1. CLIMATE: To sidestep pre-emption, states pitch changes for Lieberman-Warner bill (E&E Daily, 04/24/2008)

Darren Samuelsohn, E&E Daily senior reporter

Three states who have taken a leadership role in shaping their own global warming polices are working with Senate staff on new ideas that could potentially defuse the Capitol Hill debate over whether states should be allowed to set more ambitious emission reduction targets than the federal government.

On Friday, officials from California, Connecticut and New York spelled out two main ways to address the pre-emption issue in an hourlong conference call with the aides for Sens. Joe Lieberman (I-Conn.), lead author with Sen. John Warner (R-Va.) of a climate change bill due for Senate floor debate June 2.

Under one approach, the states suggested they be allowed to implement their own cap-and-trade program to control greenhouse gases -- even if it is stronger than the new U.S. policy.

But the states also proposed a less aggressive route that would allow them to keep their programs intact until a federal cap-and-trade program starts.

After that, the U.S. system would include some type of transition assistance than compensates the states for their early efforts -- either by allowing them to retire emission allowances or through another type of financial incentive. As a security blanket, the states asked for the right to resume their own efforts if the federal program was slow in being implemented, or if the emission targets were later weakened.

"States in general have not been influential in shaping federal legislation [until now]," said Mary Nichols, chairwoman of the California Air Resources Board and one of the state officials who participated in last week's call with Senate aides. "All they ask is to be left alone, or for money."

As written, the Lieberman-Warner bill (S. 2191) includes a section stating that nothing in the bill takes away the right of a state to adopt or enforce its own climate policies. It also mandates that no state can set greenhouse gas limits weaker than the federal policy.

That language was strong enough to help the Lieberman-Warner bill move last December out of the Senate Environment and Public Works Committee. But the bill's Senate sponsors have since been on the lookout for ways to refine the language -- both to protect state rights and also in anticipation of a heated floor debate as opponents look for ways to undermine the measure.

Starting in January, Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.), Lieberman and Warner sent out feelers to more than a dozen states to come up with ways to change the bill. Their strategy was a departure from how the trio handled other hot-potato issues where they had turned to their own Senate colleagues for help in finding compromise (E&E Daily, March 31).

Bill Becker, executive director of the National Association of Clean Air Agencies, said he expected the states' responses to be useful as the Lieberman-Warner bill reaches the floor in June.

"The burden is upon the states to help them make the case," he said. "They will be able to explain very logically and very directly why protecting state rights is important and how it's not going to create the kind of havoc that opponents are suggesting it may."

State officials say there are several other potential approaches to deal with the interplay between their programs and an eventual federal climate law. There also isn't consensus among the states or regions -- differences exist between California and the Northeast, for example -- on what to do.

Reasons for pre-emption

A tough fight awaits the states that want to do more than the federal government. Industry groups and even some key Democrats maintain the best way forward is to have just one set of emission limits.

"Ultimately, state programs should be pre-empted," John Hofmeister, president of Shell Oil Co., said in a recent interview.

Rep. John Dingell (D-Mich.), the chairman of the House Energy and Commerce Committee and a close ally to his home state's auto industry, is no stranger to the pre-emption issue. Last year, Dingell publicly challenged House Speaker Nancy Pelosi (D-Calif.) by trying to take away the rights of California and other states to set stronger motor vehicle regulations. Dingell backed down then, but indications are he may try again soon.

In February, Dingell released a white paper warning that state climate programs could cause job losses in states without similar standards, especially those dependent on the domestic auto manufacturing industry. Dingell signaled he would take a different route on the topic compared with what was in the Lieberman-Warner bill (E&E Daily, Feb. 25).

Unlike smog or water pollution, Dingell and many others insist it makes little sense for states to take such a proactive stance on global warming because the benefits of fewer emissions do not translate into any fewer localized harms.

"That argument is not sound with the global climate problem," said Robert Stavins, a Harvard economist.

Jeff Holmstead, an industry attorney and former U.S. EPA air pollution chief under President Bush, is no proponent of federal cap-and-trade policy. Even so, Holmstead said his biggest doubt about state efforts centers around the economics of having multiple climate programs in different parts of the country. "Everyone knows you'd have a less effective market and significantly increased costs," he said.

Protecting their image

In many ways, the state pre-emption debate comes down to image.

Governors and legislators in some 17 states have fought to put their climate laws on the books. State bureaucrats have spent years writing regulations and refining legal arguments. Environmentalists and industries have pushed to influence the emerging systems in countless ways.

"They don't want to be patted on the head and sent home," said Jason Grumet, executive director of the nonpartisan National Commission on Energy Policy and also a top energy and environmental adviser for the presidential campaign of Illinois Democratic Sen. Barack Obama.

Politics are also a big factor given the attention and headlines won by elected officials in their push to establish climate limits in direct contrast to the Bush administration.

Consider Boxer, a major player in the Senate debate over global warming policy. Boxer is trying to find compromises in Washington on the Lieberman-Warner bill, but she also is being careful to be seen at home as a defender of the state's landmark climate law. "That's a line in the sand for me," Boxer told reporters recently. "Either we allow the states to do more and encourage them to do more if they want to, or there's not going to be a bill."

Boxer faces a re-election campaign for a fourth term in 2010 -- around the time many expect a U.S. climate policy to be signed into law.

David Hayes, a former deputy Interior secretary from the Clinton administration, said many state leaders have something invested in their climate policies -- enough so they won't be willing to give in so quickly. "The politics of that would be very bad, particularly since the states have been in the lead," he said. "It's naive to think they're simply going to put down their pens and say 'Oh, OK, nevermind."

Grumet has been working with state officials in anticipation of the Capitol Hill climate debate, but it has only been in the last few months that he has seen any signs of progress.

"It's an issue that until recently had been thought of as too hallow to even talk about," said Grumet. "It was the Voldemort of the climate debate" -- a reference to the evil Harry Potter character feared to such an extent that no one will say his name.

Indeed, consensus does seem to have emerged over areas where the federal government won't interfere with the states.

"I don't think Congress wants to get involved in doing energy efficiency programs, or land-use impact decisions, or how to best reduce vehicle miles traveled," said Peter Iwanowicz, director of the climate office in the New York State Department of Environmental Conservation.

Several state officials also acknowledged that they do not want to make industry pay for emission credits in their programs once a federal system comes into place.

"There's a role for the states going forward," Grumet said. "The question is how do you provide incentives for that additive role without getting tangled in multiple smokestack programs."

Debra Kahn and Colin Sullivan contributed to this story.

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