What's in it for me?

Interest groups pile on with suggested changes to House climate bill 7

The third day of climate hearings in the House made it clear that even representatives and interest groups that nominally support the principles of the Markey-Waxman bill have a laundry list of changes they’d like to see made to the bill before they’ll back it.

Thursday’s hearings brought 26 new witnesses before the Energy and Commerce Committee, each testifying to their specific concerns with the bill. The panels included representatives from unions, the coal industry, a chemical company, public utility commissions, manufacturers, the clergy, and environmental organizations. Many came with requests that would arguably weaken the bill—calling for free allocation of carbon credits, a safety valve that would kick in if the price of credits got too high, and more leniency for dirty coal plants.

Ed Markey (D-Mass.) and Fred Upton (R-Mich.) at a hearing of the Energy and Commerce Committee.Their suggestions will be taken into account as legislators meet behind closed doors over the next few days to hash out the final provisions of the bill. The blank spaces in the current draft—how many carbon credits should be allocated freely versus auctioned off, what measures should be taken to insulate citizens and industries from higher energy costs —must be filled in before the committee can begin the markup process next week, during which lawmakers will offer and vote on amendments.

The bill’s sponsors are using these hearings to tease out the issues currently preventing fellow legislators and interested parties from wholeheartedly supporting the bill. “I can actually see some new working arrangements that could be constructed from your testimony to create a format we might be able to use,” Rep. Ed Markey (D-Mass.) told witnesses after the first panel on Thursday.

So what are you gonna do for me?

The question of how much the bill will cost average Americans has been the hottest topic during these first days of discussion.

“It’s all about the consumer,” Rep. Charles Gonzalez (D-Texas) told reporters. “Any increase in the price in energy looms large.” Gonzalez, a moderate who hasn’t fully backed the bill, will be one of several votes the bill’s sponsors are pursuing.

Republicans on the committee have painted a doomsday scenario of skyrocketing costs for American families, while the head of the EPA testified that her agency’s analysis of the bill found it would lead to only a modest increase in costs for most consumers. The key provisions that will determine the overall cost—how emission credits are distributed and how any revenues from that process are spent—have yet to be worked out, so everyone with a horse in the race is trying to influence the bill’s authors on these points.

The electric utility representatives testifying on Thursday argued that the best way to protect consumers is to give away all the carbon credits to polluters so they won’t raise prices. Most enviros take issue with that approach, as the whole point of a cap-and-trade plan is to create financial incentives for businesses to shift to cleaner fuels.

Jeff Sterba, representing the industry association Edison Electric Institute, told the committee that emission allowances to the electric sector “is the most effective way to minimize costs for customers.” He recommended that at least 40 percent of the total credits offered in a cap-and-trade program (equal to the amount of emissions the electricity generating industry is responsible for) be distributed free of cost, at least until the technologies for capturing and storing CO2 emissions from coal-fired plants is commercially available.

Glenn English, CEO of the National Rural Electric Cooperative Association, seconded the premise that the majority of credits should be allocated. He also called for a safety valve to be included in the bill, which would essentially halt the mechanisms of a cap-and-trade program should the price of carbon credits get too high. A safety valve, he said, “makes sure consumers are assured we have a limit on economic damage.”

Mark Crisson. the CEO of the American Public Power Association, joined the call for a safety valve and suggested that the committee remove from the bill a renewable electricity standard and tough emissions controls for new coal-fired power plants.

Another idea put forward was disbursing emission credits to local distribution companies (LDCs), rather than electric generators. Richard Morgan of the National Association of Regulatory Utility Commissioners, which represents state public service commissions, and Richard Cowart, director of the Regulatory Assistance Project, argued that LDCs would be better able to use the credits to protect consumers from price increases.

The future of coal-fired power was also a much-discussed topic, with panelists from the industry calling for major funding for carbon-capture-and-storage technologies. In that they were joined by Natural Resources Defense Council director of climate programs David Hawkins, one of the few voices representing the environmental community on Thursday. “I think we can get deep cuts faster and with lower costs if carbon capture is on the table,” said Hawkins.

And in case you haven’t heard enough already about what electricity companies want, John Somerhalder II, testifying on behalf of the American Gas Association, which represents natural gas utilities, argued that such facilities should be exempted from the plan entirely until 2016.

The lone panel member not calling for free allocation of emission credits was Robert Greenstein, executive director of the Center for Budget and Policy Priorities. His organization wants to see the vast majority of credits auctioned off, and the revenues from that auction returned to citizens through tax credits and other rebates. Routing consumer protections through electric utilities, he said, is “unwise,” as it cannot account for cost increases in other areas like gasoline and consumer goods. “Relief that only focuses on home electricity and gas bill leaves a major hole,” said Greenstein.

But he did suggest a middle-ground option: distributing a portion of credits to LDCs, and auctioning the rest to provide consumer refunds.

Jobs, jobs, jobs

The other main focus on Thursday was how to best prevent industries from fleeing the United States should a carbon pricing plan be enacted. Many members fear that jobs will leak out to other countries that don’t limit greenhouse-gas emissions, like China and India, and the U.S. will become less competitive in the international marketplace.

Republican committee members and their invited witnesses from conservative think tanks have claimed that the exit of energy-intensive industries would be inevitable under a cap-and-trade plan. Yet the majority of panelists argued that measures could be taken to prevent that outcome.

Tom Conway, international vice president of United Steel Workers, argued that the best solution would be to put a fee on energy-intensive products like steel that are coming in from other countries in order to bring the prices level with goods made in the U.S. under a carbon cap—at least until other countries enact their own emission-reduction plans. A so-called “border adjustment,” he argued, would keep the playing field fair for American manufacturers.

“Carbon shouldn’t be used at an advantage or disadvantage by any of these nations,” said Conway. “If we’re going to reach a global agreement on this, if someone’s not living up to it, there ought to be a penalty at a border as if it were done right ... We believe that carbon reductions are the right thing, but it shouldn’t be done at the cost of jobs here.”

Others witnesses argued that free credit allocations to energy-intensive, trade-exposed industries could also help insulate them.

Ultimately, the goal is to get a global climate treaty that would bring countries like India and China under a carbon cap as well, as some panelists discussed. To do so, they argued, the United States must both take the lead at home and provide incentives for other countries to join in. Incentives should include aid for adaptation to a climate-changed world, reimbursement for avoided deforestation, and assistance in transitioning to clean energy, said witnesses from environmental and faith-based groups.

“Domestic action must provide positive incentives for the engagement of other countries,” said Eliot Diringer, vice president for international strategies at the Pew Center on Global Climate Change.

There’s still more where that came from

Friday is the last scheduled day of hearings on the draft bill, with several big names on the ticket. Al Gore will address the committee during the first panel of the day, along with former Sen. John Warner (R-Va.), who last year sponsored a Senate climate bill with Joe Lieberman (I-Conn.). The day’s second panel will feature the GOP’s go-to spokesperson, former House Speaker Newt Gingrich, champion of the “Drill here, drill now” slogan last summer.

Committee leaders still seem focused on getting the final language of the bill in place in the next few days, in order to begin markup next week. But a lot of grunt work will be needed between now and then to craft a bill that will satisfy a majority of the committee’s members.

Kate Sheppard is Grist’s political reporter.

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  1. dmeyer's avatar

    dmeyer Posted 9:45 am
    24 Apr 2009

    Excellent summary to a rapidly changing political landscape.  The climate legislation debate is like playing "whack a mole".  Never certain what is going to emerge next, given all the special interests.  One thing is ceratin...that the United States is falling behind in clean energy technology developmnent and there needs to be an effective balance of GHG control-focused legislation, public-private incentives, and performance based measures that incentive-izes rather than penalizes.  See more of my comments on this topic at www.valuestream2009.wordpress.com  

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  2. catmandew Posted 11:03 am
    24 Apr 2009

     Kate, After having listened to six hours of testimony I am of the impression that an energy bill will not pass in this poltical environment if it includes Cap and Trade. I doubt that a single Republican will vote for this. Most of the 50 Blue Dog democrats will not vote for this. If Cap and Trade is included, this bill will not pass in either congress. That is a political reality. We have an opportunity to craft an energy bill which will pass, and we should make hay while the sun is shining. There is broad congressional and popular support for all efforts which will lead to reductions in the use of fossil fuels in a way which does not endanger US jobs. There is also broad support for efforts which will lead America toward greater energy independence. My view is that the US could now initiate meaningful action which would soon result in significant reduction in America's use of Carbon Fuel without Cap and Trade. I think Cap and Trade or any form of Carbon taxing should be stripped from this bill at this time and left as a separate issue for a period of time when Congress is less concerned about jobs. That may take require waiting only a few years. If this Cap and Trade is not removed from this bill, it will fail on the house vote if it ever gets that far and America will loose an opportunity to create a meaningful energy policy. If Cap and Trade is removed, America can go forth with the following initiatives which I believe will have a significant impact on America's use of fossil fuels over the next several years. Continue to promote and fund support for the development and use of Wind, Solar and all other alternative energy and sensible bio fuel work. Very few Americans disagree that Wind and Solar can play a meaningful role in our energy future.Increase gas mileage regulation (CAFE) on new automobiles. The numerous technologies which are now available to accomplish this are impressive in their potential. Clean Diesel, Plug in Electric, Natural Gas powered Internal combustion engines, etc.. Lighter more streamlined designs etc.. These are exportable technologies which could be exported.Promote conservation efforts. That is where the immediate low hanging fruit is. Two of the highest uses of Electricity in the world are lighting and air conditioning. We already know how to make lighting more efficient. Replace all light bulbs with CFLs. I did that last year at a cost of $200. As a result, I now save about $6/month on my electricity bill. Most of my friends have not even thought about doing this. As for Air Conditioning. The use of air conditioning can be reduced in most homes today by simply raising the thermostat a few degrees and using more whole house fans, overhead fans and evaporative coolers. These are low tech, solutions which can be employed today in nearly every home and office. And, other technologies such as combining evaporative cooling with modern A.C.s in one unit could emerge quickly if there was some form of government support for the use of this technology.Fund the development of a more efficient electric grid. This is absolutely necessary to enable the use of more Solar and Wind energy. Steven Chu said so yesterday and I agree. Doing that also lowers the cost of Electricity because the end result will be the construction of fewer Electric power plants. Look at your own electric bill with this fact in mind. The cost of fuel portion from coal or natural gas is only $17 to $34/month per 1,000 KwH from the energy source. I am siting this figure only to make this point. More than 80% of the average electric bill is the result of support for the entire cost of the infrastructure, not the fuel cost. Fewer utilities will result in lower the cost of the average utility bill because it is the construction, maintenance, interest, labor, and insurance of these facilities which creates 90% of the cost. For all who want to verify this by looking at their own bill, I give you the following facts so that you cal easily do that. To convert KwH to BTUs: 1000 KwH = 3.4 million BTUs. A average ton of coal in America contains 20 M BTUs and Nat Gas delivered to the front gate of an electric utility now cost about $5/M BTUs (NG plus Pipe Line cost). A typical ton of coal delivered to the front gate of a power plant (freight included) now costs, on average about $50/ton in the USA, which is about $2.50/1 M BTUs. The efficiency of conversion at the utility from burn to electricity is about 1 for 2. It requires an input of 2 KwH of coal or Nat. Gas to deliver 1 KwH of electricity to a home. Look at your own electric bill, and using these numbers and you will understand why the cost of infrastructure is so important. For those who don't want to work out the math themselves, I offer this average, for every 1,000 KwH (3.4 M BTUs) of your utility bill, the fuel cost is in the range of $17 (coal) to $34 (nat. gas) or 1.7 to 3.4 cents per KwH for fuel. The remaining cost of your bill is the result of all the other costs that are necessary to support the functioning of the infrastructure necessary to deliver the electricity to the front door of our homes. For my bill, the non fuel costs equal 85% of my bill. A more efficient grid electric grid has the support of nearly every congressman. We can get this done now if we remove Cap and Trade from this bill.Promote the use of Natural Gas for transportation. One therm of Natural gas which typically costs between ($5 and $10/MBTUs) has the energy content of 7 gallons of gasoline. Nat Gas also produces 50% less CO2/BTU. Commercial vehicles such as postal service trucks, UPS, Cable Service, Taxi Cabs etc., for the most part, fuel up before leaving home base. That solves the problem of distribution. We need to create incentives for the US auto industry to make these vehicles available right off the line. Doing that would add very little cost to the price of a commercial truck. The US has an enormous supply of Nat Gas. These commercial vehicles could ultimately morph into hybrid electric vehicles which use nat gas along with batteries to even further reduce greenhouse emissions.

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  3. Max8806's avatar

    Max8806 Posted 11:42 am
    24 Apr 2009

    Kate, Energy and Commerce's online schedule doesn't have a markup scheduled for next week, where did you hear that's the plan? Their site could just not be updated, but just wondering. 

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    1. Kate Sheppard's avatar

      Kate Sheppard Posted 12:07 pm
      24 Apr 2009

      Hi Max8806,Committee leadership has indicated all along that they intend to markup next week, and have not stated otherwise to date. That said, they need to give 36 hours notice before markup begins. It's not on the schedule yet, so it's not clear what date it would begin. They could begin markup on some of the titles earlier in the week though and then move to the more contentious titles later -- the ones that still need the blanks filled in. So right now we don't have schedule, but all indications are that they intend to start next week sometime.Cheers,Kate

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  4. Salzman Posted 12:58 pm
    24 Apr 2009

    If we do not united behind a carbon tax and mandatory conservation measures, we will be doing exactly what industry and the utilities want us to do: evade all necessary measures that could actually reduce CO2 emissions and spur development of renewable energy. I am appalled that people on this list oppose any meaningful action on climate change out of concern for higher energy prices. They forget the fact that climate change was brought about by CHEAP ENERGY: energy priced way below its true cost. That cost is now coming due globally, but the true full costs will not be known until the heat hits the fan as a result of our failure to put a sufficiently high price on CO2. I know that most Americans are uninformed on this issue but I assumed Grist readers and writers were a bit brighter. Clearly they are not. They are in a state of Avoidance much like the Deniers of climate change. This country, thanks to an ignorant congress, a mild mannered president out to rescue capitalism in all its horrendous manifestations, a useless media and confused citizens, is about to lose the opportunity to avert a far greater economic crisis brought on by irreversible global warming, a crisis that will dwarf today's financial woes. And everyone will have to share the blame, including those on the Grist site who are willing to sell out this country and the global environment out of misdirected and unjustified fears about higher energy prices....the precise thing that is needed to start solving the problem.

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  5. catmandew Posted 6:51 pm
    24 Apr 2009

    Salzman wrote...  " I know that most Americans are uninformed on this issue but I assumed Grist readers and writers were a bit brighter. Clearly they are not. "It is not worth being “appalled” over.......“A poster who was once appalled!Got so mad he nearly bawled.Pay more for gasyou stupid assis the message he angrily scrawled.” Salzman... as a great American, you should relish the opportunity to find and save all of those poor godless souls who are still sinners at heart.  Not everyone who visits Grist will sing from exactly the same sheet music.  We are, more like a "rock fest" than an orchestra!  Those of us who commute  a hundred miles a day, might actually find expensive gas to be uh.. what's the word, oh yeah...... EXPENSIVE.  The choice is not always as simple as choosing to ride a bike to work over driving.   For those who have long daily commutes, cheap gas may actually seem to be more of a reasonable goal than a horrible sin. C'

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  6. greeniemeanie Posted 5:16 pm
    25 Apr 2009

    My personal favorite for witness without a clue:"Mark Crisson. the CEO of the American Public Power Association, joined the call for a safety valve and suggested that the committee remove from the bill a renewable electricity standard and tough emissions controls for new coal-fired power plants."Uh huh. Yeah, that'll do something about climate change, all right. Increase it.

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