As featured on p. 218 of "Bloggers on the Bus," under the name "a MyDD blogger."

Tuesday, May 12, 2009

Climate/Energy Bill Deal?

It's a bit odd to have two important bills moving rapidly through the Congress, on parallel tracks, both of which would represent a key pillar of the President's agenda. I've focused a lot of health care, but there's also climate and energy legislation, which may have hit a breakthrough, according to CQ (subs. req.):

House Democrats may be nearing a resolution on energy and climate legislation ... Waxman will meet Tuesday afternoon with committee Democrats to follow up on staff discussions over the weekend. A markup is expected to begin as early as May 14, though a committee spokeswoman said no decision has been made...

...The biggest area of contention is the bill’s cap-and-trade plan to reduce greenhouse gas emissions. President Obama proposed to auction pollution allowances that industry would use in order to meet the cap. Yet to win votes, Waxman’s bill will almost certainly allow businesses to receive some of these allowances for free.

Lawmakers are not divulging any details of a compromise proposal. However, the bill is generally expected to provide about 35 percent of the allowances to local electric distribution companies, which would then be expected to pass the savings on to consumers. Additional allowances, most likely around 15 percent, could go to the manufacturing industry, and coal-fired utilities could receive some allowances to fund research into carbon capture and sequestration. Oil-state lawmakers want 5 percent of the allowances to go to refineries, but Gene Green, D-Texas, said negotiations are continuing. “We’re not there yet,” he said.

Several members also want to auction a substantial portion of the allowances to pay for research into clean-energy technologies and to assist low-income consumers. Some of the allowances would also go to the Treasury so the bill is deficit-neutral.

An even bigger decision for Waxman is whether to change the draft bill’s short-term target to reduce emissions 20 percent from current levels by 2020. Waxman has repeatedly said he does not want to change the target, but to reach a deal, he could move closer to Obama’s proposal to reduce emissions 14 percent by 2020.

I think it's a mistake to allow pollution credits to go to industry for free. But importantly, cap and trade makes up just part of the proposal, and the other elements of the bill would not only clean up some of the shortcomings of cap and trade, but actually strengthen the cap:

...unpriced carbon is not the only market failure. In fact, there are dozens, hundreds of such failures. If you sought to address them all with a carbon price—a fairly blunt tool—you’d need a very, very high price, and that’s not going to happen. A politically realistic price on carbon, likely to be low at least for the first decade or two, will not address or overcome most of those failures. The idea behind “complementary policies,” or policies outside the carbon price, is to address some of those failures and thereby make the road smoother (cheaper, more efficient) for the declining cap.

Roberts uses some examples: utilities, which are regulated monopolies acting outside the free market that may default to the most cost-effective but least climate-friendly options; the need for coal-fired plants to get phased out to meet the cap target despite the fact that they are grandfathered in under the Clean Air Act; and some more. Ultimately, complementary policies like a renewable energy standard drives the cap down to a level where it can actually mitigate the most disastrous effects of climate change. Ultimately, this may not be enough to prevent a rise of, say, three degrees in global temperature, and we need to move to an adaptation strategy as much as a mitigation one. But the fatalist notion of "there's no political will to tke meaningful steps," or "even if we lower carbon emissions, India and China won't" doesn't fly with me. In fact, since China has built power plants far more efficiently than we have, perhaps that phrase should get flipped around.

We don't really know what the changes in the legislation will be - hopefully, Peter Welch fattened up the Blue Dogs with enough lasagna so they didn't muck around with the bill too much. But while I still wonder whether we can get this done in this year, the most hopeful sign, for me, happened outside of Congress:

Bloomberg reports that Duke Energy Corp., which owns utilities in the Southeast and Midwest, announced that it won’t be renewing its membership with NAM, in part because of NAM’s refusal to address global warming:

“We are not renewing our membership in the NAM because in tough times, we want to invest in associations that are pulling in the same direction we are,” Duke Chief Executive Officer Jim Rogers said last month in an interview. The association, the U.S. Chamber of Commerce and Republicans “ought to roll up their sleeves and get to work on a climate bill, but quite frankly, I don’t see them changing.”

Charlotte, North Carolina-based Duke is a founding member of the United States Climate Action Partnership, a coalition of business and environmental groups that seeks to influence legislation on greenhouse gases linked to global warming. The National Association of Manufacturers has opposed mandatory controls, arguing they will harm the economy.

A Duke spokesman also said that the company would like to see cap-and-trade legislation “happen this year if possible.”

If energy companies like this want something done, something can actually get done.

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