WILL THERE BE CLIMATE ACTION?

Green-energy gurus not holding breath on CO2 rules; Process is certain to be lengthy and laborious
Steve Gelsi, June 4, 2009 (MarketWatch)
and
Key points of the climate-energy bill before Congress; Lawmakers craft a bill that will move the US to a far cleaner energy policy.
Mark Clayton, June 4, 2009 (Christian Science Monitor)
and
U.S. House puts climate bill on quick pace for passage
Richard Cowan (w/Philip Barbara), June 4, 2009 (Reuters)
and
The race for clean-energy innovation
Edward J. Markey, June 6, 2009 (Boston Globe)

SUMMARY
Because it is one of the Obama administration’s highest priorities, Speaker of the House of Representatives Nancy Pelosi (D-Calif) has put the controversial Waxman-Markey legislation on the fast-track.

A landmark move toward the much-heralded New Energy economy, the House Energy and Commerce Committee late last month approved the American Clean Energy and Security Act of 2009 (ACESA), authored by Energy and Commerce Committee Chair Henry Waxman (D-Calif) and Energy Subcommittee Chair Ed Markey (D-Mass).

Ms. Pelosi has reportedly given House Committee leaders until June 19 to wrestle with the almost 1,000-page bill. She will then, presumably, send it to the House Rules Committee for final approval before bringing it to the floor of the House for debate and vote ahead of the August recess.

A major shift from the policy of the previous administration, the bill introduces 3 major advances: (1) A shift from fossil fuels and other old energies to New Energy through a national Renewable Electricity Standard (RES) requiring regulated utilities to obtain 15% of their power from New Energy sources by 2020; (2) A big emphasis on advancing Energy Efficiency in U.S. transportation, power generation and transmission through a wide-ranging set of incentives for smarter buildings, smarter cars and a smarter transmission system; (3) Market-based greenhouse gas emissions (GhGs) reductions through a cap&trade system.

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The goal is to cut GhGs 17% from 2005 levels by 2020 and 83% by 2050 and at the same time stimulate the economy and create jobs. Waxman-Markey invests $20 billion in U.S. automakers to support the production of Battery Electric Vehicles (BEVs) and $190+ billion in New Energy technologies. The unique challenge of the moment is to do those things when potential costs to consumers and businesses, predicted by the bill’s opponents and dismissed as unlikely by the Democratic leadership, could hamper an economy trying to emerge from the most severe recession since the Great Depression.

The compromises Waxman and Markey were forced to make in the bill’s national Renewable Electricity Standard (RES) demonstrate their political dilemma. They originally proposed requiring regulated utilities to obtain 25% of their power from New Energy sources by 2025. To win the support of Democrats from fossil fuel states and states with limited New Energy development, they reduced the standard to 15% by 2020 and included provisions allowing efficiency-building to reduce the requirement to as low as 12%. Opponents say the compromises render the proposal dangerously weak.

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The most controversial part of the bill is the cap&trade system it would create. Beginning in 2012, a national cap will be placed on GhGs, primarily at the smokestacks responsible for 85% of the spew. The cap will be ratcheted down yearly. Utilities and manufacturers would need an emissions allowance for every ton of spew.

The original Waxman-Markey proposal required for an auction of 100% of the emissions allowances, as promised in President Obama’s campaign platform. Compromises forced changes. The present bill assigns 15% of the allowances for auction, gives 70% at no cost to utilities and manufacturers and uses the value of the remaining 15% to offset the burden of higher energy costs for low- and moderate-income households.

The free allowances will have the effect of making participation in cap&trade more attractive to the big players but it will also make it possible for them to profit from the system and go on spewing – in the early stages. By 2020, 90% of the allowances will be auctioned.

Thanks to the compromises, the Waxman-Markey bill is expected to win approval from the Democratic majority in the House. Similar legislation is being prepared in the Senate. The 2 pieces of legislation will eventually require a conference process – if the Senate's proposal can get past the filibuster obstacle the Republican minority is expected to try to use to block it.

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The fate of energy legislation in the Senate is in question because conservative Democrats are trepitdatious about approving a bill with the potential to increase energy costs in fossil fuel-dependent districts. They fear that would provoke a ratepayer backlash, cost them the support of their constituencies and end up forcing the cap&trade system's repeal, serously setting back the cause of action against climate change.

Already the recession has stalled the development of New Energy. A cap&trade system would affect every sector of the economy. Much of big business, as represented by the U.S. Climate Action Partnership (USCAP) that includes giants like General Electric Co., American Electric Power Co. and Duke Energy Corp., is anxious to define the rules of the new emissions-constrained world and get on with planning for it. But there is significant opposition from a minority of recalcitrant political leaders and the fossil fuel-dependent interests that own them. And a very small but significant number of those recalcitrants are Democrats. In the Senate, therefore, the major focus remains on the national RES - and pondering whether to go after that oh-so-almost-within-reach 60-vote fillibuster-busting coalition.

Big business backs the Democrats' plan. (click to enlarge)

COMMENTARY
According to the EPA, the cost of the cap&trade emissions reduction program as originally defined in the Waxman-Markey bill would have reportedly been $22 billion in 2015, $31 billion in 2020 and $64 billion in 2030. It would reduced average annual U.S. economic growth from 2.71% to 2.69% and costed the average household $98-to-$140 per year. The present, compromised bill will cost even less.

Critics, largely Republican, warn that the EPA is underestimating the cost. Natural Resources Defense Council economist Laurie Johnson says that even if the EPA estimates are low, by 2030, when costs are $64 billion a year or more, the U.S. economy will be more than $9 trillion, 150 times more than the cost.

The return on investment, as President Obama has so frequently pointed out, is opportunity in the New Energy economy of the 21st century. Germany’s investment in solar energy over the last decade has made it the world leader in installed photovoltaic capacity, despite having no more sun than Anchorage, Alaska. Because of their investment, Korea and Japan are presently moving ahead of the U.S. in batteries and BEVs, even though the U.S. pioneered the technologies. Due to reluctant and inconsistent U.S. policy and public spending support, three-fourths of the world's top New Energy companies are in other countries and many more are on the verge of moving. China now spends $12.6 million per hour on New Energy and is preparing to invest $440-to-$660 billion in 2009.

In the EU, supportive policy has led to tremendous New Energy growth. (click to enlarge)

Understanding the potential returns from the right policy, Speaker Pelosi is speeding Waxman-Markey through the House. With her June 19 deadline looming, Rangel’s Ways and Means Committee, Collin Peterson (D-Minn)’s Agriculture Committee, the House Science and Technology Committee and 5 other House committees are all hustling to deal with the legislation and send it to the House Rules Committee for its final processing.

President Obama wants energy and climate legislation in place before the December international summit in Copenhagen convenes. The summit will define the world’s next steps in the fight against global climate change and the President wants the U.S. to be there with an emissions-reduction system in place, ready to take a leadership role.

The EU has worked out allowance allocation details. (click to enlarge)

A prominent environmentalist is angry about the Waxman-Markey bill because the majority of his environmentalist colleagues are calling the bill “the only game in town.”

In fact, there is another game – the do-nothing game. It is the most expensive game of all. In that game, the fight against climate change is sacrificed when conservatives get compromises and more compromises until the proponents of action become infuriated at how compromised the action is and refuse to support it.

Another way to play the do-nothing game is to insist on the perfect legislation and alienate more and more essential supporters who ask for compromises that are a little less than perfect so they can stay with something that remains good (though not perfect).

Senate Majority Leader Harry Reid (D-Nev), his Committee Chairs and the House leaders are playing the do-something game. It is the one where something gets done. Changes happen. They may not be the most potent changes but they are the most potent changes possible. The may not turn out to be successful but they advance the fight.

Whether legislation is passed this year or not, next year, there will be another fight. Guaranteed. Copenhagen is this year. Either the U.S. gets in the game this year, or it doesn’t.

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QUOTES
- Representative Edward J. Markey (D-Mass), Chair, House climate and energy subcommittees:
- Representative Charles Rangel (D-NY), Chair, House Ways and Means Committee, on the June 19 deadline given his committee by Speaker Pelosi: "We're going to make it…"
- Representative Rick Boucher (D-Va), Democrat member of the House Energy and Commerce Committee who forced compromises in the Waxman-Markey legislation on behalf of the fossil fuels industries: "I think we'll have the votes…"
- EPA, on the free allowances provided in the compromise Waxman-Markey bill: [It will] likely result in lower allowance prices, a smaller impact on energy bills, and a smaller impact on household consumption…”
- Representative Joe Barton (R-Tex), Ranking Member, Energy and Commerce Committee and unapologetic opponent of Waxman-Markey: “ [It will] impact every person, every family, and every business…[in the] trillions of dollars.”
- Stephen Ward, chief of staff for Senate Energy Committee Chair Jeff Bingaman (D-NM): "A repeal [of the emissions reduction legislation] could set us back decades…"

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- Neil Auerbach, managing partner, Hudson Clean Energy Partners LP: "We were starting to crawl forward, and now we've completely stopped... What you're finding here is that a lot of the traditional players in corporate America are saying, 'Give us the rules and let us lead the way to transitioning to a low carbon economy,'…CO2 emissions basically affect the entire economy, and the legislative process has to disentangle who's going to pay and who's going to benefit. There will be winners and losers."
- Andy Karsner, former Assistant Secretary, Bush administration Department of Energy: "What we've asked for is to put our faith in the government inducing this market. The government is setting up a new rule book. So inevitably you're going to have to trust that government inefficiencies are also going to accompany that."
- Auerbach: "The political alliances that one needs to create to pass such a comprehensive and complex piece of legislation cannot be underestimated, and is going to take a lot of time…It's exciting that Congress is getting fully dedicated and involved in passing this legislation, but let's not kid ourselves, it's not going to happen overnight."
- Karsner: "Everybody in America who doesn't understand or care about the wonkiness of the mechanism is going to care about what's on their energy bills, and naturally that's what many of even the Democrats are trying to consider ... what it means to them in the next election.”