Kerry-Lieberman “climate” bill is worse than nothing

05/14/2010 by James Handley

“Is this the Climate Treaty You Came For?” George Monbiot asked hundreds of activists at the Copenhagen Klimaforum last December. Monbiot, a prolific reporter for The Guardian (U.K.) on climate, and author of Heat, offered this reply: “The UN isn’t even asking the right questions yet.” Green energy is still trying to “out-subsidize” dirty energy. “The Kyoto agreement isn’t curbing demand for fossil fuels.”

Alberta Tar Sands Mine

As one example, Monbiot pointed to tar sands mining wrecking boreal forests in Canada, a nation ostensibly “capped” by Kyoto. Monbiot agreed that unlike subsidies and “caps,” a revenue-neutral carbon tax would effectively curb demand while creating broad incentives for efficiency and increased supply of low-carbon energy.

Yesterday, the climate advocacy group 1 Sky held a conference call with Sierra Club’s climate and energy lobbyist David Hamilton. David pondered an updated version of Monbiot’s query: “Is the cap in the Kerry-Lieberman American Power Act worth the cost” in terms of subsidies for dirty energy and huge compromises including more offshore drilling. Hamilton called this a “cosmically difficult question.”

Not for me. Here’s why:

First and foremost, in dollars, Kerry-Lieberman is overwhelmingly a dirty energy subsidy bill with crumbs tossed to “green” energy. More money (loan guarantee, tax breaks, insurance subsidies) for nukes, “clean coal,” oil companies, and highways. As documented by Earth Track and Taxpayers For Common Sense, K-L’s “buy everyone off” approach means inducing more demand for energy, which in turn means driving drilling anywhere and everywhere, blowing up more Appalachian mountaintops, and maintaining and extending America’s military presence around the world:  An addict’s frenzy for yet another “fix” of cheap fossil fuels.

For the utility sector, K-L relies on a “cap” with trading and offsets, ceding to traders (i.e. Wall St.) the authority to set carbon prices. In the transportation fuel sector, K-L at least uses a more direct approach of selling allowances at a price established by the utility permit auctions, thus limiting somewhat the problems from trading. (Oil companies don’t like volatility, either.) Yet nowhere does the bill set the clear, briskly-rising price on CO2 pollution essential to create incentives for efficiency and low-carbon energy development across the economy.

Deepwater Horizon Oil Spill (5/1/10)

K-L gives offshore drilling the green light. While K-L purports to let states “veto” drilling in previously-protected waters up to 75 miles off their coasts, it offers them a whopping 37.5% share of revenues generated by offshore oil and gas activity — no strings attached. How many cash-strapped states will resist cries to “drill, baby, drill” in coastal and marine areas already under stress from pollution, over fishing, ocean acidification and warming? And this virtual “bribe” to drill will run afoul of long-standing domestic and international maritime law holding that coastal waters (and revenue from leasing) belong to the entire nation, not just the adjacent state.

K-L continues the pretense that coal can be made “clean” through thermodynamically-challenged “carbon capture and sequestration” by throwing an additional $2 billion/yr on top of the $2.4 billion in the 2009 stimulus package. CCS is a speculative technology that (if viable at all) will require burning at least 30% more coal per unit of net output to power the process of “capture” and “sequestration” of CO2 and building an additional facility roughly equal in size and cost to every coal-fired power plant. Plus, a huge new network of pipelines. Then there’s the problem of finding the underground capacity for permanently storing a few billion tons more CO2 every year… from now on.

K-L’s vaunted “cap” is a joke. A “cap” that adds 2 billion tons of offsets on top of an economy that generated 5.4 billion tons of CO2 last year means that even if the cap tightens a few percent each year, polluters will be able to buy (cheap) offsets instead of making reductions for the next two decades. By design (K-L calls it “cost containment”), CO2 prices will be set in the offset market, not by supply constraints of the “cap.” Charles K. Ebinger, Director of the Energy Security Initiative at the – Brookings Institution critiqued the bill forcefully:

“If we are trying to reduce carbon emissions in the U.S., let’s do it. Otherwise we simply are exporting capital and jobs [via offsets]. The [K-L] bill’s price on carbon is unlikely to be high enough to generate any real movement away from fossil fuels. Furthermore, the provisions… for trading in carbon are too complex and as written could allow gaming of the system. Energy security and climate change are issues of the most urgent national significance. We should not pretend that we can do it on the cheap with no pain, at no cost, and with no sacrifice for the greater national good.”

In short, as climate scientist Jim Hansen articulated on Earth Day, we will not address climate and energy security without raising the price of cheap, dirty energy. And if we’re serious about a meaningful and effective price, we must return revenue to U.S. workers and families.

Senator Kerry has been boasting about returning revenue, apparently in response to Senator Cantwell’s “CLEAR” bill that proposes returning 75% of revenue to citizens. But K-L’s revenue return has barely budged from that in the Waxman-Markey bill. K-L would return about half of revenue generated by allowance auctions in the utility sector (about 40% of CO2 emissions) through local distribution companies. In states with aggressive public utility commissions, consumers would see some reduction in the fixed charges on electric bills. But in poorly regulated states, which include many in the South, revenue return will be a big windfall for utilities. And since a majority of electricity usage is commercial or industrial, that leaves only a minority of the returned revenue for households. Bottom line: K-L returns only a small fraction of CLEAR’s 75% revenue return.

Still, the Big Green groups and their allies in the US Climate Action Partnership insist that K-L is “better than nothing.” And “we have to do something about climate now.” In exchange for an energy-giveaway bill masquerading as a climate bill, they’re in effect lobbying for dirty energy subsidies and for undercutting much of EPA’s authority to regulate greenhouse gases — an authority that these same groups once vigorously defended, and which was recently upheld by the Supreme Court.

Though K-L would leave intact EPA’s recently-finalized CAFE (automobile efficiency) standards, it would limit the Agency’s authority to mandate technology to cut CO2 emissions from stationary sources (e.g., coal power plants) and would confiscate EPA’s biggest Clean Air Act hammer, the National Ambient Air Quality Standards (NAAQS). The Center for Biological Diversity petitioned EPA to “cap” CO2 emissions using NAAQS under which states would develop and enforce plans to reduce GHG emissions. Some analysts suggest that states’ existing Regional Greenhouse Gas Initiatives (RGGIs) could be adapted and approved by EPA under NAAQS.

Cap-and-trade simply cannot achieve emissions reductions large enough to avoid climate catastrophe. The price signal is too murky to trigger the needed shifts to clean energy, and the revenue return is too meager to cover the needed price rises. Nor can it lead to an international price on CO2 pollution supported by trade agreements. Big Green’s insistence that “we have to pass Kerry-Lieberman or we won’t have any climate program” is specious, therefore, insofar as K-L itself is no more a climate program than was any other energy-giveaway bill in recent decades. We still need a carbon fee that returns all or nearly all revenues to citizens to gain and keep broad bipartisan and public support. Passing K-L will only make this difficult task harder by entrenching traders, offset purveyors and recipients of the bill’s dirty energy subsidies.

K-L presents no “cosmic difficulty” for me. Let’s book a grand, New Orleans-style funeral for cap/trade/offset where concerned citizens gather, take stock and start working for a People’s Climate Bill – a revenue-neutral carbon tax.

Photos: flickr– Google/SkyTruth, NASA Goddard


15 Comments »

  1. Bravo James ! Well said. thank you for reading the bill and telling me and others about it. I am so disappointed in John Kerry. Why can’t these folks ever do the right thing, and say no to big corporations and big oil. It’s so depressing. It’s hard to believe that with this recent catastrophe in the Gulf, they are still planning more off shore drilling. We seem intent on destroying the planet absolutely as quickly as possible.

    Comment by Emily Roth — May 14, 2010 @ 11:22 pm

  2. James, it may not be cosmically difficult for you, because you don’t actually grapple with passing legislation. You can get all the economists on Earth to sign a statement in favor of a carbon tax and it will not reduce emissions by a single ton. You can stand on principle from now until 2050, and unless you get into the dirty details of what swing senators will actually vote for and why, we will not move forward. Unions will not support a measure that does not provide some safeguard against their members’ jobs being exported to Asia. You must be looking through the thickest of rose colored glasses if you think that large and powerful energy industries (that I have battled my entire career) will roll over without a fight. We do not live in utopialand. American politics is dirty and difficult and requires sweat and money and endurance to prevail. I have asked you before; what makes you think you can get a virginal carbon tax through Max Baucus’s Finance Committee without it emerging laden with breaks and loopholes for coal, oil, and nuclear power? I still have no satisfactory answer from you that could justify such a derisive and self-satisfied superiority.
    I have a slew of problems with your criticism. We should get together and talk about those or I can put them in writing. You failed to relay my own many and varied criticisms of the bill when I spoke yesterday. But your contempt for Sen. Kerry and me and others who are working our asses off to find a way forward through the extremely difficult politics that we now face is truly stunning.

    Comment by Dave Hamilton — May 14, 2010 @ 11:45 pm

  3. David,

    Thanks. Yes, you (& others) raised many concerns about K-L on the call… I can only imagine all the trench work you’ve been doing. Yes, let’s get together soon to discuss.

    Briefly,

    1) Unions/jobs: We advocate a rev-n carbon fee with border tax adjustments so energy-intensive industry in non C-taxing countries wouldn’t gain unfair advantage. BTA’s also push US trading partners to impose their own C-taxes to capture revenue.

    2) Energy industry: Yep, big, powerful, esp. in Senate. But coal jobs are few, declining. Oil/gas jobs aren’t growing either (except spill cleanup?). I’m skeptical of overblown claims about green jobs but think it’s fair to say that with a rising C price, clean energy and retrofitting jobs would more than replace lost jobs in dirty energy. We like Rep. Larson’s C-tax proposal (cutting payroll taxes) which would dedicate funding to temporary transition assistance. We recently pointed Sen. Dorgan’s staff to a Belfer Center study showing that ND’s wind resources could supply almost half of US electricity.

    3) Yes, as Healthcare reform proved, Senate Finance can be a thicket. But Sen. Baucus’ Montana has even greater wind resources that won’t be developed without a C price.

    4) If you felt I was derisive, self-satisfied, I apologize. More like: frustrated that cap/trade/offset has sucked all the oxygen out of Congress for over a decade despite three failed attempts in the Senate.

    5) Kerry: Dr Hansen and I met w/ Sen Kerry. Hansen explained the emergency scientifically, pointing to the ineluctable economics: As long as fossil fuels are cheaper than efficiency and renewables, we won’t make the shift. Kerry pointed to 26 years’ experience in Senate politics. Brought to mind Scott Fitzerald’s quip about holding two conflicting thoughts in mind at the same time. Hansen “speaking truth to power” — Kerry speaking “power to truth.” But, ultimately, we can’t bargain with nature.

    6) Even if K-L is inadequate, it’s fair to ask whether it would lead to something effective, e.g., through subsequent reforms. I don’t see how a bill that leads to increased capital investment in fossil fuels (and thus their sway in the Senate) is a way to wean ourselves from their addictive power.

    Comment by James Handley — May 15, 2010 @ 12:37 pm

  4. Dave – re “what makes you think you can get a virginal carbon tax through Max Baucus’s Finance Committee without it emerging laden with breaks and loopholes for coal, oil, and nuclear power?”:

    First, it should be noted that K-L actually represents an evolutionary step toward a tax-type policy with its price collar and dividend provisions. Experience with prior trading systems indicates that trading prices under K-L would be lower than expected, in which case greater emission reductions could be achieved by trading off a lower price ceiling for a higher floor, to the point where the floor is equal to the ceiling.

    Second, regarding “breaks and loopholes” and political compromises, I think that any “economy-wide” legislative policy, particularly one that focuses on carbon pricing, only invites consolidated political opposition and necessitates such compromises. Sectoral policies that emphasize “carrots” over “sticks” would not be as susceptible to such opposition.

    For example, Germany is driving a massive ramp-up of its renewable-electricity sector, not by relying on an economy-wide carbon price, but by providing price incentives in the form of feed-in tariffs. Such a policy could be implemented within a carbon-pricing framework by using carbon fee revenue to finance the price subsidies. A very modest carbon fee (e.g. starting out below $10/ton) could provide new clean-energy sources an immediate price incentive far surpassing anything contemplated by K-L if the revenue is used exclusively for that purpose. The focus on positive incentives and price stability would benefit industry interests (especially the clean-energy industry), and consumers would accrue dividends in the form of moderate energy prices resulting from subsidized clean-energy prices.

    I believe that there are policy alternatives that would be both more environmentally effective and more politically viable than K-L, but effective climate action is impeded as much by imagination as by political will.

    Comment by Ken Johnson — May 15, 2010 @ 1:45 pm

  5. Mr Handley: Thanks for the essay on the banal futility of the American Power Act. Yeah, the mountain has labored and delivered a weasel. You omitted one argument against the APA: it is being presented as doing something positive about the climate crisis, energy security etc instead of being, to paraphrase the late Chairman Mao, a Great Leap Backwards. Enacting this travesty of a bill would remove incentive for taking real action.

    I happen to be one of those who support a significant increase in nuclear power generation, but the APA’s promulgation of an approach I favor cannot bring me to support the bill. Indeed, the way it promulgates nuclear power gives me the creeps. (I worked in nuclear power for a number of years.)

    Mr. Hamilton: The fact that legislation is an unattractive sausage-making process, that scrounging up enough votes to pass a bill requires heavy lifting, does not mean that a resulting bill which does more harm than good is worth passing. Even if one has invested so much of one’s self into bringing it forth.

    This leaves me wondering: just how do we go about doing what is needed?

    Comment by David Collins — May 15, 2010 @ 2:52 pm

  6. Got kids to deal with tonight. But looking forward to engaging all of your arguments tomorrow.

    Comment by Dave Hamilton — May 15, 2010 @ 6:22 pm

  7. You are right, James. The reductions for 2020 and 2050 put us on track for 650 ppm CO2-eq, enough to raise global temperature several more degrees. In the future, it won’t matter that we reduced emissions a little bit if global warming goes out of control anyway.

    This bill’s 17% reduction by 2020 is only 0.3 to 2.0% below 1990 levels, when we need 40%. It’s pitiful! If that is all we do, we won’t be able to make up for it later on. A first step is only a first step if it has a chance of taking all the other steps necessary to be successful. This bill’s reductions are simply not enough, not nearly enough.

    That alone is enough reason to be against it. And on top of that, it has a bunch of terrible things, such as removing the EPA’s authority to regulate greenhouse gases. That will give us virtually no chance of correcting our mistake when the politicians in Washington finally realize they have not done nearly enough. Congress moves too slowly, but the EPA might have a chance of saving us.

    We all must work to defeat this bill and force Congress to start over, or force the President to do his duty to protect our country from the greatest threat it has ever faced. He actually has all the authority he needs to do so, I have heard. He is just too timid to do it without the cover of Congress. But Congress has proved it is not capable of dealing with this threat, so Obama may be our only hope. Unfortunately, he doesn’t understand the threat either. I fear we may be doomed.

    Comment by Brian — May 17, 2010 @ 10:54 pm

  8. Brian,

    I might be persuaded that we should try to support a measure that is “not enough,” if it could lead to set of policies that are effective and sufficient. My conclusion here is that K-L is both “not enough” (which even its proponents concede when they’re candid) and that it would seriously hinder efforts to establish policies that can do the job. I don’t see how strengthening the position of the fossil fuel industries can help us get to a low carbon future.

    Comment by James Handley — May 18, 2010 @ 9:07 am

  9. Who are these people:

    http://www.americansolutions.com/energytax/gastax.php?source=Google13

    A demagogic appeal, based on “TAX HIKE BAD, TAX CUT GOOD” straight from Napoleon the Pig. Sign up, knowing nothing about who is proposing this, what they mean, etc.

    With such opponents, pussyfooting around the name for a Pigovian tax on GHG emissions will gain no traction. Might as well call it what it is. And skip trying to make it palatable to the Parties That Dare Not Speak Their Names; there is no rational response to irrationality.

    Comment by David F Collins — May 19, 2010 @ 3:13 pm

  10. i think we already pay enough taxes for other peoples mistakes and it is unfair to tax the people of the united states for everything when we seem to have money to send other countries every time they have a problem. the government needs to hold fund raisers and put cans in gas stations or something cause we are broke and tired of it

    Comment by nomoretaxes — May 29, 2010 @ 12:46 am

  11. Alexandra,

    Thanks. I may write a follow-up. What aspect are you interested in? Note that I’ve inserted links to many sources that offer more detailed information — I especially recommend reading Dr Hansen’s two-page proposal here. Also, see our summaries with links under “Read these first.”

    Comment by James Handley — May 29, 2010 @ 7:20 pm

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