Graham, Kerry, Lieberman almost ready to run their bipartisan climate and clean energy bill up the flagpole!!!!!!!!!!

But will 60 Senators salute?

February 27, 2010

UPDATE:  Since many commenters seem confused about my position on cap-and-dividend (CAD) and the Cantwell-Collins (C-C) version of CAD, I elaborate below.

Senators to propose abandoning cap-and-trade

Three key senators are engaged in a radical behind-the-scenes overhaul of climate legislation, preparing to jettison the broad “cap-and-trade” approach that has defined the legislative debate for close to a decade.

That’s the lead WashPost story today.  My sources say the final proposal is not fully baked, so this scoop is closer to a “leaked” trial balloon [shaped like a flag, of course, to put all my metaphors in the mixing bowl].  Indeed it’s not even clear whether Graham, Kerry, Lieberman will float a final bill or something closer to a discussion draft.

Frankly, I’m not sure they have the winning proposal yet, but here’s what’s out there:

According to several sources familiar with the process, the lawmakers are looking at cutting the nation’s greenhouse gas output by targeting, in separate ways, three major sources of emissions: electric utilities, transportation and industry.

Power plants would face an overall cap on emissions that would become more stringent over time; motor fuel may be subject to a carbon tax whose proceeds could help electrify the U.S. transportation sector; and industrial facilities would be exempted from a cap on emissions for several years before it is phased in. The legislation would also expand domestic oil and gas drilling offshore and would provide federal assistance for constructing nuclear power plants and carbon sequestration and storage projects at coal-fired utilities.

“This is a different bill,” Lieberman said in an interview. “We haven’t abandoned the market-based idea, but we’re willing to negotiate with colleagues who have different ideas.”

My sources say that what they’re proposing isn’t actually a carbon tax on gasoline, nor is it the original cap-and-trade proposal, but something in between.  Since the notion is complex and confusing — and no final decisions have been made — I won’t try to explain it fully here.

Basically, refiners (the kissing cousins of Big Oil) don’t want to have to buy all the allowances for their refined products, even though they can pass almost all of those costs onto consumers.  They want the government to pass the costs on directly and leave them out of it.  The refiners say they can’t pass 100% of the costs on and don’t want to be blamed by consumers for higher prices.  One can sort of understand that, but in fact it makes little difference.  While some oil companies may support this approach, my guess/fear is ExxonMobil/API will simply attack the new bill as a gasoline tax — indeed, that may be their plan.

While Obama has continued to assert the need for any climate bill to raise the price of carbon-based fuels, the American Petroleum Institute has been running television ads during the Winter Olympics saying “Americans say no to raising energy taxes.”

In any case, it’s still an uphill battle for the bill:

Many lawmakers and lobbyists say even a radically different climate bill would face big hurdles to passage, given conflicting corporate and consumer interests, regional divides and a crowded Senate calendar. Energy industry lobbyists have turned much of their attention to proposing numerous variations of more narrow energy legislation….

Environmental advocates, eager to pass comprehensive climate and energy legislation before the November midterm elections, said the shift in strategy represents the best shot at getting something done this year.

“The Senate is understanding this is not a simple problem — it’s multiple problems, and it requires multiple solutions,” said Carl Pope, executive director of the Sierra Club.

The change in policy, which might even include giving money raised through carbon pollution allowances directly back to consumers, a scheme known as “cap-and-dividend,” could appeal to some wavering senators. Senior Obama administration officials have also been studying the cap-and-dividend approach. But it remains unclear whether that would be enough to produce the 60 votes proponents need, especially when the Senate has yet to finish work on health-care legislation and a jobs package.

Cap and dividend as currently constructed is neither politically nor environmentally viable, as I’ve noted.  The only reason that isn’t obvious to everyone is that few big players in the debate took it seriously enough to look closely at it until recently.

Powerful business leaders have their own priorities. Michael Morris, chief executive of American Electric Power, a heavily coal-based utility, said one much-discussed proposal for a cap-and-trade plan limited to utilities was “ridiculous” because it would place an unfair burden on coal-based utilities. He added that “cap-and-dividend would be equally inappropriate.” He said it would take money from “mom in the Midwest and dividend it to Paris Hilton.”

The lack of regional equity is one of the political Achilles heels of that approach, though that would be far less true if you refunded just the portion of the money generated by the carbon price on gasoline — hence some of the interest in that approach.

UPDATE:   People seem confused about my position on cap-and-dividend (CAD) and the Cantwell-Collins (C-C) version of CAD, so let me elaborate.   If C-C  were written in a way that its enforceable mandatory 2020 target was  anywhere near close enough to the 17%  reduction Obama promised before Copenhagen, I  would have a different view of it — and its political untenability would be less … salient here.  Waxman-Markey, for all its faults, passed the House, a staggering achievement.  If not for the filibuster rule, we’d probably have health care and a climate bill by now.

I have talked to major players in the House and there is no chance C-C could pass it.  Indeed,  I doubt it could get many more than 2 votes in the Senate.  Fundamentally, C-C is a cap plus trading, so I’m  not certain how anyone’s statement “cap and trade is dead”  would not apply to C-C.  But since C-C can’t enable a global climate deal, it’s hard to imagine why anyone would want to spend a lot of effort finding out whether it could get, say, 10 votes in the Senate.  C-C really does a disservice to the idea of CAD, since its 2020 target is too weak, it’s floor price is too low, and it has a pure safety valve.  Hard for me to get excited about that, even if it had meaningful political support in both houses, which it most certainly does not.

Even some moderate Republicans, seen as possible supporters of a new climate bill, remain opposed to the idea of putting a price on carbon, which Lieberman still calls “sine qua non,” or an essential ingredient, of any such bill. Andy Fisher, a spokesman for Sen. Richard G. Lugar (R-Ind.), said the senator, who has opposed cap-and-trade and carbon taxes, could support pricing carbon “potentially at some point, but not at the moment.”

Senate Majority Leader Harry M. Reid (D-Nev.) told Kerry this week that he and his colleagues need to produce a bill as soon as possible to have any chance of passage in 2010. Jim Manley, Reid’s spokesman, said it is the majority leader’s “hope to bring it up to the floor for a vote,” adding, “But we’ve got a whole host of other things on our plate, and a Republican Party that’s making it difficult for us to pass all but the most routine legislation.”

Kerry said that although the package the three senators will unveil will not have 60 votes when it becomes public, he is confident that it will win over skeptical lawmakers.

“What people need to understand about this bill is this really is a jobs bill, an economic transformation for America, an energy independence bill and a health/pollution-reduction bill that has enormous benefits for the country,” Kerry said.

I’m not sure they have the winning proposal yet — the set of ideas needed to get 60 votes for a bill that sets a shrinking cap and rising price to achieve true domestic reductions, jumpstart the clean energy economy, move toward energy independence and enable a global climate deal, while harnessing the power of the marketplace to set the price and promote innovation.    The president understands that is the bottom line:

But President Obama has continued to push for broad legislation that he says would make the U.S. economy more efficient, slow climate change and fulfill U.S. pledges in international climate talks in December to cut the country’s emissions by 17 percent by 2020. A U.S. failure to fulfill that commitment could undercut the determination of other nations to live up to their pledges.

It may be that nothing can get the 60 votes in this political climate (see “The central question for 2010: Will anti-science ideologues be able to kill the bipartisan climate and clean energy jobs bill?“).  But it’s quite clear that all roads to 60 go through the White House — and that the President will not be engaging personally on this bill until we are far closer to the end of healthcare reform (which has been true for months and months and months).

It is certainly one of the great political blunders of our time that the more important (and more politically popular) bill on clean energy and climate has had its fortunes held hostage to — and undermined by — the overall incompetence of the effort to pass health care reform.

Related Post:

• Lindsey Graham: “Every day that we delay trying to find a price for carbon is a day that China uses to dominate the green economy”
• Graham: “The idea of not pricing carbon, in my view, means you’re not serious about energy independence. The odd thing is you’ll never have energy independence until you clean up the air, and you’ll never clean up the air until you price carbon.
• Stick a fork in the energy-only bill: Lindsey Graham (R-SC) slams push for a “half-assed energy bi

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