INSIGHT: New US Senate climate bid founders on coal

04 March 2010 16:08  [Source: ICIS news]

By Joe Kamalick

US climate bill flounders on hard rocks of coalWASHINGTON (ICIS news)--A new, more moderate plan for a climate bill is soon to be set afloat in the US Senate, but the still tentative effort seemingly has already run aground on the hard rocks of coal.

Senators John Kerry (Democrat-Massachusetts), Lindsey Graham (Republican-South Carolina) and Joe Lieberman (Independent-Connecticut) are said to be close to issuing a working paper for a new climate bill, although not a formal piece of legislation.

While details are not yet available, the new climate bill’s key feature is said to be a gradual industry-by-industry sequence to reducing greenhouse gases - a go-slow approach that will abandon any sort of economy-wide cap-and-trade mandate.

The three senators’ effort is said to be designed to avoid the controversial central element of earlier climate change bills - a federal mandate to cap current greenhouse gas (GHG) emissions throughout the economy and gradually reduce them through an emissions permit trading system.

Their measure, say sources, would call for aggressive reductions in US emissions of greenhouse gases but would offer a measured and slower approach, perhaps beginning with electric utilities and then gradually moving on to encompass other sectors, such as manufacturing, mining, transportation and agriculture.

In each successive segment of the economy, entities that emit greenhouse gases would be given flexibility and time to reach targeted emissions cuts.

Electric utilities likely would be the first-at-bat industry, and that critical sector would be allowed generous compliance terms to ease the transition to less carbon-intensive operations.

But barely had word of the three senators’ “pre-bill” circulated on Capitol Hill when it came under perhaps fatal fire from 13 Democrat senators vehemently opposed to any special favours for utilities and their carbon-rich ways.

In a letter to Senate Majority Leader Harry Reid (Democrat-Nevada) and pointedly copied to Kerry, Graham and Lieberman, the group of 13 warned that they oppose any climate bill that would exempt utilities from strict emissions cuts.

Led by New Jersey Democrat Robert Menendez, the 13 senators demanded that Reid “ensure that energy and climate legislation builds on the existing Clear Air Act and does not create loopholes for old, inefficient and polluting coal-fired power plants”.

“The bill should require coal-fired power plants - old and new alike - to meet up-to-date performance standards for carbon dioxide that will complement an overall cap on emissions and move America to clean energy,” the letter to Reid said.

“Coal-fired power plants are the nation’s larges source of global warming pollution,” the 13 senators said in a note accompanying the letter to Reid.

“The Clean Air Act requires that power plants - as well as factories, refineries and other big sources of pollution - meet source-specific performance standards,” the note said, adding: “In the landmark 2007 decision in Massachusetts v EPA, the Supreme Court ruled that carbon dioxide fits within the purview of the Clean Air act as an air pollutant.”

The 13 Democrat senators - who in addition to Menendez include Barbara Boxer of California, Chris Dodd of Connecticut, Frank Lautenberg of New Jersey and Jeff Merkley and Ron Wyden, both of Oregon - were sharply critical of the massive climate bill passed by the US House last year because that narrowly approved measure granted major exemptions or compliance allowances for coal-fired utilities.

However, any climate legislation that would hold coal-fired utilities to an immediate and strict carbon emissions standard would lose the support of senators that otherwise might support a sharp cut in greenhouse gases.

Coal is the nation’s most common fuel for electric power generation and accounts for almost half of all electricity produced in the US.  It also sees significant use in the broad US manufacturing sector.

Among the 50 US states, 31 rely on coal for 50% or more of their electric power generation, according to the US Energy Information Administration (EIA). 

That figure alone means that 62 US senators would be put on the hot spot with their constituents if they were to approve legislation that forces coal-fired plants to quickly shift to natural gas, incurring capital and operational costs that could boost utility prices for consumers by as much as 100%.

Within those 31 coal-dependent states, nine of them get 80% of their in-state electric power from coal. And of those, seven states - New Mexico, North Dakota, Ohio, West Virginia, Wyoming, Indiana and Kentucky - source more than 90% of their electric power in coal.

Among the 19 states that use coal for less than half of their in-state power generation, many rely on coal for 33% to 40% or more of their electricity. Alabama, for example, falls below the 50% coal-fired power measure, but the state still relies on coal for 48% of its electricity.

Even some states that have low percentage use of coal for power generation within their borders still are dependent on coal-fired electricity because they import juice from neighbouring states that are coal-dependent, according to the EIA.

To Frank Maisano, a long-time energy policy analyst and senior principal at the Washington, DC, law firm of Bracewell & Giuliani, the letter from Menendez and 12 other Senate Democrats is a perfect illustration of how difficult - and likely impossible - it will be for Congress to pass a climate bill in this election year.

“When you push a piece into a bill that will pick up a couple of more votes on one side, it pushes votes out on the other side,” he said in reference to the Menendez letter.

“Every time someone says something to make a climate bill more moderate, it raises objections from the others side. It is a political formula that never adds up.”

Maisano also noted that the US utilities industry went along with the climate bill approved by the House last year because it was an economy-wide mandate and the power sector was in line for major compliance allowances.

If the emissions mandate is not economy-wide and focuses first on utilities, then their support is gone, he said.

“There’s not going to be climate legislation this year,” Maisano said. 

“Of course that’s not 100% certain,” he added, “nothing ever is - but I don’t see any widespread cap-and-trade legislation for this year. There’s simply not the votes for it.”

“It’s just a house of cards,” another Hill watcher said of climate legislation. “Every time someone tries to add a card or take one out, it all falls apart.”

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
To discuss issues facing the chemical industry go to ICIS connect

By: Joe Kamalick
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