Climate Battle Hints at Next Year

Sen. John Warner (R-Va.) and Sen. Joseph Lieberman (I-Conn.) (WDCpix)

One of the biggest legislative fights of 2008 played out last week as the Senate debated a bill on climate change for the first time. It ended with the Lieberman-Warner Climate Security Act (CSA) failing to get the 60 votes needed to end a GOP filibuster. The outcome was expected — though the bill had support from many Democrats and some Republicans, and both environmentalists and industry. But this attempt at global warming legislation now sets the stage for 2009.

Some form of climate legislation is expected to reappear next year. The Lieberman-Warner CSA provided a glimpse into what that might look like. The bill sought to establish a market-based cap-and-trade system to reduce greenhouse gas emissions up to 66 percent by 2050. Supporters of the bill, including its sponsors Sens. Joseph I. Lieberman (I-Conn.), John Warner (R-Va.) and Barbara Boxer (D-Calif.), promote a cap-and-trade program because they say it will balance economic and environmental concerns. Washington, many point out, had success with another cap-and-trade plan: the Acid Rain Program.

Illustration by:Matt Mahurin

The Acid Rain Program is regarded as one of the Environmental Protection Agency’s most successful efforts, so there is reason to believe a new climate bill could try to repeat its pattern. Established under the 1990 Clean Air Act, the Acid Rain Program uses market-based incentives to reduce sulfur dioxide (SO2), the pollutant that causes acid rain. The Lieberman-Warner CSA sought to replicate this for CO2 and other greenhouse gases. Many experts say a 2009 bill could also be modeled on this.

Opponents of a cap-and-trade system for greenhouse gases argue that it would be different from its acid rain precedent in one big way — it has the potential to increase energy prices.

That’s one reason why this year’s bill was so controversial. The CSA would have had an enforced emissions cap for polluters, like power plants and manufacturers, to cut greenhouse gases by 2 percent below 2005 levels each year between 2012 to 2050. Companies affected by the cap would have been given credits to pollute that they can sell, buy or trade among themselves.

These profit incentives worked with the Acid Rain Program. Unlike a typical command-and-control regulation, it instituted an allowance trading system. For example, electric utility plants were allotted polluting allowances, which could then be sold to other companies, bought from other companies or banked for future use. The program targeted coal-fired power plants.

When that program was proposed, it too faced strong opposition. Critics argued that it would be too costly and would increase energy prices. Some claimed it would drive power companies out of business.

But the program proved successful — in environmental and economic terms. It ended up costing one-tenth of the estimated costs, and resulted in over-compliance by the power companies.

Tony Kreindler, media director for climate at the Environmental Defense Fund, says history could repeat with climate legislation. The Environmental Defense Fund was a strong backer of the CSA. This effort, he said, had “the same core framework.”

Critics of the bill said that the CSA’s cap-and-trade program was too expensive. President George W. Bush said the Lieberman Warner CSA would create $6 trillion dollars in new costs. Industries were already looking for ways to lower costs as it was debated. Kreindler says that critics would ultimately have been proven wrong — just as they were in the 1990s.

But the Institute for Energy Research, a think tank that opposed the CSA, says there are key differences that would set a climate bill apart from the Acid Rain Program.

“First and foremost,” said senior vice president for public affairs Brian Kennedy, “a cap-and-trade system for acid rain didn’t place a more direct tax on the lifeblood on our economy — energy.” Kennedy argues that since the CSA covered a range of industrial sectors — from electricity to manufacturing to transportation — its economic impact would be felt more deeply. He insisted that the CSA would have resulted in higher energy prices.

“We cannot produce the energy that we need in this country to sustain our quality of life and our standards of living without emitting carbon,” said Kennedy, “So to put a tax on energy in such a fashion is going to have a far more diverse and intense impact on our economy than a trading system designed to reduce the incidence of acid rain.”

Studies on the economic effects of the CSA differ. While they generally agree that climate legislation will increase energy prices, some say this increase will be less than what the nation is dealing with now.

The EPA was also concerned about implementing a cap-and-trade system to tackle climate change. For one thing, acid rain targeted just one pollutant, SO2, but a climate bill would target greenhouse gases, which could include six pollutants. The Lieberman-Warner CSA covered 80 percent of the economy, not just one sector.

“While the acid rain program does provide a model,” said EPA spokeswoman Roxanne Smith, “the climate issue will be a tougher one to apply the model to…Greenhouse gases would provide new challenges because many more sources, including utilities, other industrial sources, residential and commercial users of fossil fuels and mobile source emissions, could be covered.”

The other big difference between the two programs, says Kennedy of the Institute for Energy Research, is technology. To reduce emissions to the levels that Lieberman-Warner set, he says, the country needs technology that can capture and store carbon. This technology, he says, has yet to be commercially viable on a large scale.

“To set the country on a course where we’re taxing the lifeblood of our economy based on the development and operation of technology that does not yet exist is irresponsible,” said Kennedy. He said that the Acid Rain Program was in part successful because it used available technology.

Some argue, though, that there are existing technologies that can be used. John Larsen, an associate in the climate and energy program at the World Resources Institute, says industries can use current technologies to increase energy efficiency and therefore decrease emissions.

The EPA anticipates that a government-created market could potentially reduce greenhouse gas emissions. The first cap-and-trade program worked, says EPA spokeswoman Smith, because utility companies had the flexibility to reduce emissions anyway they wished. “A cap and trade program for climate,” she said, “would similarly allow sources to use a wide range of reduction opportunities for greenhouse gases — including ones not envisioned by policymakers today.”

Most analysts agree that it’s too early to tell whether a climate change plan could ever achieve anything approaching the success of the Acid Rain Program. A new bill might be less likely to face a presidential veto in 2009. But the first step will be making it through the Senate next year.