A safety valve in Lieberman-Warner is senseless

I see no point whatsoever in passing a climate bill this year that includes a safety valve. I have blogged on this before, but it bears repeating as we appear to be getting to the endgame negotiations in the Senate on the Lieberman-Warner bill. Bottom line:

If you want to get a 60% to 80% greenhouse gas cut in four decades, you just can’t waste time with safety valves. We need to get to a price of $30 to $40 a ton for carbon dioxide as soon as possible — and if it needs to go higher than that because conservatives block the progressives and moderates from legislating aggressive technology deployment strategies that would keep costs low, well, as the saying goes, “We’ll burn that bridge when we come to it.”

If you just want to pass a bill that makes it seem like you’re doing something while in fact doing little, then go for it! But surely a year’s delay (waiting for a somewhat wiser Congress and an infinitely wiser President) is better than a pointless bill.

In an article, titled “Sponsors of Senate emissions bill seek compromise on cost provisions,” Greenwire (subs. req’d) reports today:

Senate sponsors of a major global warming bill are trying to find compromise on the vexing question of how to cap U.S. emissions of heat-trapping greenhouse gases without damaging the economy….

Electric utility companies, labor groups and several senators who hold critical votes on the measure still want to set some type of price ceiling on the annual price of a carbon credit….

“There’s a really serious conversation going on in a lot of venues about how this doesn’t become that last issue standing, and it’s a take-it-or-leave-it for environmentalists,” said Tim Profeta, a former senior aide to Sen. Joe Lieberman (I-Conn.)….

Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) opposes the inclusion of a “safety valve” in the climate bill originally drafted by Lieberman and Sen. John Warner (R-Va.)….

The safety valve is a favored concept among economists and business types who maintain that a set carbon ceiling gives them enough certainty that the new global warming program would not sink their businesses. They insist it can also help to assure nervous lawmakers about the limited economic effects of the legislation.

It is favored among people who simply don’t get how dire the situation is. You know, maybe 10 or 15 years ago we could have given a safety valve a chance, but you just can’t ignore scientists for three decades and then think it is going to be peaches and cream. We need the full dose of anti-biotics now, not some watered down dosage that allows the fever to fester.

In one bill introduced last year from Sens. Jeff Bingaman (D-N.M.) and Arlen Specter (R-Pa.), carbon prices in the cap-and-trade system would not go above $12 per ton in the first year. After that, the ceiling would rise 5 percent per year above the rate of inflation.

I believe it was $12 per ton of carbon dioxide — $12 per ton of carbon would be utterly meaningless. If you doubled that safety valve, $24 per ton of CO2 and 10% rise per year above inflation, that would probably be the lowest safety valve that could be tolerable — but again, waiting a year would still be better than a safety valve.

Yes, as Greenwire notes, “Three Republican senators — Specter and Alaska’s Ted Stevens and Lisa Murkowski — crossed a major threshold by signing up as cosponsors for the bill in part because of the safety valve,” but as I blogged earlier:

No point in supporting a bill that will actually save Alaska from becoming a muddy, flooded place when you can spend your time looking for middle ground between global warming denier Sen. James Inhofe (R-OK) and those whose views are actually based on science.

You don’t need a safety valve, as I’ve previously noted, when you have permit banking and borrowing (Everything you could possibly want to know about permit banking is here).

Here is more from Greenwire on the backroom negotiations:

But Boxer and her traditional allies in the environmental community argue a safety valve would send the wrong message to industry. A price limit on CO2 would discourage companies from making investments in new low- or zero-carbon technologies.

“Any legislation that would move forward would have to have very strong market signals,” a Boxer aide said yesterday. “It’d also have to ensure that the greenhouse gas reductions are achieved.”

The closed-door talks on a solution to the cost debate are in the early stages. But some ideas already are being kicked around that signal some of the key features of the Bingaman-Specter approach are open to modification.

“There seems to be a general agreement that cost certainty, or confidence about costs, are most important in the early years of a new program,” said Jason Grumet, executive director of the nonpartisan National Commission on Energy Policy, an early supporter of the Bingaman-Specter bill’s safety valve.

Grumet said one idea under discussion involves “how you can start with a more fixed system that could phase out or be more flexible over time.”

And he also left open room for the $12-per-ton figure to change. “I’ve never seen a number in Congress that’s nonnegotiable,” he said.

Environmental groups have been united in their opposition to the safety valve concept since it first surfaced more than a decade ago during the Clinton administration.

“This is a cap-buster,” Jennifer Havercamp, a former senior Clinton trade official now working as counsel to Environmental Defense, said last week during testimony to the Senate Finance Committee.

Brent Blackwelder, president of Friends of the Earth, said he expected Boxer to pull the Lieberman-Warner legislation from the Senate floor if a safety valve were added to the legislation.

“It’s got to get stronger,” said Blackwelder in an interview. “Safety valves are a way of copping out. It’d absolutely derail the entire process.”

Yet some longtime climate policy observers predict the negotiations over a cost provision may still yield agreement.
“I’ve had the sense in informal conversations that when it comes to a deal, if there’s really a deal on the table, they could live with that,” Richard Morgenstern, a senior fellow at Resources for the Future, said of environmental groups.

Morgenstern, who worked at U.S. EPA and the State Department during the Clinton administration, added, “They don’t want to offer it up too soon.”

Fine — don’t offer it up this year, okay?

10 Responses to A safety valve in Lieberman-Warner is senseless

  1. David B. Benson says:

    Err, one tonne of carbon === (12/44) tonnes of carbon dioxide.

    So a tax or whatever of $12 per tonne of fossil carbon equals a tax or whatever of $44 per tonne of carbon dioxide.

  2. Well said!

    With a safety valve, when prices reach a predetermined dollar value, businesses no longer have to rely on the established supply of allowances available in the market. Instead, the federal government makes new allowances available for sale at a specified price – potentially in an unlimited quantity.

    This creates two serious problems:

    1. It destroys the cap, and the hard limit on emissions is critical, as you point out. A safety valve gives the illusion that we are controlling emissions while allowing more greenhouse gas pollution into the atmosphere.

    2. It limits the economic opportunity of those who develop cleaner technology. Higher prices for emissions allowances are a good thing if you’re inventing and selling ways to cut pollution. A safety valve sharply reduces the incentive for innovation.

    Sheryl Canter
    Environmental Defense

  3. Steven Kimball says:

    Actually a tax of $12/ton of carbon equals a tax of $3.27/ton of CO2. (12×12/44=3.27)

    Perhaps the biggest problem with Lieberman/Warner is that it calls only for Cap and Trade rather that Cap, Auction and Trade. As such it represents a giveaway of at least 500 billion dollars to the biggest polluters. Also, its targets are too low (60% CO2 emissions reductions by 2050).

    I agree that it is better to wait until 2009 and get a decent bill. If L/W is passed those forces opposed to stopping Climaticide will claim that we have already done enough and resist any future efforts to revise the bill. Better to get it done right the first time.

  4. Joe says:

    Yes, that’s my point. $12/ton of carbon is a meaningless price. $12/ton of CO2 is just “low.”

  5. RhapsodyInGlue says:

    To my mind I wouldn’t at all see a problem with starting out for a few years with fairly low relief valve… but one that then ramped VERY quickly and phased out within 8-10 years. My top of the head suggestion… start with the $12 they want (as long as that’s tons of CO2 equiv) and then increase it 35% each year. In the eighth year it’s at $98. The $24 with 10% would be about $48 in the eighth year.

    While an argument can be made that companies should have seen emission limitations coming and already started doing the research and planning necessary, that unfortunately is overestimating some who run our companies. Once the law is enacted, then it’s certainly their own fault if they don’t adjust accordingly. Reasonable caps that lasted for a few years would help protect consumers and investors from the inevitable existence of incompetent business people that are still either asleep or having wishful daydreams.

    In effect this is a hybrid system starting with the predictable costs of a carbon tax and ending with the predictable environmental outcome of the cap.

  6. RhapsodyInGlue says:

    Though, I suppose my engineering mind doesn’t always consider the political aspect. I’m sure an argument can be made that agreeing to a low but steeply rising valve leaves it open for congress each year to pass an “emergency” change that postpones the increase after companies band together and run endless commercials about how life as we know it will end if the valve isn’t opened a little wider.

    Joe… do you have a pointer to a description of what a bank and borrow version of this legislation might look like? What would happen if some big polluting utility borrows all they can and then declares bankruptcy? Is there trading under this scheme?

  7. David B. Benson says:

    Thanks for correcting my faulty thinking. Can’t blaim it on the arithmetic, which is faultless.


  8. $12/ton?? Wimpy!

    Let’s go for $.67/kg and we can momentarily replace the income tax. Or go for $.57/kg and replace payroll taxes. (These rates would need to go up once people start conserving, which would be rather quickly.)

    Offer conservatives a complete replacement of an existing tax, and you might have some success getting them on board for a carbon tax. Offer a carbon tax on top of existing taxes, or offer some Stalinist quota system, and you’ll continue to get stonewalled.

    Via this strategy, a steep carbon tax may well be an easier sell than a “reasonable” carbon tax.

    Derivations of the above figures at:

  9. Tom says:

    The Congressional Budget Office report that gave the safety valve some support cites its evidence selectively. It begins by praising the U.S. market to control sulfur dioxide (which has no safety valve), then later cites the volatility in the sulfur market as a reason to employ a safety valve for carbon. It would seem to me the sulfur market was so successful precisely because it lacked a capped price for emissions.

  10. David B. Benson says:

    Here is a carbon tax just put in place:

    although I have not found a source which gives the $ (CA) per tonne.