Hill Heat

As he previously announced he would, Energy and Commerce’s Energy and Air Quality Subcommittee chair Rep. Rick Boucher (D-Va.) released the first of a series of white papers on climate legislation today, Scope of a Cap-and-Trade Program.

Based on the hearings earlier this year, the Committee and Subcommittee Chairmen have reached the following conclusions: The United States should reduce its greenhouse gas emissions by between 60 and 80 percent by 2050 to contribute to global efforts to address climate change. To do so, the United States should adopt an economy-wide, mandatory greenhouse gas reduction program. The central component of this program should be a cap-and-trade program. Given the breadth of the economy that will be affected by a national climate change program and the significant environmental consequences at stake, it is important to design a fair program that obtains the maximum emission reductions at the lowest cost and with the least economic disruption. The Subcommittee and full Committee will draft legislation to establish such a program.

Oddly, the white paper fails to mention a baseline for emissions reductions; the scientific consensus for the 80 percent reduction is from 1990 emissions levels.

The white paper makes no recommendations on how credits should be allocated, though Boucher has stated his resistance to auctions in the past. Nor does it discuss interaction with foreign carbon markets or how to deal with imports from unregulated entities.

The white paper argues that complementary measures are necessary:

“Even with a broad-based cap-and-trade program, complementary measures (such as a carbon tax or other tax-based incentives, efficiency or other performance standards, or research and development programs) will also be needed. For example, funding for research, development, and deployment of new technologies would assist industries that will need to adopt new technologies. In addition, efficiency or other performance standards might be appropriate for some economic actors that would be inappropriate to include directly in a cap-and-trade program, but that should contribute to an economy-wide reduction program in some other way.

Proposed measures range from Dingell’s carbon tax, increased CAFE standards, appliance and lighting efficiency standards, a federal renewable energy standard, to carbon sequestration funding.

Further notes are below.

Forwarded to Hill Heat (as always, I’m reachable at [email protected]):

A Message from Irv Miller

Dear Associate:

Toyota is currently the target of a campaign by the National Resources Defense Council (NRDC) that accuses us of opposing increases in the Corporate Average Fuel Economy (CAFE) standards for cars and light trucks. The assertion by this group that we are actively lobbying against increased fuel economy standards is just flat wrong, and we want you to be aware of the company’s position on this important issue and the facts.

FACT: Toyota has long supported an increase in the CAFE standards. Moreover, Toyota has always exceeded federal fuel economy requirements. We’ve never waited for federal mandates. Under the current CAFE standard, an automaker’s average miles per gallon for cars must exceed 27.5 and light trucks must exceed 20.7. Trucks weighing less than 8500 lbs. must average 22.5 mpg for model year 2008, 23.1 mpg in 2009 and 23.5 mpg in 2010.

FACT: There are various bills before Congress that would mandate a new target of 35 mpg by 2020 and require both cars and trucks to meet that standard. Our engineers tell us the requirements specified by these proposed measures are beyond what is possible. Toyota spends $23 million every day on R&D but, at this point, the technology to meet such stringent standards by 2020 does not exist.

FACT: Toyota supports a proposal known as the Hill-Terry bill, HR 2927, that would set a new standard of from 32 to 35 mpg by 2022 (up to a 40% increase) and maintain separate categories for cars and light trucks. That won’t be easy, but we believe it is achievable.

To help set the record straight, I have posted a message on this topic on the company’s blog. To learn more, visit the blog by clicking here—> http://blog.toyota.com/2007/09/irvs-sheet-a-ca.html

Toyota, maker of the 46 MPG Prius*, is lobbying against the Markey-Platts fuel-economy bill (HR 1506), which calls for 35 MPG by 2020, and for the significantly more industry-friendly Hill-Terry (HR 2927) as part of the Alliance of Automobile Manufacturers. (An AAM rep has even commented on this site).

NRDC is challenging Toyota on its blog and with its How Green is Toyota? campaign, which asks people to email the Toyota North America president and stop opposing Markey-Platts.

Irv Miller, Toyota North America’s VP of corporate communications, promoted Hill-Terry on the Toyota blog in July and fired back at NRDC in September.

Today, from Thomas Friedman in the New York Times:

Representative Edward Markey, the Massachusetts Democrat who heads the House Select Committee on Energy Independence and Global Warming, said to me that Toyota could meet a 35 m.p.g. standard in Japan and Europe today, “but here — even though they bombard Americans with ads about how energy efficient Toyota is — they are fighting the 35 m.p.g. standard for 2020.”

Mr. Markey said he has tried to persuade Toyota that “a lot of people have bought Priuses or Camry hybrids to fight global warming and reduce our dependence on foreign oil” and “they would be shocked to find out” that Toyota is lobbying against the highest m.p.g. standards for America.

CQ.com reports:

Senate Finance Chairman Max Baucus is contemplating changes to the ethanol tax credit, Social Security taxes and property taxes to help pay for a bill that would give farmers new tax breaks. . . .

Reducing the 51-cents-per-gallon ethanol tax credit by 5 cents would save about $854 million over 10 years. The provision would take effect only after annual ethanol production reached 7.5 billion gallons. Last year, about 6 billion gallons were made.

While the provision could irritate corn state lawmakers who say current law is helping boost rural economies, biofuel advocates say they won’t fight the provision.

“This is . . . the natural evolution of the industry,” said Matt Hartwig, spokesman for the Renewable Fuels Association.

At the same time, Jon Doggett of the National Corn Growers Association says he has “some real misgivings” about the proposal. Any change in the tax credit should be hashed out in the energy bill, he said.

As he announced he would last month, Rep. John Dingell (D-Detroit), chair of the House Energy and Commerce Committee, unveiled draft legislation for a carbon emission fee and related elements.

Dingell is soliciting comment online.

The elements:

• A $50 tax per ton of carbon (approximately equivalent to a $14 price on CO2, not the $100/ton CO2 reported by CNSNews) to be phased in over five years and then indexed to inflation
  • Revenues will be apportioned to Medicare and Social Security, universal healthcare, SCHIP, conservation, renewable energy research and development, and LIHEAP
• A $0.50/gallon gasoline tax to be phased in over five years and then indexed to inflation
  • Diesel would be excluded from this tax because “the fuel economy benefits of diesel surpass even its emissions benefits; it provides about a thirty percent increase in fuel economy and a twenty percent emissions reduction,” figures basically in line with the Union of Concerned Scientists report, The Diesel Dilemma “on an energy-equivalent basis, each gallon of diesel fuel results in about three percent more heat-trapping gas emissions than gasoline.”)
  • Biofuel blends would only be taxed on their petroleum content
  • Revenues go to the highway trust fund, with 40% going to the mass transit and 60% going to roads
• A $0.50/gallon jet fuel tax, with revenues going into the airport and airway trust fund
• McMansion provision: Phases out the mortgage interest deduction on primary mortgages on houses over 3000 square feet, going to zero for homes 4200 square feet and up
  • Exemptions for historical homes (prior to 1900) and farm houses
  • Exemptions for home owners who purchase carbon offsets to make home carbon neutral or own LEED certified homes
  • Budget savings will go to pay for an increase in the Earned Income Tax Credit

Panel I

• Olafur Ragnar Grimsson, president of Iceland

Panel II

• Alexander Karsner, assistant secretary of Energy for energy efficiency and renewable energy
• Mark Myers, director, U.S. Geological Survey

Panel III

• Susan Petty – AltaRock Energy
• Lisa Shevenell – Mackay School of Earth Sciences and Engineering, University of Nevada
• David R. Wunsch – New Hampshire Geological Survey
• Kenneth H. Williamson – geothermal consultant

At last week’s American Meteorological Society Hurricanes and Climate Change panel, Greg Holland highlighted the importance of the National Hurricane Research Initiative Act of 2007 (HR 2407, S 931).

The bill, introduced by the Florida delegation in the spring, would establish a multi-agency board to set strategy and make grants for hurricane research. From CRS:

Requires the Under Secretary for Oceans and Atmosphere of the Department of Commerce and the Director of the National Science Foundation (NSF) to establish a National Hurricane Research Initiative and to cooperate with other specified federal agencies to carry it out. Requires such Initiative to set research objectives (based on a National Science Board report on the need for such Initiative) to: (1) make recommendations to the Board; (2) assemble the expertise of U.S. science and engineering capabilities through a multi-agency effort focused on infrastructure, the natural environment, and improving understanding of hurricane prediction, intensity, and mitigation on coastal populations; and (3) make grants for hurricane research, including regarding hurricane dynamics, modification, and observation, air-sea interaction, relationships between hurricanes and climate, predicting flooding and storm surge, coastal infrastructure, building construction, emergency communication networks, information utilization by public officials, and sharing computational capability. Directs the White House Office of Science and Technology Policy, through the National Science and Technology Council, to coordinate U.S. activities related to the Initiative as a formal program with a well-defined organizational structure and execution plan. Directs the Under Secretary and the Director to: (1) establish a National Infrastructure Database to catalog infrastructure, provide information to improve information public policy related to hurricanes, and provide data to improve researchers’ abilities to measure hurricane impacts in order to improve building codes and urban planning; and (2) develop a National Hurricane Research Model to conduct integrative research and facilitate the transfer of research knowledge to operational applications

Business meeting to consider original bills entitled, “American Infrastructure Investment and Improvement Act”, “The Habitat and Land Conservation Act of 2007”, and to review and make recommendations on proposed legislation implementing the U.S.-Peru Trade Promotion Agreement

From the Politico, at today’s PPI forum Joe Lieberman said he and John Warner are open to changing their bill from a proposed 76% give-away of pollution credits to 100% auction, following the polluter pays principle:

We’ve heard [calls for a 100 percent auction] from some stakeholders and heard that from some of our members. We’re thinking about it. Warner and I haven’t closed our minds to that. It’s on the table.

From E&E News (subscription required), at an event in Washington hosted by the Council on Foreign Relations, Rep. Rick Boucher (Va.), chair of the Energy and Air Quality Subcommittee of John Dingell’s Energy and Commerce Committee, said he planned to draft a cap-and-trade bill that distributes tens of billions in pollution credits to U.S. industries for free:

I’m disinclined at the moment to do auctioning, at least in the early years to give it very much prominence, if any at all. The best we can do is give the allowances to the emitters according to their needs. We’re going to have enough problems as it is with coal-fired utilities, for example, and other carbon-intensive industries meeting our production schedules. I think perhaps, at least for the early years, it’s better not to compound these problems by imposing a cost on these emitters of having to go out and pay for these allowances. It will be the least painful, most politically attractive way to do it.

In other comments, Boucher asked Pelosi to delay the conference committee negotiations on the energy bill until he produced his draft cap-and-trade bill, but he said she probably won’t. He agrees with the 80% by 2050 target but is unsure of the path to there: “The schedule that takes us to that very aggressive target will be perhaps the most difficult thing we have to negotiate.” He will be releasing a series of position papers over the coming weeks.

In contrast, Nat Keohane, Ph.D., the Director of Economic Policy and Analysis at Environmental Defense offers support for full auctions in a blog post countering Greg Mankiw’s recent NYT op-ed favoring a carbon tax over a cap-and-trade system (in line with Robert Shapiro’s argument):

Mankiw assumes that allowances in a cap-and-trade system would be handed out for free rather than auctioned, thus generating no federal revenue. Now, I admit that this has been the modus operandi in the past. Virtually all allowances were handed out for free under the wildly successful sulfur dioxide trading program in the U.S., set up by the 1990 Clean Air Act Amendments. But that doesn’t mean it has to be that way.

The alternative, full auctioning, would raise exactly the same amount of money as a carbon tax, and there are signs that it’s gaining ground. Earlier this year, several states participating in the Regional Greenhouse Gas Initiative, including New York and New Jersey, announced plans to auction off 100 percent of their allowances. Plus there are calls to phase in auctioning in the European Union’s Emissions Trading System.