctioned off.
The group, which supports 80 percent reductions in greenhouse gas emissions by 2050, says that climate laws would kindle investment in low-carbon technologies and thereby enable the country to reach its goals. "With it, we would move our economy forward, encourage investment, create jobs and transition to a greener economy in a way that minimizes costs for consumers," says Jeff Sterba, chief executive of PNM in Albuquerque. "Without it, we risk failure in each of these areas."
The momentum for climate change rules is building. But any sudden surges will be modified in the early years by blue news and political nuances. If the promise of a new energy-centric economy holds and the number of green jobs multiplies, attitudes will change and the pace of reform will speed up.
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