Senate Begins Debate on Climate Bill, Faces Presidential Veto By a vote of 74-14, the Senate voted yesterday (June 2) to "invoke cloture" to proceed to debate on Senate Environment and Public Works Committee Chairman Barbara Boxer's (D-CA) revised version of the Committee-passed Lieberman-Warner climate change bill, S. 3036. It is important to note that this vote was a procedural vote and does not reflect where Senators will be on substance. The Senate is now engaged in 30 hours of "post cloture" debate, before proceeding to debate on the merits of the bill.
Given the cost and complexity of the bill, support even among Democrats appears to be eroding. Therefore, it is unclear how the Democratic leadership will proceed with debate, and amendments, on the bill. Despite this uncertainty, numerous amendments on both sides of the aisles are being prepared, and may be offered, including those related to enhancing nuclear power development and increasing funds for low-and middle-income families affected by the bill, among others. Furthermore, the President has threatened to veto the revised bill (see related update below).
The following are some of the changes included in S. 3036 from the Committee-passed bill:
To address budget deficit concerns raised by the Congressional Budget Office, the revised bill now directs the EPA Administrator to auction a certain number of allowances from the available allowance "pool" to raise cash to pay the difference between the level of revenues the climate program raises and the level new federal spending. In 2012, 5.75% of the pool will go to deficit reduction. This will grow to 16.75 % in 2050;
In order to allocate allowances for deficit reduction, which was not contemplated in the bill as reported from committee, the percentage of allowances allocated to other entities and functions were also adjusted. For example, transition allowances to fossil-fueled generators in 2012 will now be 18%, instead of 19% in the Committee-approved bill. However, fossil fueled generators will get a greater percentage allowances in 2030: 2.75% compared to 1% in the Committee-approved bill;
Allowances for "new entrants" were zeroed out in S. 3036. The Committee-passed bill gave "new entrants" allowances from the 19% allocated to fossil-fueled from 2012 to 2030. In S. 3036, allowances for new entrants are eliminated, leaving new fossil-fueled generators to obtain needed allowances from the auction or other holders of allowances;
- Load-serving entities, now classified as "local distribution companies" receive a slight boost in allowances in S. 3036: 9.50 in 2012; 9.75% from 2013 to 2025 and 10% from 2026 to 2050. From this pool of allowances, 3.25% will go to local gas distribution companies each year of the program. Proceeds from the sale of these allowances may be used for a broader range of activities than in the Committee-passed bill: demand response, promotion of zero-and low-carbon distributed generation technologies and assistance to small business customers were added to the list that previously included assistance to low-and middle-income consumers and energy efficiency. Thirty-percent of the proceeds from sale of these allowances must go to residential customers;
- New authority is granted to the Carbon Market Efficiency Board to hold a "cost containment auction" each year from 2012 to 2027, to stabilize the allowance market. The Board shall offer a certain number of allowances at an initial price no lower than $22/metric ton and no higher than $33/metric ton. Six million allowances for this "cost containment auction" will be taken from the overall pool of allowances available for the program in 2030 to 2050. This is an attempt to address industry's request to include a "safety valve" that caps the cost of allowances; and
- As in the Committee-approved bill, a "covered entity" may meet up to 15% of its allowance requirements through the use of "offset" allowances. S. 3036, however, allows the use of international credits and international forest carbon credits developed through tree planting or forest restoration projects to be used if the covered entity does not have enough domestic offsets to meet the 15% provision.
President Threatens to Veto Senate Climate Change Bill
On June 2, the White House released its Statement of Administration Policy (SAP) on S. 3036, Sen. Boxer's revised climate change bill. The SAP states that the President would veto the bill. Among the many reasons for a veto, the SAP cites provisions that would: hurt consumers; severely damage the economy and drive jobs overseas; impose excessive regulatory costs; implement and tax and spend system; expand mandatory spending irresponsibly; create new bureaucracies; risk trade conflicts; not achieve the stated goals of the bill; expand the Davis-Bacon Act prevailing wage requirements; and create legal problems with regard to the President's ability to conduct foreign policy.
House Energy and Commerce Committee Issues Fourth Climate Change
"White Paper"
On May 27, the House Energy and Commerce Committee released the fourth in a series of "white papers" designed to focus the attention of Committee Members on design features and key issues to be resolved as they craft climate change legislation. This white paper addresses ways of "Getting the Most Greenhouse Gas Reductions for Our Money" - an issue of vital interest to electric utilities and the consumers they serve.
The white paper states that one of the Committee's goals in designing a comprehensive climate change program is to "achieve the necessary greenhouse gas reductions for the least cost and with the least economic disruptions." The paper begins by stating that the decision to have a cap-and-trade program as the centerpiece of the legislation was driven, in part, by the flexibility that such a program offers to emitters of regulated entities - a statement with which many emitters will take issue.
Two cost features that will definitely be part of anticipated Committee-drafted legislation will be the ability for emitters to bank allowances for later use and to use offsets to reduce costs and increase flexibility.
Other features that the Committee "should consider" are:
- Firm level borrowing that would allow emitters to borrow allowances from the future. The paper notes that it is uncertain whether this gives emitters flexibility they would otherwise not have, or whether it would create administrative issues, such as the need to decide whether an emitter was "credit-worthy" enough to permit it to borrow;
- A compliance period longer than a year, to allow emitters to average out business cycles and unexpected circumstances;
- A cost containment mechanism to release additional allowances into the market when allowance prices are high. The white paper explores a range of options for such a mechanism, including a "safety valve" that would allow the government to sell an unlimited number of allowances at a certain price, a "strategic allowance reserve" that could be set aside and tapped when allowance prices reach a certain level and variations on these ideas; and
- A floor on allowance prices, to provide minimum price certainty to technology developers;
Other cost features to be discussed in subsequent white papers include:
- Complementary measures (beyond the cap-and-trade program) such as additional appliance standards, or local or state energy efficiency programs;
- Allowance distributions and use of allowance proceeds; and
- Interim timetables and targets for greenhouse gas reductions, while maintaining the goal of reducing emissions overall by 60 to 80 percent by 2050.
Markey Releases Climate Change Bill
On May 28, Rep. Ed Markey (D-MA), a close ally of House Speaker Nancy Pelosi (D-CA), released a new global warming bill that calls for cuts in greenhouse gases which exceed those of the Senate's revised Lieberman-Warner bill, S. 3036. Markey intends to formally introduce his bill this week. The bill, called the "Investing in Climate Action and Protection Act" or "iCap," would cut carbon dioxide emissions by 85 percent by 2050, through an economy-wide, "cap-auction-and-trade" system that would start in 2012. It would set up an auction system of allowances, beginning with 94 percent in 2012 and transitioning to a 100 percent auction by 2020.
When speaking recently at the Center for American Progress, Markey said that the bill was the culmination of what he has learned as the chairman of the House Select Committee on Energy Independence and Global Warming. As chairman of that committee, which has no legislative authority, Markey has held over 40 hearings since January 2007.
To view the bill and other iCap documents, go to: http://markey.house.gov/
Senate Energy and Natural Resources Committee Announces Hearing on Renewable Transmission
Today, the Senate Energy and Natural Resources Committee announced it would hold a hearing on Tuesday, June 17, on regional initiatives facilitating transmission to renewable generation. The Committee has invited the following organizations to testify at the hearing: Bonneville Power Administration (BPA); Department of Energy (DOE); Western Governors Association; Wyoming Infrastructure Authority; CapX 2020; and the South Dakota Public Utility Commission. The witness list reflects the composition of the Committee - Members represent Western states primarily - and the focus of current efforts by the renewables community to facilitate their access to the transmission grid.
DOE and the Western Governors Association are expected to testify on their joint initiative to promote the development of transmission for renewable energy. Wyoming is one of about half a dozen states that has created a new state transmission agency to promote investment in new transmission infrastructure, which is of direct interest to Sen. John Barrasso (R-WY), a member of the Committee. CAPX 2020 is, largely, a Minnesota initiative by cooperatives, municipals, and investor-owned utilities to jointly plan and finance needed transmission lines.
South Dakota has significant wind energy potential, which the state plans to export. BPA will testify about current plans to integrate almost 6000 MW of wind into its system, as well as current transmission planning and construction efforts.
House Water and Power Subcommittee to Hold Hearing on Hydropower
The House Energy and Natural Resources Subcommittee on Water and Power has scheduled a hearing for June 12 on hydropower, entitled "Hydropower: providing 75 percent of America's current renewable energy; exploring its role as a continued source of clean renewable energy for the future." This comes as a result of a request last month from Rep. Cathy McMorris Rodgers (R-WA), the Ranking Republican on the Subcommittee. The Subcommittee is still working on securing witnesses.
Senate Adopts Bingaman-Warner Fuel Resolution
On May 22, Sens. Jeff Bingaman (D-NM) and John Warner (R-VA) introduced a "Sense of the Senate" resolution that calls on the President to reduce gasoline consumption by federal agencies. They argue that since Americans are altering their lifestyles to accommodate the rising prices, so should the government. Warner said that the purpose of the resolution is to "call on President Bush to require all federal departments and agencies to take initiatives to reduce daily consumption of gasoline and other fuels." Bingaman added that "it is important that the federal government show its solidarity with the American people in this time of economic hardship." The resolution passed the Senate on May 22 by unanimous consent.