On Wednesday, Senators Jeff Bingaman (D-NM) and Arlen Specter (R-PA) introduced the text of the “Low Carbon Economy Act” (S 1766), an industry-friendly cap-and-trade bill.
The targets are 2006 levels of emissions by 2020, 1990 levels by 2030. No targets are set before 2020.
Price of CO2 is not set by market, but by the legislation at $12 a ton, rising each year at 5% above inflation. This decouples the price of CO2 from the target reductions, a central component of most cap-and-trade systems.
Allowances are intially given away to the private sector, the bonanza being reduced after five years. Allowances will also be given away for fuel converted to feedstock and for fuel or other GHG precursors (e.g. HFCs) exported from the United States (Section 301).
Sectors covered are limited to petroleum and natural gas plants and importers, and large coal-consuming (>5000 Ton/yr) facilities.
The bill was written by the National Commission on Energy Policy (a project of the The Bipartisan Policy Center, supported primarily by the Hewlett Foundation) and supported by coal-intensive and nuclear industry players including American Electric Power, Duke Energy Corp., Edison International, Exelon Corp., PNM Resources, PPL Corp. and NRG Energy Inc.
USCAP is a group of businesses (Alcoa, BP, Dupont, etc.) and environmental organizations (Environmental Defense, NRDC, Pew Center, etc.) that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions. Their report: A Call for Action.
The report advocates a cap-and-trade system plus R&D support with the following targets for GHG emissions:
- 100-105% of today’s levels within 5 years of enactment
- 90-100% of today’s levels within 10 years
- 70-90% of today’s levels within 15 years
- Chad Holliday Chairman and CEO , Dupont
- Fred L. Smith Jr. President, Competitive Enterprise Institute
- Jonathon Lash President, World Resources Institute
- Kevin Book Senior Analyst/Vice President, Friedman Billings Ramsey & Company, Inc
- Peter Darbee Chairman, CEO, and President, PG&E Corporation
- Harold G. Hamm Chairman and CEO, Continental Resources, Inc.
- Steve Elbert Vice Chair, BP America
10:56 Fred Smith of the EII is anti-cap-and-trade. “Even if one accepts the alarmist view of global warming.” His opening statement is going too long.
10:59 Harold Hamm, Continental Resources (mid-size oil & gas exploration company). “While I do not believe the science of global warming is proven or settled…” he does support energy efficiency. “I strongly disagree with” cap-and-trade. He’s equivalating it with Pres. Clinton’s proposed BTU tax which was killed by the oil & gas lobby.
11:03 Sen Carper is up. Darbee (PG&E) is neutral on cap-and-trade since their profit margin is already regulated. What’s your motivation? “In short, it’s to do the right thing.” The company had no official position on global warming when he became CEO two years ago. They studied it, had roundtables, and decided that anthropogenic global warming is real and the time to act is now.
11:08 Kevin Book: review of acid rain mercury/sulfur rules. (Paraphrasing) it worked.
Peter Darbee: there is merit in breaking up the problem into discrete components. US-CAP believes in an economywide program but it may be reasonable to start going industry by insdustry.
Holliday: DuPont used an internal cap-and-trade like program by rewarding internal programs that were more efficient.
Carper: What can Congress do to get industry ready?
Holliday: It’s understanding the total legislation that comes is important. Companies will be like DuPont: our employees and shareholders are asking us to take action. Change has come in the last two or three years.
11:14 Sen. Lamar Alexander questions Darbee. “There’s no coal-fired plants in California?” Some coal-powered energy comes in from outside the state, but even though 50% of US energy comes from coal, nearly none of California’s energy is coal-based. It’s almost entirely hydro, nuclear, and natural gas.
11:21 Elbert is interested in a national, mandatory program that covers all sectors of the economy.
11:56 Kit Bond (R-MO), a big cap-and-trade opponent. It’s fun watching a Republican trying to attack big corporations like those represented by the panel. He’s actually bringing up Enron as why cap-and-trade is evil. “They would profit off the pain of other companies and consumers.” Companies are willing to work for environmental goals because it pads their bottom line. Big Oil will make money in any scenario. Some on this committee, but not me, would consider their profits ill-gotten windfalls. But hey, they’re there to make a profit. He’s twisting himself into knots being a pro-mega-corporation populist.
The future is clear in cap-and-trade: less coal, more natural gas, higher profits from higher costs. Am I here to blame the companies today? No, I expect you to return value to shareholders. Let’s not get that competitive advantage by sticking it to the people.
Ah, the struggling middle-class workers.
“Don’t saddle the Midwest
- our workers, our farmers, our poor - with outrageously expensive natural gas caused by carbon caps.”
He throws it to Fred Smith to attack cap-and-trade.
Boxer basically says Smith’s claims about Europe’s situation is a bunch of hooey.
12:08 Sen. Sanders (I-VT) in his remarkable accent is talking about the Boxer-Sanders legislation. “While the political will in Washington has been lagging the American people, the technology is moving forward.” How could it be that MPG has gone down in the last twenty years? We are at the cusp of a solar energy revolution. All of the technologies are sitting there waiting to go forward. Sanders knows Lash from Vermont.
What is the economic implication if we do not move away from fossil fuels.
Lash says that Paul Volcker gave a speech a week ago: moving away from greenhouse gases won’t be that bad, but if we don’t, the economy will go down the drain in the next 20-30 years.
12:12 Darbee (PG&E): regulations on our industry were great for California and just fine for our company. Similarly the acid rain cap-and-trade worked faster and was cheaper than expected. “The cost of not [dealing with GHG] could be catastrophic.”
Darbee: I’m very concerned about energy security here in the United States. Plug-in hybrid cars can make use of the unused night-time generating capacity than even already exists. The leap to the plug-in hybrid is not very far. Toyota is leading.
Sanders: Despite the significant amounts of corporate welfare we have given Detroit, Toyota and Honda are ahead on hybrid cars. I find that very unfortunate.
Holliday (DuPont): hooray for corn ethanol!
12:17 Inhofe up to make his closing statement. I can’t deal with it, honestly, it hurts my head to hear him.
Inhofe: hero of marginal and stripper wells everywhere.
12:35 Boxer: Don’t compare companies that are sitting here today with Enron! Don’t use Enron as a way to defame people who support action on global warming.