Boxer Eyes Cost in Prepping for Climate Bill Fight
Monday, September 14, 2009 at 6:00 am
In May 2008, Senate Environment and Public Works Chair Barbara Boxer (D-Calif.) delivered the final text of the Climate Security Act, the failed bill to conquer climate change. She included with her summary a long list of how the $6.7 trillion in pollution permits would be distributed.
Some observers equated Boxer’s list to a deli counter for special interests – line up, get a number, get a cut. The document read like a massive wish-list, and included “transition assistance” for every fossil fuel and heavy industry, and handouts to agriculture, the building sector, renewable energies, “clean” coal, cellulosic biofuels, truck fleets, firefighters, and state energy programs. The bill, which Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.) co-sponsored and Boxer ushered through the Senate, aimed to slash carbon dioxide emissions 19 percent below 2005 levels by 2020 and 71 percent by 2050. The plan would create a cap-and-trade system that would require polluting entities to acquire permits to emit carbon dioxide. Some would be auctioned, while others would be handed out for free. In total, the plan would be worth trillions over the 38-year lifetime of the bill. It included a significant amount of money for consumer tax relief, but that was lost in the list of industry hand-outs. While Boxer’s allocations were the result of clear political and economic calculations, it wasn’t presented in a way that helped her sell it to the public.
Now, with the country wrapped up in the worst recession in decades and Republicans gearing up to malign climate legislation as just another tax on hard-working Americans, Boxer is going to have an even tougher time selling a climate plan. Her job will become more difficult if it reads like a laundry list of handouts to industry, while increasing costs on average energy consumers. Whatever climate bill Boxer puts on the table this fall will likely have a similar dollar figure attached, worth trillions over the bill’s lifespan. As she shapes the bill this year, however, Boxer seems to be taking more time and deliberation in crafting her plan for distributing value of a climate program, figuring out a way to keep costs low and making other “tweaks,” as she has told reporters. Environmental advocates say they are confident that stronger 2020 emissions reductions targets are among the tweaks she’s going to make to the House bill, but that would likely make the plan more expensive.
One of the reasons the House was able to pass a bill in June was that they employed more effective messaging on the costs and benefits of legislation than Boxer did last year, according to advocates who have worked closely with Congress on the bills. House leaders pushing the legislation billed each allocation as pursuing one of three goals — creating new jobs, supporting the development of clean energy technology, or reducing costs to consumers. “I think that’s what was maybe missing a little bit — without criticizing Boxer’s staff — last year,” said Nathaniel Keohane, director of economic policy and analysis? at Environmental Defense Fund. “I think one thing the House was able to do, with the benefit of the lessons learned from the Senate process, was to block out and frame what we were trying to do and accomplish with the allocations. I think that people didn’t get that same message coming out of the Senate.”
Boxer and co-author Sen. John Kerry (D-Mass.) have bought themselves some extra time to figure out what tweaks they need to make to get a bill through the Senate this year, announcing in late August that they were pushing back the release of their bill for several weeks. While they had planned to release it shortly after Congress returned from recess, they’re now saying it will be out “later in September.” It appears Boxer and Kerry are using the time to craft a plan that comes with the lowest price tag – and can bring on the 60 votes needed to pass the bill while fending off “cap-and-tax” allegations from the right. Kerry acknowledged last week that bringing the costs for consumers lower is among their primary objectives at this point. “We’re burning and churning with CBO and with the EPA,” Kerry told E&E. “We’re just running by them. The minute you nix something here, or change something, you change the overall formula and outcomes. And we need to know what the costs are, and what the impacts are.”
Environmental advocates are pushing Boxer to raise the targets of the bill, possibly back to cutting emissions 20 percent below 2005 levels by 2020 – the goal included in the original draft of the House bill, but reduced to 17 percent before final passage. Boxer endorsed a target of 19 percent last year, indicating that she’s interested in tougher targets. But Boxer has been keeping her cards close to her chest, offering few specifics on the bill. It’s clear, though, that the price tag is going to be a key element to gaining public support and the 60 votes necessary to move the bill, with numerous swing-vote senators expressing concerns about the impact on individual consumers and the overall economy. It seems Boxer’s biggest challenge this year may be not just how to adjust the bill to hit a sweet spot on cost, but how to sell it – which means no laundry list of handouts like last year.
Public support will be built around keeping costs to individual consumers low. The Energy Information Administration found that the House bill would increase household costs about $83 per year. The Environmental Protection Agency put the cost slightly higher, at between $88 and $140 per household per year, and the Congressional Budget Office estimated about $175 a year by 2020.
Industry groups have offered up higher figures. The National Association of Manufacturers released a study in August that concluded that the House bill would increase costs for each household between $118 to $250 by 2020, and $730 to $1,248 by 2030.
Kerry said in a speech on Thursday that they’re “still working with colleagues, negotiating” on what they’d need to see in a bill to support it. “We have to get 60 votes, so we’re looking at ways to patch together a coalition,” said Kerry. “I think people will be surprised by some of the things we put in there to get the coalition we need together.”
There will of course be competing visions of what it means to keep costs low, and whether that will be costs for consumers or for industry. Those in the business and power sectors, and some in Congress, want a bill to include strong provisions to keep the cost of pollution permits from rising too high. One such proposal, often called an offramp, would put additional pollution permits on the market if the price of carbon gets too high. Others want a set floor and ceiling price on carbon permits. Changes of that sort would give Boxer’s environmental allies pause, as the point of a cap-and-trade plan is to let the market drive the price of permits — forcing companies to change their practices when polluting becomes too expensive.
There’s also the question of lowering costs for consumers. The House bill compensates for increased energy costs by giving 30 percent of allowances to local electrical distribution companies, which are required to pass the value of permits on to their customers, which they could do by providing rebates or possibly investing in energy efficiency. “Ratepayers aren’t going to be happy when they see their bills going up through the roof,” said Rob Thormeyer, a spokesperson for the National Association of Regulatory Utility Commissioners, the national organization that represents the state boards that regulate LDCs. “If you give them a way to ease the pain, for lack of a better term, you will find this to be an easier transition.”
The bill will provide rebates for lowest-income Americans. Some groups, like the Center on Budget and Policy Priorities, an economic policy think tank focusing on low- and moderate-income households, argue that there would be a greater benefit for average consumers by redirecting more cap-and-trade generated money to this type of direct rebate.
House leaders won high praise from proponents by making a strong case for how each of their allocations helped either offset costs for low-income families, create or protect jobs, and aid with transition to a low-carbon economy. “I think that made a big difference in terms of being able to have a coherent vision in terms of the allocations,” said Keohane.
According to Keohane, the senators need to ask whether each allocation helps American consumers and households, protects jobs, or aides in the transition to a clean energy economy. “If you can’t answer one of those questions ‘yes,’ then it doesn’t belong,” said Keohane. “That’s the kind of test that the Senate needs to apply, and I think the House did a good job of.”
This article has been updated for clarity.
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