Reuters - SCENARIOS-US climate change bill options for senators
3/1/10
Richard Cowan
WASHINGTON, March 1 (Reuters) - A new U.S. climate change bill could make its debut in
the Senate soon in what likely would be the last big effort by Democrats to enact major
environmental reforms this year.
The House of Representatives narrowly passed a "cap and trade" bill in June to bring down
U.S. emissions of carbon dioxide and other greenhouse gases blamed for global warming.
But that bill, and a similar one approved in November by the Senate Environment and Public
Works Committee, did not gain broad enough support to win passage in the Senate.
As a result, Democratic Senator John Kerry has been trying to come up with a compromise
that could pass in this congressional election year. He's been working with Republican
Senator Lindsey Graham and Independent Senator Joseph Lieberman.
The legislation will include national targets for reducing carbon emissions and a mechanism
for pricing carbon, according to a Senate aide familiar with the talks. But public details are
"weeks away," the aide said, adding, "a number of different ways to price carbon are on the
table."
Here are possible scenarios for how they might force significant reductions in carbon
pollution and increase the use of cleaner alternative fuels. If they can attract at least 60
votes, a bill could be on the Senate floor by June:
NO CAP AND TRADE:
Senators have been looking for ways other than cap and trade to increase the price of fossil
fuels and thus encourage industry to use cleaner alternative power sources.
The House bill would have imposed a cap-and-trade program on utilities, oil refineries and
large manufacturers. Under it, the government would require companies to hold permits for
every ton of carbon pollution they emit. Fewer and fewer permits would be available
between 2012-2050, and those permits could be traded in a new, regulated financial
market. The bill aims to reduce U.S. emissions 17 percent by 2020, from 2005 levels.
Instead, senators are weighing several alternatives listed below. According to environmental
groups, one option is to impose one of those carbon-pricing schemes for utilities and a
separate fee for the transportation sector, such as an oil industry tax. The third main sector
-- manufacturing -- might be spared from new pollution controls for several years.
NARROW CAP AND TRADE:
Senators had been looking at initially using cap and trade just for utilities, which produces
about 40 percent of carbon emissions. Several industry and environmental groups support
the cap-and-trade route, but many senators are loathe to vote for a new trading scheme at
a time when poor regulation has been blamed for one of the worst recessions in decades.
SAFE MARKETS:
It's been called "training wheels" for cap and trade. Supporters say "Safe Markets"
combines the emissions certainty of cap and trade with the price certainty of a carbon tax.
Between 2012 and 2020, government would impose caps on pollution emissions and
companies would have to hold permits to emit carbon dioxide. But a board would set permit
prices and decide how many permits to issue each year to maintain the target prices.
"Businesses get the price predictability they need and we still meet emissions goals," said
Marty Spitzer of the Center for Clean Air Policy. Under the plan, some emissions trading
would be allowed, but in a very narrow price range. In 2020 the system would move to a
full-blown cap-and-trade scheme.
CAP AND DIVIDEND:
Being sold as a much simpler alternative to cap and trade, the proposal by Senators Maria
Cantwell, a Democrat, and Susan Collins, a Republican, also aims to pare carbon emissions.
But instead of focusing on the plants that spew pollution, it would focus the emissions cap
upstream -- on coal and oil companies and importers that would have to hold the pollution
permits.
The dividend part is the checks consumers would receive each month to help ease the cost
of higher energy prices.
The Edison Electric Institute, representing utilities, opposes the idea, claiming it would bring
big price increases. It also fears consumers might not make the connection that the
dividend check they receive is to help cover higher costs, thus possibly undercutting support
for rate increases.
Critics say Midwestern consumers would have to pay higher energy prices because of their
reliance on coal, but consumers everywhere would get the same government compensation.
Energy prices also could end up being higher than with cap and trade.
CARBON TAX:
Republican Senator Lisa Murkowski is looking at a tax on carbon-intensive fuels and levying
it "as far upstream as possible," such as on oil company exploration and production.
But environmental groups have also heard talk of a gasoline tax with the revenues being
used to help development of electric vehicles or to replenish highway maintenance funds.
PHASE-IN FOR MANUFACTURERS:
Environmentalists also have said the Kerry-Graham-Lieberman bill could hold off on
mandating emissions reductions for factories, including carbon-intensive manufacturers of
paper, glass, chemicals and steel. This would give these industries time to take advantage
of alternative fuels as they're developed.
CLEAN COAL, NUCLEAR POWER AND OIL DRILLING:
To attract support from Republicans and fence-sitting Democrats, the bill is certain to have
funds to develop clean coal technologies; additional loan guarantees and tax breaks to help
the nuclear power industry expand; and incentives for more domestic energy drilling,
including offshore.