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Some of global warming's worst consequences could be averted over the next century if climate legislation by Sens. Joe Lieberman (I-Conn.) and John McCain (R-Ariz.) becomes law, so long as other international players include similar strategies, U.S. EPA said in a study released today.
The EPA analysis -- the agency's most comprehensive in a decade on global warming legislation -- delves into the environmental and economic effects of the Lieberman-McCain "Climate Stewardship and Innovation Act," S. 280.
Among the findings: The bill would bring global greenhouse gas concentrations by 2095 to levels that many scientists say is necessary to avoid increasing the risks of forest fires, water scarcity and more intense heat waves. Those benefits would only come, EPA added, if other countries that are already limiting greenhouse gas emissions under the Kyoto Protocol continue on a similar path to a new U.S. policy that limits emissions 50 percent below 1990 levels by mid-century.
EPA's modeling also assumed China, India and other emerging economies would bring their emissions down to 2000 levels from 2035 to 2050 -- a long-shot scenario Lieberman and McCain requested.
By contrast, EPA found that continuing current U.S. and world climate policies would allow emission concentrations to reach levels that scientists say would heighten risks of the most severe climate impacts by century's end.
The U.S. economy would continue to grow with or without the climate policies becoming law, EPA says. But the Lieberman-McCain bill by 2030 would lower U.S. gross domestic product by about 1 percent compared with a business as usual scenario. And average annual per-household consumption would fall 2 percent ($550) from projected levels in 2030 if the measure became law.
EPA also found electricity prices would increase 22 percent in 2030 and 25 percent in 2050. And gasoline prices would rise by 26 cents a gallon in 2030 and 68 cents a gallon in 2050. Costs would also increase "significantly" if some of the most promising energy technologies -- including carbon capture and sequestration and nuclear power -- do not pan out as promised, EPA said.
Lieberman, who chairs a key Senate Environment and Public Works subcommittee with oversight of global warming legislation, said today he would release a new compromise draft bill before the start of the August recess that incorporates many elements from his original bill and some from eight other bills introduced so far.
In a press release, the senator said, "While no economic model predicts the future perfectly, EPA's projections are informative and useful."
Lieberman's office also played up the environmental benefits of the legislation, especially as they compare to current policies implemented during the Bush administration. McCain, a Republican candidate for president, added that the bill "provides a valuable roadmap for finding a sound solution to the most difficult environmental change of our time."
Under the Lieberman-McCain bill, pollution cuts would be required for power plants and large manufacturing and commercial facilities, as well as transportation fuels at the refinery or the import terminal. The legislation would require U.S. emissions to fall in 2050 by 67 percent below 2004 levels.
An EPA letter from the agency's top air pollution official, Robert Meyers, takes a neutral tone in describing the effects of the legislation. But a White House spokeswoman today cautioned against the economic effects if the Lieberman-McCain bill became law.
Kritsen Hellmer of the Council on Environmental Quality cited EPA estimates that show the projected growth of gross domestic product if Lieberman-McCain became law could slow by up to $419 billion by 2030 and up to $1.3 trillion by 2050.
Asked if the EPA study would change President Bush's position in opposition to mandatory cuts, Hellmer replied, "The president has been clear about what principles he supports to address climate change. Any climate change plan must sustain economic growth, not shift jobs overseas, create real reductions in emissions in the U.S. through the advancement of technologies, and China and India must be included."
Hellmer added, "Like all other legislation, we will review this bill and weigh it against the principles outlined by the president on climate change."
The Senate on two previous occasions voted against the Lieberman-McCain bill: 43-55 in 2003 and 38-60 in 2005.
EPA also is in the early stages of preparing a study on climate change legislation from Sens. John Kerry (D-Mass.) and Olympia Snowe (R-Maine).
Click here for the EPA analysis.
Click here for EPA's letter to the senators.
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Senior House Democrats today said they do not expect a vote on corporate average fuel economy to occur before the August recess.
Both House Majority Leader Steny Hoyer (D-Md.) and Energy and Commerce Committee Chairman John Dingell (D-Mich.) separately told reporters this afternoon they do not believe CAFE will be part of the energy bill the House is expected to take up next week.
"My expectation is that CAFE will be addressed at a later date," Hoyer said. "But I think CAFE will undoubtedly be addressed ... the CAFE provision will be on any bill we send to the president."
At the same time, House Speaker Nancy Pelosi (D-Calif.) has yet to take a definitive position.
Hoyer said he still expects the energy legislation to come to the floor next week, comprised exclusively of the bills reported out of various committees earlier this year. "That was not the subject," Hoyer said of CAFE. "What I expect to be the subject is that which was discussed in our press conference" to announce the energy package, he said.
Hoyer did leave the door open for the House to accept the Senate position on CAFE when the energy legislation goes to conference. "That's certainly an option or we could deal with it in September," he said.
Hoyer's comments come as industry groups, environmentalists and lawmakers are working to build support in favor of a CAFE proposal.
A broad coalition of industry groups -- including automakers but also various state and national business groups -- today publicly threw their support behind the CAFE proposal offered by Reps. Baron Hill (D-Ind.) and Lee Terry (R-Neb.).
The Hill-Terry plan would keep separate standards for passenger cars and light trucks but require that the average standard for the overall vehicle fleet sold in the United States be no less than 32 mpg and no greater than 35 mpg by 2022. The bill's supporters have been able to gather more than 100 cosponsors, roughly divided equally between Democrats and Republicans.
Dingell, who previously said he could back the legislation, also officially signed on as a cosponsor of the bill and appeared at a press conference with other supporters of the legislation to throw his support behind the measure.
Dingell also indicated he did not anticipate having to deal with the CAFE issue until the fall, when his committee takes up the climate change package.
"We have had a number of discussions, and the speaker has indicated to me in our discussions that she favors ... to bring forward during the month of September all of the tough issues which exist with regard to global warming, climate change and also energy supplies," he said.
When pressed further about whether he has received an assurance from Pelosi on CAFE, Dingell said, "The speaker must speak for herself ... I have said what I have said, and I do not choose to expand upon it."
Pelosi's office was not available for comment at press time.
Meanwhile, advocates of the CAFE plans sponsored by Rep. Ed Markey (D-Mass.) -- which resembles the Senate legislation -- intend to continue pressing for a CAFE vote next week.
Markey, several lawmakers and environmental groups have scheduled a press conference for tomorrow to call for consideration of both CAFE and a renewable portfolio standard on the upcoming energy bill.
A Markey spokeswoman this afternoon said no decision has been made on whether the House will take up CAFE next week. "There has been no definitive decision," said spokeswoman Jessica Schafer. "But I think it's clear with the Senate action that there is clear support for 35 miles per gallon."
Markey's bill mandates a CAFE standard of 35 miles per gallon for light trucks and passenger cars by 2018 and has more than 150 House cosponsors.
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The farm bill headed for a vote in the House later this week would increase federal spending by $2.4 billion over the next five years in the energy title alone, the Congressional Budget Office said today.
CBO's "cost estimate report," released today, puts the total spending for the five-year reauthorization of farm, energy, conservation and nutrition programs at $286 billion.
House Agriculture Committee Chairman Collin Peterson's (D-Minn.) bill finds $607 million in savings over the next five years, according to CBO. The total bill, including the "en bloc" amendment that would bump up spending for many programs, advances $5.8 billion in spending increases that need offsets to comply with House budget rules. Peterson expects those offsets to come from the Ways and Means Committee and the energy bill the House approved earlier this year.
Conservation programs would see a $3.8 billion increase, most of which would go to the Environmental Quality Incentives Program and the Wetlands Reserve Program, according to CBO. The bill saves $703 million over the next five years by putting off new enrollments in the Conservation Security Program until 2012.
The numbers fall in line with most of the estimates Peterson was citing throughout the farm bill markup last week.
Within the energy title, CBO said a provision that would let the Agriculture Department sell sugar for ethanol could cut the cost of the sugar support program by $107 million. But economists from the Agriculture Department have said the provision will overall mean net costs to the government.
The federal government currently assists sugar growers with a price-support program and controls on sugar import amounts. Next year, the North American Free Trade Agreement will allow Mexico to export its sugar to the United States in unlimited amounts.
The committee's farm bill requires the government to buy surplus sugar from U.S. producers then sell it to ethanol plants. CBO estimated cost savings because of the sales, but USDA officials say selling the sugar will not likely make up for the cost. The bill also raises the price support for sugar.
"The sugar program will still cost over a billion dollars," USDA chief economist Keith Collins said in an interview. "Basically, this is just shifting the cost."
Collins estimated an influx of sugar into the U.S. ethanol market would not have big effects on corn prices. "The tremendous demand for corn and corn ethanol is growing," he said.
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This story was updated at 4:50 p.m. EDT.
President Bush threatened today to veto the House's fiscal 2008 Commerce-Justice-Science appropriations bill, citing what he said was "irresponsible and excessive" spending.
The House is expected to take up tomorrow the $53.6 billion measure, which includes the departments of Commerce and Justice and federal science agencies -- and exceeds the White House budget request by $2.3 billion.
The CJS bill is the sixth fiscal 2008 appropriations measure that Bush has threatened to veto, even as Democratic congressional leaders have pushed the White House for a budget compromise.
In a Friday letter, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) asked President Bush for a meeting with the hope of "avoid[ing] a protracted battle over relatively small differences."
The difference between congressional appropriations and the White House budget request amounts to about 1 percent of the $2.9 trillion federal budget, or about $22 billion, the Democrats said.
In the CJS bill, one area of contention is the House funding level for the National Oceanic and Atmospheric Administration -- about $3.95 billion, an increase of about $195 million over the White House request of $3.811 billion.
In its latest statement of administration policy, the White House today urged lawmakers to jettison earmarks and reduce spending on "lower priority items" in the House CJS measure.
As it now stands, the fiscal 2008 bill marks the first time in at least half a decade the House is poised to approve an overall increase in NOAA funding, as part of Appropriations Committee Democrats' stated focus on climate change and oceans-related spending.
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A split federal appeals court today upheld an injunction against a planned salvage logging project on public land in southwestern Oregon.
The 2-1 ruling by the 9th U.S. Circuit Court of Appeals blocks the Bureau of Land Management's plan to allow salvage logging on 961 acres of about 12,000 acres burned by the Timbered Rock fire near Medford, Ore., in 2002.
Judge Ann Aiken of the U.S. District Court for the District of Oregon blocked the planned salvage project after the Klamath-Siskiyou Wildland Center and other environmentalists sued, saying the salvage sale would damage northern spotted owl habitat set aside in the 1994 Northwest Forest Plan.
The environmentalists argued BLM failed to study the cumulative effects of fire suppression and salvage logging when developing the study, violating the National Environmental Policy Act. Judge Aiken and the majority of the three-judge panel agreed, also ruling BLM violated the Federal Land Policy and Management Act.
BLM and timber industry intervenors appealed, leading to today's ruling.
Judge Diarmuid F. O'Scannlain dissented from today's ruling, saying the district court and the appeals court judges "have inappropriately substituted their own policy views for the BLM's."
Click here to view the ruling.
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BP promised today to consider alternative plans for expanding its Indiana refinery after Illinois' lawmakers vowed to block the company's plan over concerns about pollutants the plant would discharge into Lake Michigan.
Sen. Dick Durbin (D-Ill.) told reporters after a meeting with BP officials that the company would review its approach to water treatment at the Whiting refinery and report to lawmakers in September. The president of BP's America unit, Robert Malone, also promised to address potential air pollution concerns, the senator said.
"We all want cheap gas," Durbin said. "But if it's at the expense of the safety of the water that we drink, that is unacceptable. It's your money or your life and that's an unacceptable choice here." About 30 million people drink Lake Michigan water.
The planned $3.8 billion refinery expansion would allow BP to refine Canadian crude, which is heavier and demands more energy for refining than other crude. The project would increase the refinery's fuel production by 15 percent, which translates to about 1.7 million additional gallons of gasoline and diesel per day, BP spokesman Scott Dean said. The Whiting refinery currently produces about 4.5 billion gallons of fuels each year.
Indiana issued a state water permit that would allow the refinery to discharge 54 percent more ammonia, as much as 1,584 pounds, and 35 percent more suspended solids, up to 4,925 pounds, into Lake Michigan every day. The permit is the first in years that allows an increased pollution discharge into the lake.
Dean said the permit was crafted to minimize environmental harm. All sludge would be treated and not discharged into Lake Michigan, Dean said. "We have not proposed the dumping of toxic waste or sludge," he said in a telephone interview.
Environmentalists have protested the permit, asking that BP install more effective pollution controls. But state and federal regulators backed the company, saying the 1,400-acre site is not large enough to upgrade the refinery's water treatment plant (Greenwire, July 17).
Reps. Rahm Emanuel (D-Ill.) and Vernon Ehlers (R-Mich.) introduced a resolution expressing congressional disapproval of the plan. It is scheduled for a recorded vote later today.
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Natural gas needs significantly more infrastructure to support its expansion regardless of how much it costs, a federal energy regulator said today.
"We are likely going to have high natural gas prices for a while, and you are just going to have to get used to it," said Philip Moeller, a commissioner at the Federal Energy Regulatory Commission, before a natural gas roundtable hosted by the American Gas Association.
A way to mitigate this reality, or at least create more stability, is through the creation of more infrastructure and obtaining more natural gas "from every source possible," Moeller said.
Moeller would not comment specifically on opening offshore or Western natural gas fields in the United States, but he did emphasize the need to weigh costs and benefits to future generations when barring access to these resources.
An important part of building more infrastructure is creating more clarity into natural gas regulations, Moeller said. "There have been a lot of questions because FERC has exercised authority in a relatively short period of time," he said.
FERC has and will continue to clarify regulations on price reporting, transparency in the volume of transactions going through pipelines, pipeline recovery costs and the range of fines FERC will issue for regulation violations authorized by the Energy Policy Act of 2005, he said.
But key questions remain, especially regarding transparency requirements such as voluntary versus mandated reporting or third-party monitored data, Moeller said.
Although FERC has issued rulemaking notices on some of these issues, the commissioner said he hoped the industry would continue to submit comments and suggestions, because many of these subjects are new to the regulatory body.
FERC is a changed agency from where it was a year ago when Moeller was appointed to the commission. It gained more authority and enforcement capabilities under the Energy Policy Act of 2005, a strength that has appeared in its rulings in the last six months on wholesale power markets, reformation of the rate proxy groups for pipeline companies and market reporting requirements.
Today was the one-year anniversary for Moeller on the commission. It was also the end of the year in which he recused himself from market rulings regarding his former position at Alliant Energy Corp.
Moeller said he was an "undefined commodity" to the industry outside the Beltway because he never ran for public office, choosing to work behind the legislative scenes instead. The commissioner said he hoped that in the coming months he would be able to have more opportunities to define and share his points of view with the public.
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With climate discussions heating up on the Hill, the political advantage seems to lie with a cap-and-trade policy. But is a cap-and-trade approach the best option for the United States? During today's OnPoint, former American Petroleum Institute economist Michael Canes discusses his new report, "Cap & Trade is the Wrong Policy to Curb Greenhouse Gasses for the United States." Canes, currently with the Logistics Management Institute, discusses what he believes are better options for the United States: a voluntary approach to emissions reductions, and a carbon tax with redistribution of funds. Canes also gives his recommendations to policymakers and explains why a safety valve would not be enough to constrain the volatility of a cap-and-trade policy.
Go to www.eande.tv to watch today's OnPoint.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Michael Canes, senior research fellow at the Logistics Management Institute. Michael is a former chief economist and vice president of the American Petroleum Institute and is author of the new report, "Cap and Trade Is the Wrong Policy to Curb Greenhouse Gases for the United States." Michael thanks for coming on the show.
Michael Canes: Thank you Monica.
Monica Trauzzi: The title seems to say it all. Your new report takes aim at the very popular cap-and-trade approach to reducing greenhouse gas emissions. You say implementing a cap and trade program would be a serious policy mistake. It's currently the most widely supported legislation on the Hill. Why is there that disconnect? What are the main points that you're making about the negatives about a cap and trade policy?
Michael Canes: Sure. Well, there's two separate points here. One is what's wrong with cap and trade? And number two is so why is it so popular? What's wrong with cap and trade is that it's very wasteful. It's going to result in a lot of constraints on the economy. It's going to result in volatility of energy prices that is unnecessary. It is going to create a source of wealth for people to lobby for and for the political sector to distribute. And that's going to result in socially wasteful activity to try to redistribute wealth among parties, including not just within the United States but from abroad as well. And lastly, it's going to have to have a monitoring system. Cap and trade requires policing, and not just in the United States, but internationally, because it will become an international system very quickly. So, in my opinion, it is going to be wasteful. Many, many billions of dollars will go into the construct of this system and it's not necessary. There are better alternatives on the table. Now, why is it politically popular even though it appears to be a more efficient system than other systems? The reason is because it does create a source of wealth. And that means that the business sector sees possibilities of obtaining part of that wealth. And so they view this favorably. The political sector sees ways to distribute that wealth and so it has attractiveness to the political sector. It will result in organized exchanges to exchange these allowances to emit. And those who would set up such exchanges see this as favorable. And ultimately the environmental community finds it favorable because a cap is a cap, and you have a quantitative limit on how much can be emitted. This is a mistake on their part. And the reason for that is the annual rate is not what counts. It is the total stock of greenhouse gases that are in the atmosphere that matters. And whether the rate is a little higher or a little lower really doesn't matter in any given year. But the environmental community likes the certainty and that's why they favor it.
Monica Trauzzi: So would a safety valve provision in a cap-and-trade package, like the one that Senator Bingaman has introduced, be sufficient to you, in your opinion?
Michael Canes: No. It would help in some ways. It would curb the volatility. It would put a limit on how far the price of allowances could rise in any given period. And so in that sense it would result in lower costs than otherwise. The EPA has the ability to put extra allowances into the SO2 program, but they have not chosen to do so. It has been an extremely volatile program. So even with that feature it doesn't necessarily mean that you're going to constrain volatility. And even then there will be volatility and it's unnecessary.
Monica Trauzzi: Talk a bit more about what would work. Carbon tax, is that the best option?
Michael Canes: I see two other options that would be superior to cap and trade. One is the path that we are following now, which is surprisingly effective. It is a voluntary program. We have set a goal in terms of carbon intensity of our GDP. As you may recall the administration enunciated a goal of an 18 percent reduction between 2002 and 2012. In four years, through 2006, we have actually accomplished about 60 percent of that. We actually have reduced the carbon intensity of our GDP by about 11 percent over four years. So it is working. We do have the voluntary partnerships, private-public partnerships, environmental organizations have such partnerships. We have the Asia-Pacific agreement which brings in India and China and we're trying to get them to focus seriously. And they are focusing seriously. The president has enunciated that he's looking for the 15 largest energy users to set long-term goals. This is a voluntary approach coupled with a heavy research program, but it seems to be working. We seem to be actually doing something. Our carbon, the intensity is falling and even our absolute carbon fell in some of those years.
Monica Trauzzi: But is that going to be enough? If we keep that voluntary ...
Michael Canes: That's a good question.
Monica Trauzzi: ... the biggest emitters, they might not be compelled to reduce emissions to a point that will actually make a difference.
Michael Canes: Well, that is of course the carrot to the voluntary approach. And I can accept that stronger measures might be necessary and if so, then in my view a carbon tax would be the way to go. A tax on carbon is much neater. The revenues from the carbon tax are kept inside the United States. You set it at a level that tries to approximate the costs that carbon is imposing on the world, you might say. It efficiently gets people to economize on carbon. If revenues can be redistributed, say through other kinds of tax reduction, you can actually improve the efficiency of the tax system. The people at Resources for the Future estimate somewhere between $15 and $25 billion annually in gains from a $7 to $15 carbon tax per ton. So you can improve the economy, it's a more efficient system. You don't have this creation of wealth that people begin to try to lobby for and the people try to distribute. You don't have to deal with international offsets which requires monitoring worldwide of who is producing what in the way of offsets. Are they real? Should they count or should they not? A very expensive way to go. You can avoid all that with a carbon tax and that is the way I think we should go if we're going to take more serious action than voluntary behavior.
Monica Trauzzi: So, then is there a specific legislative proposal that's been circulated so far on the Hill that you think it's these parameters?
Michael Canes: I have not seen one that quite fits these parameters. I know that Congressman Dingell has proposed a tax, at least conceptually, on carbon. I think his purpose is to see whether or not such a tax could fly. But it's how you pose the alternatives. If you say let's have a tax or let's not have a tax, many people in the public will oppose the tax, no question. If you say let's have a tax that has redistribution, via reduction of other taxes at least equal so that its revenue neutral or even possibly a small tax decrease, a kind of a sweetener, to get people to kind of agree to this, then I think this could fly politically. And I have not seen that.
Monica Trauzzi: So, specifically, what would be your recommendation to policymakers? If you could create the legislation what would you say to policymakers?
Michael Canes: Well, I would say, number one, look hard at the voluntary approach and see whether you can strengthen it. You could, for example, fund the provisions in EPAC 2005, the Energy Policy Act of 2005 that dealt with climate change. Appropriations have not been forthcoming and there are some programs for technology demonstration in the developing world and some other things that could help. You could also try to speed up the turnover of the American capital stock, which would reduce the energy intensity of our GDP. You can do that through depreciation allowance improvement or through tax incentives for vehicle purchase, highly efficient vehicle purchase. So you could do that. I would look to that first, but if you feel at the end of that, that that is not going to be sufficient, then I would say look at a carbon tax and redistribute those revenues in a way that reaches the people pretty much that are having to pay the carbon tax. Probably Social Security tax reduction or income tax reduction would be the ways to do it.
Monica Trauzzi: What should be weighed more heavily, the economics of the policy or the environmental benefits?
Michael Canes: Well, you're doing this for environmental purposes and you can use economic based policy to encompass the objectives.
Monica Trauzzi: But some proposals would provide more environmental benefits.
Michael Canes: Well, in a sense. But, as I said, it isn't necessary to cap the annual amount of carbon produced to get the effect you want. What you will get with an annual cap is volatility because the allowance price would be volatile and it's tied to the energy price and the energy price is pretty volatile. And that has been studied. What is the consequence of having volatile energy prices in the economy? And that we know will cause GDP affects. How big? A few tenths of a percent of GDP. But a few tenths of a percent of GDP in the United States is a lot of money. One-tenth of 1 percent is $13 billion, so two or three-tenths of a percent is up to $50 billion if you get that kind of affect. You don't want volatility in these prices. If you set a carbon tax, it enters into energy prices once and for all and then people know what the energy price is. And we're not going to get volatility from this policy. So it is a superior policy to cap and trade for that reason.
Monica Trauzzi: As someone who worked for the American Petroleum Institute are your loyalties still with the petroleum industry? Do you think your credibility comes into question when you put out a report like this saying cap and trade isn't the way to go, yet you did work for the petroleum industry years back?
Michael Canes: I did, but I retired from the petroleum industry actually in 2000 and I have been working for a not-for-profit consulting firm. We consult with government agencies and so we do take a different perspective on energy problems than I did when I was with API. It's not a matter of loyalty. It's a matter of trying to find what is the most efficient policy? What will accomplish the ends that we want to get with the least wastage? And I see a cap and trade policy as tremendously wasteful and something that we can avoid by not going that direction. I think that the political incentives are strong for a cap and trade. I understand that, but I think if the public understands that there is a better way to go and that we can do it more fairly and we can accomplish the objectives that we want to with respect to carbon management and can do it much more cheaply and efficiently, then I think hopefully support will rise that this is the better way.
Monica Trauzzi: And what would a cap and trade approach do to the price? And what impact would that have on the overall economy?
Michael Canes: It depends on how you design the system. The same would be true for a carbon tax of course, how big a carbon tax. But basically if the price of the allowances were say about $10 per ton of carbon that would mean about ten cents a gallon in the price of motor fuels. So right now people are calling for somewhere in the $10 to $15 range, so that would mean 10 to 15 cents on a gallon. In Europe today the price of the forward markets for the allowances there is about $25 a ton so that would mean about 25 cents on a gallon of gas if we got that here.
Monica Trauzzi: All right. We're going to end it right there. Thanks for coming on the show.
Michael Canes: Thank you Monica. I appreciate being invited.
Monica Trauzzi: This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
[End of Audio]
Go to www.eande.tv to watch today's OnPoint.
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