Industry Groups Love The Senate Climate Bill. But Why?

by Bradford Plumer | April 23, 2010

According to Kate Sheppard, John Kerry has been telling people that he's lined up some serious industry support for his climate bill, which will be released on Monday. The Edison Electric Institute, which represents private electric utilities, will reportedly back the legislation, and the American Petroleum Institute will at least refrain from attacking it too bitterly. Meanwhile, the Post reports that Shell, BP, and ConocoPhillips will likely back the bill, too. (For reference, EEI was on board with the House climate bill while API and other oil companies savaged it to high heaven.)

So does this news make it more realistic that the Kerry-Graham-Lieberman climate bill could actually pass this year? Maybe. But that leaves the bigger question: Is a bill with this much enthusiastic industry support going to be effective at cutting emissions? That's… still not clear. Here's the Post's bullet-point summary of what's likely to be in the bill, with a few comments from me interspersed:

1. The bill would take effect in 2013 and by 2020 would cut U.S. greenhouse gas emissions 17 percent compared to 2005 levels, and 80 percent by 2050.

That 2020 target is what Obama pledged at Copenhagen, but it's still remarkably weak if we're trying to help avert a 2°C rise in temperature. And there's no reason we couldn't go even further, quicker. After all, the recession has already knocked U.S. emissions 8.5 percent below 2005 levels. What's more, a McKinsey study from 2009 estimated that the United States could make that 17 percent cut by 2020 through efficiency measures alone—and save the country $700 billion in energy costs.

2. Trade-sensitive and energy-intensive industries would get a four-year delay before they would be subject to greenhouse gas limits.

3. Two-thirds of the revenues generated by auctioning off pollution allowances for utilities would be returned to consumers through local distribution companies.

This latter bit is pretty similar to what was done in the House bill—essentially, it's a way to even out the geographical disparities in energy use. This way, for instance, electricity customers in coal-heavy Indiana, say, get a bigger refund than those in hydropower-heavy Washington (so as to compensate for the fact that Indiana's utilities will get hit harder by the carbon price). Is it fair? Maybe not. But how else do you squeak something through the Senate?

4. Oil companies will be subject to pollution allowances that will be retired over time, rather than a linked fee. In an effort to counter criticism that any sort of carbon limits on fuel sales constitutes a gas tax, the Congressional Budget Office will issue a document stating this provision will not constitute a tax. All diesel oil fuel revenues will be set aside and directed to the Highway Trust Fund.

Er, it's difficult to figure out what this actually means, but it seems like oil companies will be included in the big cap-and-trade system after all. Except Kerry et. al. are going through convoluted lengths not to call it a cap-and-trade system.

5. The bill will preempt both the states' and EPA's ability to regulate greenhouse gases under the Clean Air Act, as long as emitters comply with the standards outlined in the measure. The EPA will monitor and enforce compliance with the law.

This is what the House bill did, too. A lot of environmental groups, plus MoveOn, will fight hard against this provision. They argue—maybe rightly—that the cap-and-trade system designed by Congress will be too weak and loophole-ridden to shut down the country's dirty coal plants, and that the EPA's greenhouse-gas authority is needed as a backstop. I wrote about this in more detail here.

6. The bill will contain a nuclear title providing loan guarantees and liability protections for the construction of up to 12 plants.

7. The measure will provide $10 billion to the coal industry for "clean coal technology" that will capture emissions from coal-fired power plants, and it will provide an accelerated bonus for early deployment of this technology.

8. It will provide financial incentives for natural gas and electric vehicles.

Buying off the opposition. The main changes from the House bill are the new nuclear subsidies and the incentives for natural gas (the natural-gas lobby was absent from the House debate; they didn't make the same mistake in the Senate).

9. The proposal will provide a hard price collar for the price of carbon, with both a ceiling and a floor.

Having a price floor is a good idea: that way prices can't collapse like they did in Europe back in 2005, allowing companies to sit back and not make any reductions at all. A price ceiling is, potentially, a fine idea, too—after all, you don't want the price of carbon to shoot through the roof and cause chaos—but it all depends on the details. Will the government just start selling extra allowances if prices get too high? That would undermine the whole point of having a cap.

10. It will also include the entire energy bill passed last year by the Senate Energy and Natural Resources Committee.

This is possibly the most heinous aspect of the Senate climate bill. The energy title passed by the ENR committee is horrendously weak. Its renewable mandates for utilities would likely lead to no more additional renewable generation than if we passed nothing at all. And its efficiency standards are much, much weaker than what the House climate bill contains. Given that energy efficiency is the cheapest and easiest way to cut emissions in the near-term, this might be the most fruitful place for environmentalists to focus their attention.

Anyway, I suppose we'll see Monday what this sucker actually looks like—and presumably we'll get a better sense of whether this bill has a chance of passing or not.

Source URL: http://www.newrepublic.com//blog/the-vine/industry-loves-the-senate-climate-bill-good-thing