Carbon Tax Center

Lieberman Climate Bill Could Hand Polluters Trillions

10/17/2007 by Daniel Rosenblum

The Lieberman-Warner bill has exposed an important split in the environmental community, with Environmental Defense, the Natural Resources Defense Council and National Wildlife Federation supporting the legislation while Friends of the Earth, U.S. PIRG and Clean Air Watch oppose it, according to a story in E&E News (subscription required). According to the E&E News story, Senators Lautenberg (D-NJ) and Sanders (I-Vermont) today issued a joint statement in which they:

outlined their demands today for legislation whose targets are "bold, aggressive, and comprehensive enough to prevent the devastating effects of catastrophic climate change." They called for pollution credits to be distributed by an auction rather than being given for free to electric utilities and other U.S. sources of greenhouse gas emissions.

An auction isn't ideal, but it is far closer to the "gold standard" of a carbon tax than a cap-and-trade program that gives away allowances. Friends of the Earth's press release is reprinted verbatim below:

Lieberman climate bill could have record corporate giveaways

Oct. 17, 2007

For Immediate Release

For more information contact:
Nick Berning, 202-222-0748

Legislation's allocation of permits to polluters could be worth trillions, says analysis from Friends of the Earth, and the coal industry stands to be the biggest winner

WASHINGTON -- Global warming legislation expected to be introduced tomorrow could provide giveaways worth hundreds of billions or even trillions of dollars to polluting industries, according to an analysis of a draft of the legislation conducted by Friends of the Earth.

The cap-and-trade legislation, sponsored by Senators Joe Lieberman (I-Conn.) and John Warner (R-Va.), would attempt to limit U.S. greenhouse gas emissions by setting annual emissions limits for each industry. Under this legislation, a set amount of greenhouse gas pollution would continue to be allowed -- and the way in which these transferable allowances, or permits, would be allocated could richly reward the country's largest global warming polluters, as each permit could be sold or traded for cash just like a stock or a bond.

"What we're looking at is the potential for corporate giveaways that are orders of magnitude larger than anything environmentalists have ever faced -- potentially the biggest corporate giveaways in American history," said Erich Pica, one of the authors of the Friends of the Earth analysis of the August draft of the legislation. "Polluters should have to pay for their pollution, not be rewarded for it."

The Friends of the Earth analysis found that the coal industry in particular stands to benefit from this legislation, precisely because it is currently the industry most responsible for global warming pollution. Depending on market conditions, the coal industry could receive permits worth up to $231 billion in the first year alone, 48 percent of the total permit allocation. It could then sell or "trade" its permits to others for their cash value, or it could emit at no cost carbon that less fortunate industries would have to pay to emit.

"If Congress is going to implement a cap-and-trade system, it should auction off 100 percent of permits so that taxpayers reap the financial rewards. We could use that money to help Americans adjust to higher energy costs, and to subsidize clean, alternative forms of energy," Pica said. "Instead, Senators Lieberman and Warner have proposed auctioning off only 24 percent of permits at the outset of this legislation, setting up a rigged market in which most permits are handed out to polluting industries for free. If you see a lot of polluters lining up in support of this legislation, that's why."

While the specific language of the legislation being introduced tomorrow could differ somewhat from the draft circulated in August, permit allocations will reportedly continue to be a problem. Friends of the Earth will update its analysis after the legislation is introduced to reflect the final numbers in the bill.

Friends of the Earth's analysis of the Lieberman-Warner draft can be found here.

FoE's August statement responding to the initial release of the Lieberman-Warner draft can be found here.