The trio of Senators behind the latest push for climate legislation took a key idea from the oil majors’ playbook. (image: examiner.com)

The latest climate and energy legislation being floated in the Senate may have taken its inspiration from an unlikely source: Big Oil.

According to the New York Times, abandoning cap and trade in favor of a carbon tax—which the proposal by Sens. Lindsey Graham, John Kerry, and Joe Lieberman would do—had already been proposed by ExxonMobil, ConocoPhillips, and BP America. Refiners have complained about the unfairness of the cap and trade system passed by the House last summer, and their concerns have won over senators like Graham and the important swing vote of Democrat Mary Landrieu of Louisiana, whose state benefits from oil industry revenues.

Exxon, Conoco, and BP don’t necessarily speak for all refiners, but Sen. Graham hopes this initial industry support could win over oil-state senators needed to get any climate legislation through the Senate. Environmental and liberal groups are wary of the international oil majors, but would support the new proposal if it achieves emissions reductions.

The oil industry could have learned a lesson from the House bill, says The New Republic. The Waxman-Markey cap and trade provisions gave utilities more allowances than refiners, possibly because electric utilities played a more cooperative role during the legislative debate. The oil industry has changed tactics for the Senate debate, and now the latest Senate proposal includes the carbon tax on transportation fuels that the oil majors have made clear they prefer to cap and trade.

The reputation of “cap and trade” has been so tarnished that the newest Senate proposal avoids it altogether. (image: cafepress.com)

In the latest effort to craft a climate bill capable of passing the Senate, the trio of senators at the center of the legislative push—John Kerry (D-MA), Lindsey Graham (R-NC), and Joe Lieberman (I-CT)—have gotten rid of cap and trade in favor of a plan that would target sectors of the economy most responsible for carbon emissions, the Washington Post reported on Saturday. The Senators themselves have not offered any details on the upcoming legislation, but the Post cites “sources familiar with the process.”

Graham, Kerry, and Lieberman have been working on an alternative to cap and trade since December, as cap and trade’s opponents have tarnished the idea and made a cap and trade plan politically untenable. But although the phrase “cap and trade” may be dead—the new emphasis is on “pricing carbon”—some of its meaning may live on. One key part of the proposal involves a cap on emissions from electric utilities; according to Scott Segal, a lawyer who represents utilities and refiners, “It is hard to imagine a policy which imposes a cap but does not allow trading among those that are regulated.”

While utilities would be immediately subject to a cap on emissions that would become progressively stricter, two other sectors—transportation and industry—would face separate treatment. A carbon tax is proposed for transportation fuels, and industry would be exempt from the emissions cap for several years. The new bill would also include federal support for nuclear power, clean coal, and expanded offshore drilling.

The House bill raised the ire of oil refiners, but the new Senate proposal will likely elicit its most vociferous opposition from the coal and natural gas industries, since power producers would be the focus of the emissions cap. The House bill allocated only 2.25 percent of the free emissions allowances to refineries and set aside 40 percent of the allowances for utilities, even though the two sectors are responsible for the same amount of emissions. The tax on transportation fuels will affect refiners, but Jack Gerard, the president and CEO of the American Petroleum Institute (API), has nonetheless said he is “encouraged” by the latest developments in the climate bill. “Clearly, they are going in a much better place.”

Gerard’s relatively positive response should not be mistaken for support: “we’ve still got a long way to go,” the oil industry leader said. Michael Morris, the CEO of American Electric Power, a coal-based utility, has said it is “ridiculous” to limit cap and trade to utilities. Since the latest proposal mixes and matches parts of previous plans, it is unlikely to win over those in the industry who have already opposed emissions caps and a carbon tax.

As the climate and energy bill morphs from one version to another, efforts to appease one objection seems to inevitably raise another in a perpetual game of legislative whack-a-mole. The New York Times says the three senators will present a draft proposal to their undecided colleagues this week, but whether the latest version of the climate and energy bill can secure the 60 votes necessary to prevent a filibuster is still unclear.

Though heating oil is not, of course, a transportation fuel, it would still be affected by this latest version of climate legislation. Like gasoline, heating oil is a refined product, and any bill that raises costs for refiners will raise the costs of the products they sell, including heating oil. Heating oil consumers might agree with Jack Gerard that the new Senate proposal is preferable to the House bill, but even this latest bill could make heating oil more costly.

Clean coal and nuclear are cornerstones of Sen. Graham’s clean energy proposal. (image: treehugger.com)

Sen. Lindsey Graham (R-SC), part of a trio including Sen. John Kerry (D-MA) and Sen. Joe Lieberman (I-CT) working on compromise climate legislation, has begun circulating a draft of his own bill that would establish a clean energy standard for utilities, reports The Hill’s E2 Wire blog. Graham’s draft (full text available here) may or may not be included in any broader legislation that Graham, Kerry, and Lieberman are working on, and could move forward as a separate bill.

The notable feature of Graham’s clean energy standard is its inclusiveness—renewable sources like wind, solar, and biomass would qualify as clean energy, but so would nuclear power and coal plants that capture and sequester carbon emissions. His proposal would require utilities to produce progressively more electricity from clean sources: 13 percent in 2012, 25 percent in 2025, and 50 percent in 2050. While many Democrats and environmentalists oppose a standard that considers coal and nuclear to be “clean,” many Republicans insist that only coal and nuclear will allow their regions to produce the energy they need.

Climate legislation has faced a slew of setbacks, and Democrats have indicated a willingness to make concessions to nuclear power, clean coal, and offshore oil and gas drilling in exchange for a cap on carbon dioxide emissions. Whether Graham’s draft bill is merely the first step in renewed debate over climate and energy legislation or the foundation of a future Senate bill remains to be seen.

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.

[There is a video that cannot be displayed in this feed. Visit the blog entry to see the video.]

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.

Downtown Portland, ME, where mild weather has brought down heating oil prices. (image: hellomotor.files.wordpress.com)

Maine energy officials reported yesterday that the price of heating oil fell last week, marking the first price drop since early December. According to the Office of Energy Independence and Security, the average price of heating oil fell to $2.67 a gallon, about a penny per gallon less than last week.

No doubt Mainers have warmer weather to thank for the reduced oil prices. The past week has been noticeably mild—Portland enjoyed temperatures in the mid-30s yesterday—after a prolonged cold spell drove up heating-oil prices in early January. As usual, prices were lowest in southern Maine and highest in the northern regions of the state.

Those readers keeping score at home will recall that heating-oil prices in Maine have been steadily increasing for at least four weeks. Not long ago, the price for heating oil hit $2.77 a gallon, which Office of Energy Independence and Security Director John Kerry attributed to colder weather and an improving economy in Asia. As long as global economic conditions don’t cool precipitously, Mainers—like other heating oil customers in the Northeast—might expect prices to remain above $2.60 per gallon, no matter how warm the weather.

Massachusetts Senate candidates Martha Coakley and Scott Brown. (image: 3.bp.blogspot.com)

Tuesday’s special election in Massachusetts could have serious implications for climate legislation, SolveClimate.com reports. As voters go to the polls to elect a replacement for late U.S. Senator Edward Kennedy, they will be helping determine the fate of climate bills under consideration in Congress. Democrats currently enjoy a 60-vote majority in the Senate, a crucial number that can stop a Republican filibuster.

The candidates represent both sides of the climate debate, with Republican candidate Scott Brown, a state senator, clearly stating that he opposes cap and trade. If elected, he would “eagerly” side with Republican leaders against the regulation of greenhouse gas emissions. Democratic candidate Martha Coakley, on the other hand, is an attorney general with a strong record in environmental policy. It was her office’s lawsuit against the EPA that resulted in last year’s declaration by the EPA that greenhouse gases are a public health hazard. If elected, Coakley will throw her support behind the impending climate change legislation.

If Coakley loses, (she trails in the latest polls by nine points) however, the Democrats’ loss of their “supermajority” in the Senate could signal a major shift in strategy for getting climate legislation passed. Speaking to Bloomberg News on Friday, Senator Chris Van Hollen (D-MD) mentioned that Democrats could turn to a process called reconciliation to help health care legislation pass the Senate. Reconciliation was created specifically for consideration of budgets, and limits debate on the given bill to 20 hours, thereby blocking any filibuster attempts. This same process could be applied to a climate bill, but most Democrats seem opposed to the idea.

The long road towards climate legislation began with the House-sponsored American Clean Energy and Security Act, sponsored by Sens. Henry Waxman (D-CA) and William Markey (D-MA). After that passed, Sens. John Kerry (D-MA) and Barbara Boxer (D-CA) took up the climate mantle in the Senate, working to get the Boxer-Kerry bill passed with an increased emissions reduction target of 20 percent. Recently, in response to the lukewarm reception by most Republicans and even some Democrats to the bill, Kerry began work with Senators Joe Lieberman (I-CT) and Lindsey Graham (R-S.C.) on a compromise. The new bill brings the goal of emissions reductions back to the 17 percent put forth in the bill the House passed, and carries through its support of the cap-and-trade system.

In the most recent attempt to save climate legislation from the beleaguered Kerry-Boxer bill, Senators Maria Cantwell (D-WA) and Susan Collins (R-ME) have introduced a new bill known as the CLEAR Act, or the Carbon Limits and Energy for American Renewal Act. The two main differences between CLEAR and previous proposals are 1) the auction of emissions permits, with 75 percent of the revenues raised going back to energy consumers each month and 2) a limit on the involvement of investment banks and other financial institutions, including speculators, which had been a major worry for some Democrats.

Polls for today’s race show that it is a close one, with the possibility of it going either way. The future of climate legislation, and how fast we get there, will depend largely on the outcome. Regardless of who wins, it will likely still be a long road until final, binding legislation is passed, with some thinking it unlikely that anything will move forward in an election year. The result of today’s election will at the very least tell us what direction we’re heading in: moving toward the reduction of greenhouse gas emissions, or taking two steps back.

(image: mcburnieoil.com)

WGME 13 in Maine reported Tuesday that heating oil prices in the state rose for the fourth week in a row during the week ending January 8. According to The Governor’s Office of Energy Independence and Security, the average price for No. 2 heating oil is currently $2.77 per gallon, up 10 cents from the previous week. Director John Kerry attributed the ascent in prices to a strengthening economy in Asia.

Senator Lindsey Graham. (image: media.counton2.com)

Bucking criticism from fellow Republicans and drawing praise from Democrats and environmentalists, Senator Lindsey Graham (R-SC) reiterated his call on Tuesday for the federal regulation of greenhouse gasses, The State reported.

Speaking at a climate-change conference in Columbia, SC, the senator described a cap-and-trade bill that would reduce US carbon emissions by 17 percent by 2020, while including allowances for offshore oil drilling and nuclear power. “Whatever political push back I get I’m willing to accept because I know what I’m trying to do makes sense to me,” Graham said. “I am convinced that reason, logic and good business sense, and good environmental policy, will trump the status quo.”

In December, Graham began drafting the bill with Senators John Kerry (D-Mass) and Joe Lieberman (I-Conn). Advertised as a bipartisan (or even tri-partisan) compromise on climate-change legislation, the proposal is clearly meant to appeal to both sides of the aisle. For liberal and moderate Democrats, the bill outlines a cap-and-trade system that would curb carbon emissions by requiring companies that wish to exceed emission limits to buy credits from those producing smaller amounts of greenhouse gasses. For Republicans and conservative Democrats, who tend to criticize cap-and-trade’s cost to energy industries (especially coal producers and petroleum refiners), the bill includes extra allowances and funding for offshore drilling and nuclear power.

Of course despite Kerry, Lieberman, and Graham’s best efforts, not everyone is pleased by the proposal. Environmental groups, like the ocean-preservation organization Oceana, have suggested that an increase in offshore drilling could create a higher risk of spills, although other environmental groups have been less critical, admitting that an agreement that included a key Republican is a step forward. Likewise, certain Democrats have rejected the party’s agenda, urging President Obama to save climate-change legislation for next year, after the 2010 elections. For example, Senator Mary Landrieu (D-LA) said that she has strenuously asked the White House to place cap and trade on the back burner.

Given the general resistance to climate-change legislation, Senator Graham, one of only a few Republicans who have shown any interest in curbing global warming, has demonstrated himself to be an indomitable spokesman for the cause. Even after the Lexington County Republican Party voted to censure him for his views on climate change, Graham appeared at the Columbia conference to have lost little hope that a bill will eventually be passed. Suggesting that the proposed legislation is tied to the very future of America, Graham argued that his bill would boost the flagging US economy while reducing the nation’s dependence on foreign oil. Yet, while his remarks were met by a standing ovation from his audience, Senator Graham’s message is still lost on many members of Congress, who will ultimately determine the fate of climate-change legislation, and with it, perhaps, the fate of the nation.

(image: pocket farmer via flickr.com)

Mainers didn’t see a break in heating oil prices this week, as the statewide average rose for a second week in a row. Maine Public Broadcasting reported on Monday that the cost of No. 2 fuel oil jumped seven cents in the last week, repeating its climb from the week before. According to the state’s Office of Energy Independence and Security, the price jump leaves heating oil at $2.67 a gallon in the state. That said, prices throughout Maine do vary, and in southwest Maine heating oil was found to be as low as $2.48 a gallon; in eastern Maine prices jumped as high as $2.90 a gallon.

The rising prices are, not surprisingly, tied to the intense cold front that has settled over the Northeast. According to January 5th’s weather report, Portland saw a low of 29 degrees. Speaking to the prices, OEIS director John Kerry said that the “noticeably colder weather” combined with “strengthening economic indicators” brought about the rising in heating oil prices.

Senators Mary Landrieu and Ben Nelson. (image: talkingpointsmemo.com)

Washington, not Copenhagen—that’s where the real test for the Obama administration on carbon reduction may be.

As the London Times reported Monday, members of the President’s own party are defecting from the administration’s agenda. Several Democratic senators are urging the President to table climate change legislation for at least a year, until 2011—after the 2010 congressional elections. For example, Senator Mary Landrieu (D-LA) said that she has strenuously asked the White House to place cap and trade on the back burner, “communicating that in every way I know how.”

Landrieu is not alone. Other prominent Democratic senators who would like to see cap and trade swept under the rug, at least for the near future, include Kent Conrad (ND) and Ben Nelson (NE; now known for “Nebraska Compromise” on health care legislation).

Part of the reason for the opposition could be described as “initiative fatigue.” Still in the throes of a bruising battle over as-yet-unpassed health care reform legislation, and with battles over Wall Street regulation, job creation, two different military occupations, and the economic stimulus fresh in everyone’s minds, there is little appetite for taking on another politically divisive fight. Little appetite, and—Democratic foes worry— less political capital left to spend.

Make no mistake: carbon reduction is politically divisive. Even ignoring significant international tensions, such as those between the developed and the developing worlds, domestically it pits region against region and industry against industry.
Consider regional or state-by-state differences, as embodied by some of the high-level Democratic defectors. Landrieu is concerned that taxing carbon—and that’s what cap and trade’s purpose is: to increase the cost of emitting carbon, so as to encourage reductions in emissions—will hurt the economy of her fossil-fuel-dependent state. Louisiana’s economy is largely based on energy; not only does it have significant oil and gas reserves, but it’s also a key port for crude oil imports.

Nebraska’s Nelson and North Dakota’s Conrad are worried about cap and trade’s effect on agriculture, a key industry in both states. Plants may absorb or sequester carbon, but growing them—at least on the industrial scale of modern agriculture—emits carbon in industrial quantities. Whether it’s manufacturing fertilizer, fuel for farm equipment, or electricity for agricultural operations, agriculture is an intensely energy-dependent enterprise. (Nebraska’s other senator, Mike Johanns, has called cap and trade “a death sentence” for farming.) In addition, North Dakota has large oil reserves, but generates almost all its electricity with coal—increasing the cost of carbon can hurt the state many ways.

Then there are tensions that cut across regions and instead are based in industry needs.

Some of the inter-industry rivalry is obvious: alternative energy companies vs. fossil fuel; natural gas (less carbon) vs. coal (more carbon); utilities (more favorable treatment under proposed legislation) vs. oil companies (less favorable). But soup manufacturers? Why are they getting involved? What’s Campbell’s dog in the fight?

Their dog is that making soup—like any manufacturing process—requires energy. Most energy comes from fossil fuel, so soup has a carbon footprint. The question then becomes, how much does Campbell or other food manufacturers have to pay for their footprint? Campbell—like Kellogg, Del Monte, and the industry group the Alliance of Food Associations—believes it’s being asked to pay too much. Food companies will have to bid for carbon allowances at auction, unlike some other industries (such as steel and aluminum) that are slated to receive free carbon allowances, at least under the House version of cap and trade legislation.
Kelly Johnston, Campbell’s Vice President for Public Affairs stated the food industry’s position very clearly and succinctly: “I think it’s clear from our view that we’re not being treated as fairly as carbon intensive industries. There needs to be some recognition of the role the food industry plays in our economy.”

That there will be winners and losers under cap and trade is hardly surprising. Any time government gerrymanders legislation to try to protect certain activities, people and businesses engaged in those activities win—and everyone else loses, since the cost not borne by the winners is parceled out to them. That’s why organizations who’ve never been involved in energy lobbying before—like food manufacturers—are registering to lobby the Senate on climate change legislation.

Of course, the focus on Democratic opposition doesn’t mean that Republican opposition has gone away. Many Republicans have been unalterably opposed from the very beginning. Others are engaged in aggressive horse trading to get their priorities addressed in exchange for their support. Take John McCain: he’s seeking support for nuclear power as quid pro quo for his vote. All of which makes getting 60 votes—the magic number to render climate legislation filibuster-proof in the Senate—look like drawing to an inside straight.

Right now, the Senate bill is very much a work in progress. Sponsors John Kerry (D-MA) and Lindsey Graham (R-SC) are playing it close to the vest, divulging few details as they mix together support for offshore drilling, funding for nuclear power, and support for various coal projects into what they hope will be a winning hand.

However, with soaring deficits and high unemployment, there may be no way to convince 60 senators that they should support a bill that might result in economic pain for their constituents or key industries.