Three senators at the center of the debate over cap and trade’s place in energy legislation (left to right): Graham, Kerry, Liebeman. (image: mnn.com)

Key Senate Democrats say they will support an existing energy bill that does not include a cap and trade provision, and are trying to convince their colleagues to do the same, an article on the website MotherJones.com reported on Tuesday. Buzz about a climate change of heart on the part of the Democrats grew louder last week, when the media reported that Sens. John Kerry (D-Mass.), Joseph Lieberman (I-Conn.), and Lindsey Graham (R-S.C.), who are trying to win bipartisan support for their own compromise energy and climate legislation in the Senate, were planning to do away with cap and trade altogether. The two anti-cap and trade movements represent a larger trend in the Democratic caucus: the perception that dropping cap and trade (or any carbon dioxide emissions limits) from climate legislation is the only way to get it passed.

Possible elimination of the cap and trade provision from the American Clean Energy Leadership Act (ACELA), which was approved by the Senate Energy and Natural Resources Committee last June, raises several concerns. For starters, doing away with a carbon cap may spell doom for an international climate treaty. Other big carbon emitters, most notably China, want to see the U.S. make meaningful reductions in carbon emissions before they commit to their own reductions. In November, China agreed to curb its carbon intensity 40–45 percent from 2005 levels by 2020, although it does not want these emissions targets to be legally binding.

Another potential problem with the bill, according to environmentalists, is that it could increase, rather than decrease, carbon emissions by making too many concessions to big energy interests. The bill would lift a ban on drilling on the eastern Gulf of Mexico, just 45 miles off the Florida coast. In addition, an expansion of federal authority over the placement of power lines called for in the bill could increase emissions, said David Lashof, director of the climate center at the National Resources Defense Council. He explained that more electricity infrastructure without a corresponding cap on carbon would make it easier to bring new coal plants onto the grid and increase output at existing plants.

ACELA also contains few provisions for clean, renewable energy. Although it requires utilities to produce 15 percent of power from renewable resources within the next 11 years, solar and wind advocates say that renewable electricity standard is not ambitious enough Grist.com reported.

Although the bill would establish an agency called the Clean Energy Deployment Administration, or CEDA, it also would empower the Department of Energy to distribute an unlimited number of loan guarantees to underwrite the construction of nuclear power plants without congressional review. According to the Congressional Budget Office, the chance of default on these loans is at least 50 percent, so the bill could wind up costing taxpayers billions of dollars.

Those who support ACELA include Democrats Jim Webb (Va.), Mary Landrieu (La.), Evan Bayh (Ind.), Ben Nelson (Neb.), Kent Conrad (N.D.), Byron Dorgan (N.D.), Mark Pryor (Ark.), and Blanche Lincoln (Ark.). Republicans Lisa Murkowski (Alaska), Sam Brownback (Kan.), Bob Corker (Tenn.), and Jeff Sessions (Ala.), who voted the bill out of committee, could also come on board.
Supporters of the bill argue that getting the measure passed is more politically feasible than getting a cap and trade provision thorough the Senate. In an omission that cold signify the White House’s quiet assent to the elimination of cap and trade from climate legislation, President Obama did not refer to a cap and trade system or any plans to cut greenhouse gas emissions in last week’s State of the Union speech.

Obama did, however, praise the House of Representatives for passing the American Clean Energy and Security Act (ACES), also known as the Waxman-Markey bill, which includes a cap and trade provision. He also urged the Senate to make a bipartisan effort to do the same.

ACES calls for the reduction of greenhouse gas emissions in the US to 17 percent below 2005 levels by 2020 and 83 percent below 2005 levels by 2050. It also requires utilities to generate an increasing amount of power from renewable sources and reduce dependence on foreign oil.

The Clean Energy Jobs and American Power Act (CEJAPA), sponsored by Sens. Kerry and Barbara Boxer (D-Calif.) and a companion bill to ACELA, would begin with the same 3 percent cut in carbon emissions by 2012 as ACES, but would require a sharper cut of 20 percent by 2020. Kerry, Lieberman, and Graham have proposed cutting U.S. greenhouse gas emissions by 2020 by about 17 percent of 2005 levels, the same goal put forth in the Waxman-Markey bill.

Both ACES and CEJAPA would establish a system of carbon credits, in which regulated industries would have to acquire carbon permits. However, the Waxman-Markey bill would establish a relatively free carbon market, allowing emitters to purchase carbon credits as needed, while the Boxer-Kerry measure would try to control costs to polluting industries by capping the price of credits at $28 per unit. Kerry, Lieberman, and Graham initially pledged continued support to the concept of a cap and trade system, although the senators said that they do not support the name “cap and trade.” Take a look at this comparison of the various climate bills in Congress posted in October of last year to get a more detailed description of each piece of legislation.

As cap and trade loses favor in Congress and the chances of passing comprehensive climate and energy legislation appear as bleak as ever, the Natural Resources Defense Council has stepped up efforts to force legislative action. The NRDC’s Action Fund this week launched a web-based video in which Leonardo DiCaprio and a host of Hollywood stars, with Cornell West of Princeton University thrown in the mix, exhort Americans to urge their senators to support comprehensive clean energy and climate legislation.

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The campaign uses online tools such as social networking, blogs, and e-mail to tell the Senate that the country needs legislation that will reduce carbon pollution and create clean energy jobs. It appears that the NRDC believes that grassroots action by green-minded citizens reinforced by major star power could turn around the fate of climate legislation. However, the way the political winds are currently blowing in Washington, it would take no less than a hurricane of constituent pressure to change the minds of senators who have taken up firm positions against the enactment of any greenhouse emissions reduction laws any time soon.

Winners and losers: low-carbon-emitting energy sources (like nuclear, top) stand to do much better under proposed climate legislation than high-carbon emitting sources (like coal, bottom). (images: legalplanet.wordpress.com, tammi.tamu.edu)

“Big Energy” has long been thought of as a monolithic interest block, presenting a united face to the world and, most importantly, to Congress. It turns out that Big Energy is indeed a monolithic interest block…except when it’s not.

As reported Monday by the New York Times, the climate bill is splitting energy firms along energy source fault lines.  Natural gas has split off from its traditional ally oil to form its own interest group. Nuclear is in bed with solar, wind, and hydropower. Everyone is aligned against coal.

The reason is cap and trade, the central provision of the climate bill, which will put a “cap” or ceiling on how much carbon dioxide may be emitted. The more carbon you emit, the more you have to pay—since to emit more carbon, you will need to purchase additional carbon allowances from those who have excess. (That’s the “trade” part of cap and trade.) Since energy sources differ wildly in how much carbon they give off—
•    Nuclear, solar, wind, and hydro emit no carbon
•    Natural gas emits the least of any of the fossil fuels
•    Oil and its distillates emit more than gas
•    Coal emits the most
—the economic costs to energy companies will also differ wildly. Companies producing or using high-carbon sources will have to pay more than ones relying on low- or no-carbon sources. That will mean lower profits and/or higher prices to consumers.

At present, no one knows exactly how much cap and trade may cost. For example, estimates of the cost to the average American family vary from less than $100 per year to almost $7,000. However, with energy being a multi-billion dollar industry, the stakes are enormous—even an increase in cost of a few percentage points translates into big money. The way the final bill is structured will allocate costs among the different industry segments—depending on how it comes out, some will pay more, some will pay less:
•    If allowances have to be purchased, high-carbon fuel loses big
•    If allowances are initially distributed to the industry for free, then low-carbon energy helps subsidize high-carbon energy, since the higher-carbon sources are not fully paying for their emissions
•    Any caps on carbon work to the advantage of the low- or no-carbon energy sources, since they won’t have to absorb or pass onto their customers as many (if any) new costs
Hence the split in the ranks. As one energy expert put it, “These fissures are happening because a policy is increasingly seen as inevitable.” Once some version of cap and trade looks like a done deal, it’s no longer about opposing the bill for energy companies—it’s about gerrymandering it for the maximum benefit to their own sub-industry. That’s why natural gas companies, longtime members of the American Petroleum Institute, have formed their own lobby—since natural gas gives off less carbon than oil (though it does have its own climate change issues, as well as contributing to smog and acid rain), cap and trade is not likely to be as costly for companies that produce or utilize it. In fact, cap and trade can help them by providing an economic incentive to shift energy consumption towards natural gas.

Similarly, nuclear is sitting in the catbird seat in regards to cap and trade, since nuclear energy is carbon free. That explains why Exelon, a company that operates nuclear power plants, quit the U.S. Chamber of Commerce over the Chamber’s opposition to cap and trade.

In contrast to nuclear or even natural gas, coal, as the highest-carbon-emitting fuel, stands only to lose under carbon emissions limits. That’s why some coal executives and lobbyists continue to fight a forlorn rear-guard action against the very concept of global warming, with the head of the largest producer of Appalachian coal asking, “How can [scientists and policy makers] be so confident that man is changing the world climate?”

The split in the energy ranks is good for the bill’s proponents. As Daniel J. Weiss, climate policy director at the liberal Center for American Progress pointed out, “It’s much harder to pass clean-energy legislation when big oil and other energy interests are united in their opposition.” The climate bill is dividing-and-conquering the energy industry. At this time, there is little doubt we will see cap and trade in some form—and someone will be paying the price for it.

There is one group that is unequivocally doing well thanks to cap and trade: energy lobbyists. More than $200 million was spent in the first half of ’09 alone on lobbying the government over the climate bill.