Still Time To Strengthen Waxman-Markey

Henry Waxman will suffer the endless string of GOP amendments to his climate and energy bill only until today, before he puts the hammer down and moves the bill out of committee. He's even hired a speedreader in case the GOP wants to delay the bill some more by having the whole 900-page behemoth read in full. Waxman wants the bill out of committee rather than being held up by procedural silliness and self-serving amendments. You can watch this thing drag on over at C-SPAN 3.

But of course, once the bill leaves committee, that's not the end of the story. While the Chairman believes he has the votes, and the Energy and Commerce committee is generally more conservative than the House as a whole, the bill has plenty of other hurdles. Charlie Rangel and the Ways and Means Committee wants his hands on it, and he will prioritize health care well before this bill. Collin Peterson over at Agriculture wants a piece of it as well. And Waxman wouldn't commit yesterday to this bill even reaching the House floor before August.

My point in bringing this up is that there are months to go before the final bill takes shape. Various fiefdoms in the Congress want to put their fingerprints on it, and nothing will happen quickly. This is important, because there's substantial debate over whether this bill represents a true compromise that everyone can live with, or a flawed bill that would not have the kind of impact that makes it worth the many giveaways involved. Brad Plumer at TNR highlights the biggest, but by no means the only, compromise.

One of Waxman's biggest compromises, the one attracting the most attention, was that roughly 85 percent of the pollution permits under the bill's carbon cap-and-trade system will be given out to companies for free, rather than auctioned off by the government [...]

If Congress auctioned off all or most of the pollution permits under a cap-and-trade system, companies would have to pay more for the allowances, and the U.S. government would raise more revenue. That'd be money Congress could then rebate directly back to consumers to soften the blow of higher energy prices; or it could spend some of the money on clean-energy research or efficiency projects (many of which won't necessarily come about just because there's a price on carbon). Right now, there's less money in Waxman-Markey for both of those things.

Ultimately, Plumer believes that, while the bill is flawed, it would still represent a step forward and progressives ought to support it. The Economist appears to disagree, noting the looser cap on emissions (now 17% below 2005 levels by 2020 instead of 20%). Adam Siegel calls it a coal subsidy bill because it subsidizing the fossil fuel industry far more than renewables. The bill is so large and includes so many competing measures that it's impossible to really divine what it would do at this point. But there are many months left to make that determination and find the points where it can be improved.

Progressives will either have to eat these compromises or reject anything this mushy, depending on the political movement that grows up around the issue, and right now, that movement is relatively silent.

There are two ways to overcome the political hurdle. Either cut deals with the coal, oil, auto and utility industries that weaken (but hopefully don't completely undermine) the legislation. Or convince voters in those areas that their interests are not the same as those of fossil fuel CEOs, motivating them to take action and putting public pressure on key congresspeople to back stronger climate protection legislation.

Cutting deals can be handled behind closed doors in the halls Congress. Generating public pressure requires major grassroots mobilizing.

The political reality Reps. Henry Waxman and Ed Markey had to face is there has been no major grassroots mobilizing in the broader progressive movement. While poll numbers show strong support for strong legislation, there has been no grassroots intensity to back that up, to convince skittish politicians that the public is demanding action immediately, and will hold politicians accountable if they don't follow through.

...broad, deep, relentless and coordinated grassroots mobilization is the only thing that can put a wedge between special interest lobbying and Congress. If we aren't present in the halls and offices of Congress, you better believe every day corporate lobbyists are.

Bill Scher is absolutely right. But there's a larger question about political capacity here. All these problems hitting at once really dilutes the energy that can be put to any one topic. We have a couple wars, a financial meltdown, major health care legislation and about 100 other things going on. The President prioritized health care and that's what has gotten much of the activism. The enviro groups haven't done their job of building a movement outside of throwing a couple ads on the air. But I wonder what they really could have done. And I also wonder if there won't be possibilities for movement pressure down the road. We're at the beginning, not the end, of this fight.

...Just to be clear, I think the bill should be improved. Giving away pollution credits will put the burden of transforming the energy sector on the poor and not save anyone on their electric bills. The renewable energy standard ought to be strengthened up to at least 25%. My point is we have a lot of time to do this, but the enviro groups have to take the lead.

What's 3% When The Planet Is Boiling Anyway?

Democratic leaders on the Energy and Commerce Committee and coal-state holdouts reached a deal on energy and climate legislation that lowered the threshold for the carbon cap to a level where I'm trying to determine its value.

House Democratic leaders are scaling back plans to curb global warming and make the transition to cleaner energy in the hopes that they can get a bill passed this year.

"We have resolved a good number of the issues," said (Henry) Waxman, who chairs the panel and has set a Memorial Day deadline for it to clear the committee. "I believe we will have the votes for passage of this bill next week." [...]

Initially, the bill called for electricity producers to generate 25% of their power from renewable sources like wind and solar by 2025. That target has been lowered to 15% by 2020, with as much as 5% coming from improvements in energy efficiency.

The deal also makes more modest cuts in greenhouse gases. The draft unveiled in March called for a 20% reduction by 2020 in the emissions blamed for global warming. The version that will be unveiled later this week will call for a 17% reduction from 2005 levels by 2020.

While that early pollution goal goes further than the president has called for, it still falls short of what other countries are calling on the United States to commit to by December, when a new international agreement to reduce global warming pollution will be negotiated in Copenhagen, Denmark.

Other details of the bill still need to be worked out, such as how the allowances to emit greenhouse gases will be distributed. Obama has called for a 100% auction and would use the billions in revenue to help fund renewable energy technologies and to offset higher energy prices for middle-class households.

Waxman said Tuesday that the Democrats on the committee had agreed to give 35% of the allowances away for free to local electricity distribution companies to help ease costs. Allowances will also be doled out to auto manufacturers to help them develop cleaner cars.

As expected, the original Waxman-Markey bill represented the most leftward option, and that already was pre-compromised a bit. Now we have a smaller cap, a smaller renewable mandate, and a greater amount of carbon credits handed to polluters. And that's just to get it out of committee in the House. To clear the full House might take another dent or two, and then to clear the Senate will require a whole other set of compromises.

I think by the end, the bill will require Al Gore to fly less and that's about it.

I'm wondering where the vaunted Obama organization is in all of this. They have started to ramp up an effort to pass Obama's health care bill, but only based on his "principles" and not on any specific language or hard issue, like a public option. On energy, supposedly just as key a pillar in the Obama agenda, they have been silent. Bills get constructed now, not at the end of the process when it turns to an up or down vote on the floor. Surely the details matter, unless the goal here is simply to get anything done that can be called "reform" in a moderately credible way. I fully recognize the "art of the compromise" rhetoric about politics, and as long as these bills are seen as beginnings and not endings, we can live with them. But a little volume at the BEGINNING of the process rather than a rush at the end would help, Mr. President. Unless you see these bills at data points on your re-election resume instead of deadly serious legislation that affects all of our lives.

Waxman: Focus on the Cap

The EPA today took a major step in declaring greenhouse gas pollution a danger to the public, increasing the urgency to regulate CO2.

Environmental Protection Agency Administrator Lisa Jackson is officially confirming today that greenhouse gas pollution endangers the health and welfare of the American public, finally obeying the mandate set down by the U.S. Supreme Court on April 2, 2007. Following a review from the White House and agencies across the administration, Jackson is announcing this morning that she has signed the Clean Air Act endangerment finding for six greenhouse gases. By the time the decision is finalized after two months of public comment, it will have been nearly two years since the EPA was blocked by the Bush White House from issuing such a finding.

The implications of this ruling loom large over proposed climate and energy legislation under consideration in the Congress. I agree with Barbara Boxer that this finding will provide a serious boost to those efforts, because now the EPA is obligated under the Clean Air Act to regulate carbon emissions.

The EPA's endangerment finding will open the door for the Obama administration to regulate greenhouse-gas emissions under the 1970 Clean Air Act.

Although the president would prefer not to tackle this issue through his administration's regulatory power, the threat of EPA regulation could be used as a hammer to persuade moderate senators of both parties to get behind cap-and-trade legislation.

"What it says to the senators on the fence is that it's not really a question of whether regulation is happening. It's a question of how it will happen," a senior aide to Boxer told ABC News.

Call it "blackmail," as the corporate lobbyists do in this piece, or call it what it is, a requirement under the law mandated by the Supreme Court. So the obstructionists can block legislation in Congress and watch the EPA enact strict mandates, or they can have a say in the regulation. Their choice.

Respective of Congressional legislation, I recently had a great opportunity to sit down as part of a lobbying delegation with Henry Waxman, my Congressman and the chair of the House Energy and Commerce Committee, to discuss the Waxman-Markey clean energy legislation introduced on March 31. There are actually two bills, one in Energy & Commerce and one in the tax-writing Ways and Means Committee, both following similar tracks and expected to be out of committee by Memorial Day. And it can be argued that this provides a wealth of options for Congress to consider in pricing carbon, and thus the multiplicity of bills makes sense. But clearly, by virtue of its expansiveness and impact on a host of energy/climate issues, not just carbon pricing and hard caps but energy efficiency and renewable energy standards, the Waxman-Markey bill will be the template for energy legislation in this Congress.

Waxman brings an interesting perspective to the debate. He believes that the best way to get energy legislation through the Congress is to just start moving it, with tight deadlines, and dare the Republicans to stop it. He frames the issue as one of national security, to reduce our dependence on foreign sources of energy; of environmental imperative, to mitigate the catastrophic impacts of climate change; and of economic necessity, to move the country into a renovated, clean energy economy.

There's a lot of talk about how the cap and trade portion of the bill will be handled. The bill is somewhat murky on these points. The potential exists in the bill for offsets that would give a substantial portion of the carbon permits away for free. And the bill has no mention of how the revenues gained from what permits are auctioned off would be used (Waxman said that he would like to see some money directed to ratepayers, and some money directed to R&D for innovation in the energy space, and he would like to see the money targeted rather than applied as a broad tax cut). But Waxman de-emphasizes these concerns in favor of looking at the cap part of cap and trade. If the cap is firm and based on what the scientists have set as a goal to mitigate the effects of climate change, he reasons, the rest will fall into place. He used the example of acid rain, which used a similar cap and trade system in the 1980s. Industry feared that they'd have to spend billions for compliance, but lawmakers focused on the cap, and the problem was resolved for 1/10th of the expected cost. The goal, then, must be the cap. Waxman believed that offsets would have to be verifiable, and in exchange for the offsets there would have to be more reductions (a 1-to-1 1/2 ratio rather than 1-to-1). But if that's the cost to make the bill more politically attractive, Waxman is content to focus on the cap. Waxman also responded to a question I had about Europe's cap and trade system, which was marred by offsets and giveaways, by saying that the committee worked with Europe's regulators in drawing up the legislation, and that they will not fall into the same traps.

Waxman also played up the economic possibilities of the legislation, that only the innovation unleashed by having to get under the cap will be sufficient to actually create valuable goods for America and "get us out of the recession." Dozens of new industries can be developed and tremendous potential realized through innovation and technological advancements.

The other problematic element of the bill, for the progressive citizen lobbyists in the room with me, was the inclusion of clean coal technology in the bill, something that has been accepted by the White House and the Department of Energy as part of the solution. The typical response to this is that India and China will keep using coal even if the Western world stops, and we'd better come up with a way to capture and store the carbon produced or else our efforts will come up lacking. Waxman said that "we have to figure out if we can keep coal in our future." Obviously, the cap will eventually be too stringent for coal to remain a going concern in the United States without capture and storage technology advancing. And hopefully, the cap can force that, and develop new industries and new exports in the process. I don't know that I totally agree with that, but it's the party line on this, anyway. And besides, renewable energy has its own trade-offs.

Overall, I am far more optimistic about the prospects of climate and energy legislation coming through the Congress than I was before walking into that meeting. We still need to work hard to make the bill stronger, but the combination of the EPA ruling and the deliberate pace of the legislation moving through the House could provide the necessary momentum. We have to get this done, and hopefully we can create that sense of urgency. Also, we need to use the leverage of the EPA ruling to ensure this bill doesn't get weakened as it goes through the legislative sausage-making.

Ignoring The Obvious

Over the weekend, the New York Times had an article with the thesis statement that the legislative machinery is rusty and unused to the kind of ambitious policy agenda that Barack Obama has proposed.

Lawmakers, senior staff members and other experts agree that a combination of divided government, thin majorities, the running battle for Congressional control and an emphasis on national security caused a decline in the old-school legislative give-and-take that will be required to deliver major health, energy and education measures to President Obama.

“We have been miniaturized,” said Senator Olympia J. Snowe, a moderate Republican from Maine and a veteran of health care negotiations. “You have three talking points on a card. We are going to have to be taught and relearn the process, crack the notebooks.”

Congress has not even managed to produce its basic spending bills on time in recent years and has exhausted considerable energy dealing with recurring tax and Medicare snags. Big bills have been few and far between — the 2003 Medicare drug plan and a 2007 energy law are examples — as lawmakers nibbled around the edges of problems [...]

As members of Congress and analysts look at the daunting demands for legislation emanating from the White House, some wonder if Congress is up to the task.

“Do we have a Lyndon Johnson in the Senate at the moment, someone who can push through legislation?” asked Stanley E. Collender, a former top aide on Capitol Hill and a longtime observer of Congressional budget fights. “We haven’t seen it in a while.”

There's no doubt that some of this is true. The "Masters of the Senate" have come and gone, and the reasons cited do tell part of the story. Furthermore, the internal dynamics of the Republican opposition tend them in the direction of unthinking opposition, behaving like perpetual candidates in a contested primary (Similarly, the glory-seeking Evan Bayhs of the world see value in obstructionism and shining attention on themselves). But this article never gets around to mentioning the special interests who frustrate progress on a daily basis. And we see them lining up, one by one, particularly with respect to the domestic agenda, to throw sand in the gears of the legislative machinery. As campaigns grow more expensive, and as inequality increases with the biggest firms getting bigger, these impediments have simply metastasized.

For example, lobbyists for practically every corporation want to halt the move to tax overseas profits from offshore tax havens, something the entire world came to an agreement on at the G-20. Corporate farming interests succeeded in removing cuts to farm subsidies from the budget resolution. And despite the rhetoric that action on the climate and on the economy are inextricably linked, oil companies have flat out given up on renewable sources of energy, and appear to have convinced the Administration to cave on the 100% auction element of their cap and trade proposal.

The Obama administration might agree to postpone auctioning off 100 percent of emissions allowances under a cap-and-trade system to limit greenhouse gas pollution, White House science adviser John P. Holdren said today, a move that would please electricity providers and manufacturers but could anger environmentalists [...]

During the presidential campaign, Obama called for auctioning off all greenhouse gas emissions permits at the outset, rather than just a portion of them. Many industry leaders say a phase-in will be essential to easing the transition to a low-carbon economy.

"The idea, obviously, is to end up with a bill that reflects both the thinking of Congress and the administration, a bill that the president can sign," Holdren said, adding that when it comes to a 100 percent auction, "Whether you get to start with that or get there over a period of time is something that's being discussed."

We have a model for "getting there over a period of time," in Europe, where they wasted a decade making almost no progress on reducing carbon until they just went ahead and moved to a full auction. The whole point of cap and trade is to price carbon, not give it away for free, because the pricing element encourages the innovation needed to make the needed reductions.

Some, like Chris Bowers, are optimistic that public investment will continue to grow. The question remains whether that will manifest in government spending that improves lives, or the kind of corporate welfare and Treasury raids we have seen over the last decade. Call me skeptical. And I think the reason is simple - a political class too intertwined with a corporate elite, too attentive to their concerns over the concerns of their constituents. Perhaps full public financing of all campaigns is the answer, and what we should be fighting for. Or maybe we just need A New Way Forward to sever that symbiotic relationship and restructure the economy.

Lost in the talk of tea parties by anti-tax zealots are the A New Way Forward demonstrations this weekend. It is crucial that we send a message that real structural change is not optional but necessary. I urge you to find the demonstration in your area and attend.

Waxman-Markey: Could Be Better

Some big news today on the climate change front, as Henry Waxman introduced a bill that would cut greenhouse gas emissions dramatically by 2050.

Representative Henry Waxman, chairman of the House energy panel, will unveil draft legislation to reduce U.S. greenhouse-gas emissions by 20 percent, according to two people familiar with the measure.

The California Democrat, who heads the Energy and Commerce Committee, will release the proposal today, according to the people, who declined to be identified before the plan is made public. Utilities will be forced to rely on renewable energy for some of the power they sell, the people said.

“The Waxman bill is the opening shot in the battle about what we do about global warming,” said Daniel Becker, director of the Washington-based Safe Climate Campaign. “So it’s pretty important.”

President Barack Obama has called for the U.S. to reduce emissions 80 percent by 2050, and get a quarter of its electricity from renewable sources by 2025. Waxman’s proposal would follow those goals.

These goals are actually somewhat in line with the targets of the group Business for Innovative Climate and Energy Policy (BICEP), which includes Nike, Starbucks, eBay and a bunch of other corporate partners. Those businesses are worried about the direct results of climate change to their materials and suppliers. In fact, the BICEP plan is BETTER than Waxman's, because they are calling for a 100% auction, while Waxman's bill would give some carbon credits away to polluters:

The Waxman plan doesn’t specify whether any allowances will be given for free, as some companies have requested. The committee staff favors auctioning a majority of them, according to the energy lobbyist.

The proposal will allow industrial emitters such as cement makers and utilities to buy and hold emissions permits, then use them to meet their targets any time in the future. Polluters may also use permits from “offsets,” projects that absorb carbon dioxide from the air or produce energy with fewer emissions, to meet part of their obligation.

The Waxman plan will allow offset credits covering 2 billion tons of emissions annually, or about 27 percent of total U.S. greenhouse gases in 2007. The government will hold some permits in reserve to help industry keep transition costs down, under the draft plan.

Waxman's plan hews much closer to the U.S. Climate Action Partnership plan, which includes in the coalition ConocoPhillips and General Motors along with mainstream enviro groups. Ed Markey, the go-to on climate change in the House and a co-sponsor of the bill, admitted that some credits would be given away on a conference call today.

Good for Greenpeace for speaking out that this bill doesn't go far enough.

After more than a decade of denial and delay by U.S. leaders, Chairmen Waxman and Markey have placed clean energy and global warming at the very top of Congress's agenda as the world looks to the United States for leadership in the run-up to Copenhagen. The draft bill is a good first step in the right direction, but the bill must be strengthened to ensure that it will achieve the goals of transitioning to a clean energy economy and solving global warming.

Key short-comings that must be addressed include:

• Two billion tons of pollution offsets, a virtually unlimited amount equal to a quarter of all U.S. emissions. If all the offsets in the bill were used, the bill's emissions reductions could be met without any reduction in fossil fuel emissions for more than 20 years. We cannot solve global warming by simply planting trees and continuing to pollute forever.

• The coal industry receives untold billions dollar in handouts for the false promise of carbon capture and sequestration, with American ratepayers and taxpayers footing the bill.

Finally, the discussion draft is largely silent on how auction revenue will be used. We urge the committee to dedicate this revenue to the short-term up-front investments needed to transition to a clean energy economy, including investments in clean energy development domestically and in the developing world as well as adaptation efforts for countries and communities most directly affected by climate change.

Giving away credits makes absolutely no sense and will delay perhaps forever the transition to a clean energy economy. It should be a bright line for progressives. And obviously, the so-called "clean coal" industry shouldn't be getting a bailout in this bill.

What's problematic is that Waxman-Markey is likely to be the best climate bill coming out of Congress this year. The Senate version will be even more compromised. So improving on this one before it goes to a vote is crucial.

The Dangerous Politics Of Cap And Trade

I mentioned earlier that I am less hopeful on getting meaningful carbon pricing legislation through Congress this year than getting health care reform. The main reason is that too many Americans experience the broken health care system directly for politicians to evade public anger over it. Climate change is simply more abstract, making it a tougher sell. And you can very easily turn the idea of capping emissions and selling carbon credits at auction to polluters into "an energy tax." This is from a letter from GOPers on the Senate Environment and Public Works Committee to their colleagues, and the rhetorical gambit is clear.

The President's 2010 Budget proposal contains a risky, ill defined new energy tax that has the potential to continue the economic recession for many years to come. We are writing this letter to alert you to this situation and ask that you join us in a budget resolution amendment to strike and such provision.

Specifically, the President's 2010 Budget proposal asks to collect $646 billion dollars in new "Climate Revenues" from the American people. The government will collect these new revenues through a cap and trade scheme in which " allowances" are sold to the highest bidder. The government won't tax consumers directly, but it will impose new costs on energy producers and users who will in turn pass those higher costs on to consumers, which will result in higher electricity bills, gasoline prices, grocery bills, and anything else made from conventional energy sources. In short, consumers will feel as if they are paying a new tax on energy.

The stated price tag for this new energy tax is $646 billion, yet recent news reports indicate that administration officials are privately admitting their program will actually generate between "two and three times" this amount of revenue, or between $1.3 trillion and $1.9 trillion. However, these numbers represent only the cost from 2012 through 2019. The budget summary describes the energy tax extending at least through 2050. At the 2012 through 2019 average annual rate, families and workers would face through 2050 between $6.3 trillion and $9.3 trillion in higher energy taxes.

Left unsaid is that the government would funnel most if not all of that tax to those same consumers in the form of the "Making Work Pay" tax credit. Really this is an effort to keep the oil industry in business - and the industry obviously believes it can work, as they divest from renewable energy and into biofuels, the production of which emits just as much carbon.

There are good signs as well - Lindsay Graham and John McCain have signed on to climate change legislation, but of course they would like nothing more than to eliminate the auction for carbon credits and give away polluting rights for free. That was the structure of the McCain-Lieberman (later Lieberman-Warner) cap and trade bill from last session. The hint toward using budget reconciliation clearly got McCain and Graham out of their chairs on this one. But a bad climate bill that ditches auctioning off pollution rights wouldn't be anything to cheer about. It would reward big business, plain and simple.



As Brad Plumer notes:

You see what happens if the permits are auctioned off and the revenue is divided among Americans equally. The overall impact is actually progressive, and lower-income households come out ahead—the extra amount they pay for dirty energy is more than offset by the rebate. But if the permits are given out to companies for free, it's only wealthier Americans who benefit—they're the ones running the companies making windfall profits, after all—while everyone else gets squeezed.

Given the option of another tax break for the wealthy or movement on other issues like investing in renewables and a hard standard for electricity generation... let's say it's a toss-up.

No Giveaways To Polluters

This is really bad news:

Bingaman said any Congressionally developed system capping and trading emissions probably will include carbon allowances given to polluters like cement factories and coal-burning power plants, along with permits that are sold.

Auctioning 100 percent of the permits would essentially make polluters pay quickly for emissions. In the European Union's Emissions Trading Scheme, emissions permits were given away to polluters at first. This led to a glut of permits and windfall profits for some emitters.

...."I think it's unlikely we will pass a cap-and-trade bill with 100 percent auction," Bingaman told reporters at the Platts Energy Podium. He said such a system has the risk of substantially increasing the burden on some utilities and major emitters.

100% auction is the only way to make cap and trade work. These permits have a value that needs to be set by the market rather than given away for free. Power generators are going to pass on the "cost" of reducing emissions to their customers whether they get permits or have to bargain for them. And Europe's history is instructive. Kevin Drum explains the economics.

The economic theory involved is a little hairy, but those permits have a value on the open market, and that means that in many cases marginal producers can make more money selling their permits than by producing power. They'll only be willing to produce power if they can raise prices enough to make the power-producing business more profitable than the permit-selling business, and eventually everyone will jack up prices to follow suit.

This may sound abstract—even a bit fantastical—but it's absolutely real. In fact, when permits in phase one of Europe's ETS system were handed out for free, electricity prices rose and power companies pocketed a windfall profit (which Britain's Department of Trade and Industry estimated at about $1.1 billion a year in the UK alone). Dale Bryk, an attorney with the Natural Resources Defense Council (NRDC), puts it bluntly: "If you ask them point-blank if they'll charge customers for free permits, they won't tell you. But they know they will."

A better way is for the government to hold an auction to set the price of permits. This has a couple of extremely salutary effects. First, it puts everyone on a level playing field (since Congress has no ability to allocate permits to favored interests). Second, and even better, the money from selling the permits goes to the federal government, not to the carbon emitters. That's a pretty useful revenue stream, one that would probably start out at about $20 to $30 billion per year and go up steadily as the cap came down and the price of carbon permits increased.

Barack Obama has consistently argued for a 100% auction, so special interests and existing power companies cannot game the system. Yet Bingaman is calling it "unlikely" because the lobbying against it would be too intense. Not because it would be the wrong policy, but because the entrenched interests wouldn't like it. This is a horrific way to approach this important point, and one that will fly right by the average person who doesn't know the intricacies of cap and trade. You cannot give away carbon permits and expect the program to be successful.