INSIGHT: New cap-free Senate climate bill draws some support

10 June 2010 18:59  [Source: ICIS news]

US Senate to consider cap-free climate billBy Joe Kamalick

WASHINGTON (ICIS news)--US Senate Republicans have offered a new climate and energy bill that avoids the nettlesome cap-and-trade emissions mandate favoured by Democrats - and they have drawn support from the Obama administration’s top energy official.

Energy Department Secretary Steven Chu told Senator Richard Lugar (Republican-Indiana) that he welcomed Lugar’s introduction of his “Practical Energy and Climate Plan Act,” which aims to increase use of domestic US traditional and alternative energy sources, improve energy efficiencies in industry and cut the nation’s emissions of greenhouse gases.

The Lugar proposal is co-sponsored by Senate Republicans Lisa Murkowski of Alaska and Lindsey Graham of South Carolina. 

“In particular,” Chu told Lugar in a letter, “I appreciate your ideas for reducing America’s oil dependence, which has taken on greater urgency as a result of the BP oil spill.”

Chu - a Nobel laureate and President Barack Obama’s chief energy official - did note to Lugar that he still believed that climate legislation should put a price on carbon, which is what the controversial and contentious cap-and-trade proposals would do and precisely what Lugar’s bill seeks to avoid.

Still, it is interesting that the top Obama administration energy official would extend a hand to Senate Republican sponsors of a climate and energy bill at a time when the president’s congressional Democrat allies are trying to push their cap-and-trade bill through the Senate.

In introducing his bill, S-3464, Lugar said it was time to recast the climate and energy debate in Congress and reach for middle ground with practical energy and emissions goals that could win broad support in the Senate and House and among the public.

Lugar cited polling showing that Congress should make job creation its top priority, with climate change as the lowest-rated issue of concern among voters.  However, he noted, two-thirds of polled Americans said it was important for Congress to act on our country’s energy needs.

 But, he added, the climate bill narrowly passed by the House late last year and the Democrat-sponsored measure recently introduced in the Senate both represent “a significant disconnect with the priorities of Americans”.

He argued that the House-passed bill, known as the Waxman-Markey measure, and the pending Kerry-Lieberman Senate version “could add significant and perhaps debilitating expense to our already fragile economy and they would be an invitation to special interest protectionism”.

“It is also becoming more apparent,” Lugar said, “that cap-and-trade schemes are not meeting their designed goals.”

Citing a news report, Lugar noted that the European carbon trading plan "was meant to reduce greenhouse gas emissions in the European Union by making polluting more expensive for heavy industries, encouraging them to invest in cleaner technology”.

“But even supporters admit that the system, also known as cap-and-trade, is falling far short of that goal.  Critics decry it as just another form of financial profiteering with little environmental benefit,” he added, quoting a New York Times story.

Even US Environmental Protection Agency (EPA) administrator Lisa Jackson has conceded in congressional testimony that if the US were to impose sharp reductions on the nation’s emissions of greenhouse gases, that policy would have negligible or no impact on the global environment.  

“By placing carbon reductions ahead of solving energy vulnerabilities, the cap-and-trade bills situate the energy debate on the most controversial and unsustainable political ground,” Lugar argues. 

He also contends that in addition to its burdensome costs to industry and consumers, a federal cap-and-trade mandate would not survive the first energy shock that might hit the US - a peak-oil scenario, foreign oil boycotts, wars that might interrupt energy shipping or even a major hurricane strike.

“If the American public and economy are rendered immobile by a sustained oil shock, it is almost inconceivable that they would tolerate government imposed sacrifices focused on climate change that add to their burdens and slow the economy further,” he said.

Instead, Lugar said his cap-free climate proposal would cut foreign oil dependence by more than 40%, cut national energy use by 11% and household electric bills by 15%, while at the same time reducing US carbon emissions by more than 20% - without imposing a top-down and draconian federal mandate.

Among other things, Lugar said his bill would cut US dependence on foreign oil sources by nearly 70% by 2030, in large part by incentivising greater fuel efficiency in cars, trucks and heavy-duty vehicles. The balance of that foreign-source reduction would be achieved by boosting domestic US onshore and offshore oil and gas production.

Clearly, with the BP oil spill still raging in the Gulf of Mexico, US news media and congressional hearings and memos, Lugar’s prospects for increasing offshore or even onshore output of fossil energy sources look decidedly slim now.

But the Kerry-Lieberman climate bill championed by Senate Democrats faces the same problem. Central to Democrat hopes for passage of Kerry-Lieberman was the bill’s provision for increased US offshore energy development, an element needed to attract Republican votes and the support of some Senate Democrats who have reservations about the costs of cap-and-trade.

He also calls for increased production of biofuels to help replace energy resources now dependent on foreign output.

Lugar's bill also makes multiple provisions for improving energy efficiencies in US commercial buildings, factories and homes, establishing mandatory targets for energy efficiency building performance measures for new residential and commercial construction.

This part also would steer federal funding and loan guarantees to leverage private investment in retrofitting existing residences, small businesses and manufacturing facilities.

The Lugar plan also would address another aspect of cap-and-trade legislation that has long troubled states that are major coal producers or that are heavily dependent on coal-fired electric power.

His bill would allow individual states to determine the energy mix that meets their needs but within a national framework aimed at shifting power generation to clean-coal technologies, more nuclear power, and accelerated deployment of renewable energy sources such as solar, wind and geothermal.

This has particular appeal for US specialty and batch chemical makers.

Bill Allmond, vice president for government affairs at the Society of Chemical Manufacturers and Affiliates (SOCMA), said that while he is still evaluating the Lugar climate and energy proposal, he sees it as "a potential game-changer in the climate debate".

Of particular interest, said Allmond, is the bill's priorities for renewables and incentives for energy efficiencies "because our members are sizable users of multiple forms of energy".  He said the Lugar bill gives SOCMA member companies - some of whom will be on Capitol Hill next week - a workable alternative to the Kerry-Lieberman measure when arguing their cause with representatives and senators.

Other observers have cautioned, however, that the Republican climate and energy measure could face unspoken opposition in the halls of Congress.

For if Lugar’s bill has one major drawback, it is that it lacks a component much loved by members of Congress - a massive scheme for the collection of trillions of dollars in taxes and permit fees that can then be redistributed to favoured constituencies across the country.

For that reason alone, the Lugar bill is probably doomed.

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Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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