"Outline Of Kerry-Graham-Lieberman Appears To Hew To Obama’s Clean Energy Principles"
Details of the comprehensive green economy legislation being negotiated by a bipartisan trio of senators are leaking out, as draft language nears completion. In a meeting yesterday with a coalition of industry lobbyists, Sen. John Kerry (D-MA), Sen. Lindsey Graham (R-SC), and Sen. Joe Lieberman (I-CT) unveiled an eight-page draft outline for their bill. They are attempting to mirror the House’s bipartisan vote for the American Clean Energy and Security (ACES) Act (H.R. 2454) last summer to achieve President Barack Obama’s stated goal of comprehensive clean energy reform to restore the American economy. The overall structure of the Kerry-Graham-Lieberman draft, as reported by E&E News, shows its emphasis on a sectoral approach to fighting climate change:
Overall, the bill will include eight titles: Refining, America’s Farmers, Consumer Refunds, Clean Energy Innovation, Coal, Natural Gas, Nuclear and Energy Independence. And it will set up new nationwide standards for energy efficiency and renewable energy, as well as ideas on carbon market regulation crafted by Sens. Maria Cantwell (D-WA) and Susan Collins (R-ME).
The bipartisan trio has announced they are drawing some ideas from the Carbon Limits and Energy for America’s Renewal (CLEAR) Act introduced by Sen. Maria Cantwell (D-WA) and Sen. Susan Collins (R-ME), a framework for climate policy that has gained praise from the oil industry, AARP, and some prominent climate activists. The CLEAR Act’s cap and trade program is designed to resemble a carbon tax by putting strong restrictions on the carbon market, with the bulk of the revenues going into equal consumer rebates (“cap and dividend”). The size of the market is limited not by offsets but by very weak caps and a low ceiling price.
From the details that have been released by the members of the Alliance for Energy and Economic Growth, the U.S. Chamber of Commerce working group of top polluter lobbyists who met with the legislators yesterday, it appears that the Kerry-Graham-Lieberman draft is consistent with President Obama’s principles and similar in its policy aims to the Waxman-Markey ACES Act.
Further information will be required to determine if the legislative package will allow the United States to join an international solution to global warming. The chances of passing this legislation in an election year depend on whether enough political pundits will believe, as Kerry and Graham do, that their approach is the right political response to the headline-making shocks of rising gas prices, faltering economic competitiveness, and increasing climate instability.
The following table compares key elements of Obama’s campaign promises from 2007 and 2008, the Waxman-Markey American Clean Energy and Security Act as passed by the House of Representatives, and the rumored elements of the Kerry-Graham-Lieberman draft outline:
|Provision||Obama Proposal||Waxman-Markey||Kerry-Graham-Lieberman Rumor|
|Overall Structure||Economy-wide cap and trade, plus renewable electricity and energy efficiency standards and clean energy investment||Utility, industry, and petroleum sector cap and trade starting in 2012, plus renewable electricity and energy efficiency standards and clean energy investment||Utility (2012) and industry (2016) cap and trade with linked fuel carbon fee, plus renewable electricity and energy efficiency standards and consumer rebates|
|Emissions Targets||15% below 2005 (at 1990 levels) by 2020, 80% below 2005 (77% below 1990) by 2050||Capped Sectors: 17% below 2005 (3% below 1990) by 2020, 80% below 2005 by 2050
Overall economy goal: 20% below 2005 (7% below 1990) by 2020, 80% below 2005 by 2050
|Capped Sectors: 17% below 2005 by 2020, 80% below 2005 by 2050|
|Scientific Review||Not discussed||Presidential plan in 2015 and every four years thereafter||TBA|
|Traditional Coal Plants||“Standards that ban new traditional coal facilities” if necessary, and “cap on carbon will make it uneconomic to site traditional coal facilities and discourage the use of existing inefficient coal facilities”||Price on carbon mitigated by free allocations based 50% on historical emissions; Clean Air Act performance standards in 2016||TBA|
|Green Economy Investment||$150 billion over ten years, including workforce training, plug-in hybrids, renewable electricity, advanced biofuels, advanced coal technology, nuclear power, and smart grid||Approximately $100 billion over ten years, including workforce training, plug-in hybrids, renewable electricity, advanced biofuels, advanced coal technology, nuclear power, and smart grid||Support for nuclear, advanced coal, and renewables TBA|
|Permit Allocation||Full auction||Allocations based on historical emissions and energy production with 20% auction at start, phasing to 70% auction by 2030||Allocations TBA|
|Renewable & Efficiency Standards||25% renewable electricity by 2025, 100% new building efficiency by 2030, phase out traditional incandescents by 2014||15% renewable electricity + 5% efficiency by 2020, 75% new building efficiency by 2030, appliance and lighting efficiency standards||Standards TBA; if based on Bingaman energy bill, weaker than projected business-as-usual|
|Consumer Protection||LIHEAP, low-income weatherization grants, a “dedicated fund to assist low-income Americans,” plus Making Work Pay tax cut||Over first ten years, 45% (approx. $30 billion) of allocated permits and auction revenues dedicated to consumer protection through rebates and efficiency measures, emphasizing low-income consumers||Universal rebate checks from 50% of auction revenues|
|Market Regulation||Increased regulation of energy markets||FERC and CFTC regulation, no over-the-counter derivatives trading, increased regulation of energy markets||Cantwell-Collins language prohibits derivatives, limits permit auction to covered emitters|
|Agriculture and Deforestation||Domestic and international incentives to sequester carbon and reduce deforestation, support for biofuels||Pool of offsets plus supplemental fund of 5% of permits for domestic and international incentives to sequester carbon and reduce deforestation, support for biofuels||Agriculture title TBA; Sen. Kerry supports $3 billion annually in international climate aid|
|Deficit Reduction||Not discussed||10% of permits auctioned (approx. $8 billion) over first ten years for deficit reduction||TBA|
|Fuels and Transportation||Increase biofuels to 60 million gallons by 2030, low-carbon fuel standard of 10% by 2010, 1 million plug‐in hybrid cars by 2025, raise fuel economy standards, smart growth funding, end oil subsidies, promote natural gas drilling, enhanced oil recovery||Smart growth funding, plug-in hybrids, raise fuel economy standards||Promote offshore and natural gas drilling, enhanced oil recovery, fuel fee for transportation funding|
|Cost Containment||International offsets||Offset pool, banking and borrowing flexibility, soft price collar using permit reserve auction at $28 per ton going to 60% above three-year-average market price||“Hard” price collar between $10 and $30 per ton, with an increase at “fixed rate” TBA, plus permit reserve auction, offsets TBA|
|Clean Air Act And States||Not discussed||Only polluters above 25,000 tons of carbon dioxide equivalent a year, regional cap and trade suspended until 2017, EPA to set stationary source performance standards in 2016, some Clean Air Act provisions excluded||Only polluters above 25,000 tons of carbon dioxide equivalent a year, regional cap and trade pre-empted, some Clean Air Act provisions excluded|
|International Competitiveness||Tax incentives for domestic auto industry||Free allowances for trade-exposed industries, 2020 carbon tariff on imports||Carbon tariff on imports|
|References: Barack Obama, 2007; Barack Obama, 8/3/08; Pew Center, 6/26/09; CQ, 3/18/10; E&E News, 3/17/10.|
Some senators still don’t get it. The American public wants real action on climate change, not backroom deals that gut laws with 40 years’ worth of success such as the Clean Air Act. It’s hard to imagine what the Senate thinks it is receiving in return for pandering to the likes of the American Petroleum Institute and Chamber of Commerce with a convoluted and speculative legislative proposal that won’t come even close to solving the problem of global warming.
In any case, a lot about this bill will no doubt shift in the months ahead. For one, legislation always get weakened in the Senate, as we’ve seen with health care; that 60-vote threshold can be harsh. What’s more, consider the flurry of stories this week about how the Chamber of Commerce’s chief lobbyist, Bruce Josten, thought the Kerry-Graham-Lieberman bill was “largely in sync” with industry demands. And yet, judging from the early rumors, their proposal doesn’t sound radically different from the House bill (which the Chamber absolutely loathed). Surely both things can’t keep being true, right?
Finally, breaking down the caps and controls so they apply differently to different industries may seem to be a good idea in attempting to satisfy the demands of each, but it could also be seen as trying to pass three different ‘taxes’. One of which actually would be a tax, for a change–the GOP doesn’t even have to trot out the ‘let’s call it what it is’ line in that case, as the bill includes raising the gas tax. Which, for the record, I think is a great idea–but it’ll be a political minefield to be sure.