POLITICS:

The plots thicken in Senate climate deliberations

Now the real Senate bargaining begins on a climate bill.

Late Friday night Sen. Barbara Boxer (D-Calif.) released a complete draft of the global warming bill prepared by her Environment and Public Works Committee, with details on how emission allowances would be distributed around the economy in a mandatory cap on greenhouse gases. The latest version sets the stage for Boxer to move the measure through the committee quickly.

But few say the new text changes the political dynamic for passage in the full U.S. Senate.

A U.S. EPA analysis released simultaneously with the draft concluded that the overall Senate plan produced by Sens. Boxer and John Kerry (D-Mass.) would cost households about $100 a year and largely mirrors a House version of legislation that passed in June, with a few tweaks here and there.

The similarities between the two bills leave lobbying interests largely in the same place they were in months ago. Environmentalists are settling in to defend the new bill's stronger emissions reduction targets, while many industries and interest groups are unsatisfied with their share of the proceeds.

It also means that U.S. senators who are on the fence about a mandatory cap are unlikely to be moved by this latest draft, according to many analysts. Instead, these lawmakers will be waiting for the results of yet-to-be-negotiated provisions on cost containment, nuclear power, offshore drilling and coal generation that could determine the fate of a bill in Congress when and if it reaches the Senate floor.

"This does little to move the needle one way or another," said Christine Tezak, a senior energy and environmental policy analyst at Robert W. Baird & Co.

Sweeteners for carbon capture and trade-exposed firms

Boxer did add language boosting trade-exposed companies, the agriculture and forestry sectors, and early developers of carbon capture and sequestration (CCS) technology, which envisions trapping carbon dioxide from coal-fired power plants (E&E Daily, Oct. 24). There also were sweeteners for Indian tribes, rural utilities, nuclear training programs, and states and cities that reduce emissions with cleaner transportation systems.

"And it does all this without adding to the budget deficit," said Daniel Weiss of the Center for American Progress, a think tank with close ties to the Obama administration.

Yet the bill leaves many questions unanswered, including how ideas from a compromise that Kerry and Sen. Lindsey Graham (R-S.C.) proposed in a recent New York Times op-ed would get incorporated into a final legislative product. The two called for additional nuclear incentives, offshore drilling, and a border penalty on goods from countries with looser climate restrictions, among other things.

The details of the Kerry-Graham plan are still to be determined.

It is also unclear how energy provisions from other bills, such as one that passed in the Senate Energy and Natural Resources Committee earlier this year, will get incorporated into a final package.

Adding to the pot is a forthcoming alternative proposal from another swing voter, Sen. Maria Cantwell (D-Wash.), who is drafting legislation that would cap emissions but restrict the trading of carbon as a commodity, according to spokeswoman Ciaran Clayton.

""I'd like to see what Maria's got. I'm not real happy with [Kerry-Boxer]," said Sen. Jon Tester (D-Mont.) last week. "I don't want something real, real complicated."

Final package ingredients still unknown

In the meantime, groups across the philosophical spectrum are positioning themselves for the negotiations expected to take place outside of the Environment and Public Works Committee, which will begin hearings on the new language this week. Provisions praised by one group often are disliked by others, which sets up a difficult balancing act for Democratic leaders.

Furthermore, small organizations and companies have a louder voice in the Senate than in the House, because any senator can hold up a bill via a filibuster to protect the interests in his or her home state.

Additionally, the revised Senate bill contains a smaller pie of carbon allowances than the House measure because Boxer set aside a greater portion of them for deficit reduction.

That means that groups already scrambling for financial assistance under a climate bill will have to dip into a smaller amount for carbon allowances, which businesses can buy and sell in a cap-and-trade system to meet emission cuts. If a capped entity spews more greenhouse gases than its allotted amount, it must purchase more allowances under the concept.

Steven Nadel, executive director of the American Council for an Energy-Efficient Economy, said energy efficiency got less under the most recent draft, even though both the House and Senate versions call for roughly 10 percent of allowances to help states invest in efficiency and renewable energy. The smaller pool of allowances, though, means that 10 percent doesn't go as far this time around.

"It was disappointing," he said about the new draft.

And conservation groups said over the weekend that while they were pleased with the bill, they will continue their lobbying to get a greater percentage of the allocations devoted to natural resources adaptation. The Senate bill devotes the same percentages as the House-passed version, at 1 percent, going eventually up to 4 percent in later years.

There also are subplots developing around portions of the bill that echo kerfuffles from the House. For example, supporters of offsets are waiting for a final answer on whether U.S. EPA or the Agriculture Department will gain jurisdiction over agriculture and forestry projects. Offsets support projects like reforestation efforts that businesses can turn to when they fail to curb emissions sufficiently at their own facilities.

Hard vs. 'soft' price limits

Other industry groups want a hard "collar" that sets a definitive floor and ceiling on carbon prices. Kerry and Boxer, by contrast, created what they call a "soft" collar that would release allowances from a "reserve" if prices topped $28 per ton of carbon, adjusted for inflation.

"It would be better for the regulated community to know what the upper price is," said Scott Segal, a lobbyist at Bracewell & Giuliani who represents utilities. He predicted that both offsets and the "collar" would be an ongoing source of debate for swing-vote senators.

The elimination of slated EPA standards on some methane emissions by Boxer and Kerry in favor of including them in an offsets program is another potential source of contention. Some industries want to see as many offsets as possible to lower the cost of the bill.

The change could be a boon for offset developers, as well, who want to make money from collecting methane from landfills or coal mines and counting the result as an offset.

But methane also happens to be a greenhouse gas with much greater potency than carbon dioxide, and including its capture in the offsets program instead of a regulated regime reduces the overall emissions reductions gained by the bill, environmentalists say.

The bill also includes extra allowances, more than in the House-passed bill, to fund emissions reduction projects in the agriculture and forestry sectors that might not qualify for the offsets program.

But one agriculture group said that the added bonus was not nearly enough to win the support of farmers. "It really doesn't do anything to reduce the costs of the bill to farmers. It's another technical farm program. It's not the same as letting people do offsets in a market," said Rick Krause with the American Farm Bureau Federation.

Rural electric cooperatives, which represent many small, coal-dependent utilities in the Midwest and raised a ruckus in the House debate, are eligible for a portion of allowances under the new draft.

But at a conference last week, the head of the National Rural Electric Cooperative Association, Glenn English, said "the basis for a deal" on climate would not revolve so much around allowances, but around whether people in coal-dependent regions would get enough help with efficiency retrofits on homes so they can manage potential electricity spikes.

Environmentalists are set to dig their heels in to defend Kerry and Boxer's call for a 20 percent cut in emissions by 2020, which toughens the House's 17 percent target for the same year. With the economic recession already causing a drop in greenhouse gas ouput, the tighter target is critical to prevent catastrophic climate change, in their view. They may face the ultimate fight in the conference committee, where the two bills would have to be reconciled.

At the same time, they are sending subtle messages about when their support could wane.

"There are a lot of people out there completely freaking out," said David Hamilton, director of the Sierra Club's global warming and energy program, about possible new nuclear incentives down the road from Kerry and Graham. He said the magnitude and type of nuclear subsidies would matter greatly in the ultimate reaction of his organization.

Enviros vs. coal industry remains a stalemate

Similarly, environmentalists are warning that the coal industry already has received a lot of help in both bills, but especially in this newest Senate draft, in which early CCS developers would get allowance funds in advance of installing the technology.

"The coal industry walked away with a pound of flesh on this," said Hamilton. He acknowledged that the text would be difficult to get changed, but said that the deal should be "valued" when coal-state senators inevitably demand more benefits further along in the process.

Weiss, of the Center for American Progress, said there isn't much room, in his view, for more nuclear or coal incentives.

"Unless someone proposes to open the [U.S.] Mint to them, it's hard to imagine what other benefits they would use," he said.

But much of the coal industry, for its part, is making the opposite argument. Some groups representing the oil and gas industry, like the American Petroleum Institute, also are maintaining a hard line on the latest text.

"All the flaws are still there," said Kyle Isakower, director of policy analysis at API. He said oil refiners don't receive enough allowances to cover their costs with the latest bill.

Luke Popovich, a spokesman for the National Mining Association, said over the weekend that the 20 percent cut from Kerry and Boxer would be "very damaging" for coal because the industry can't develop carbon capture technology in time to meet the deadline. He added that existing legislation fails to address potential liability problems about carbon dioxide stored underground from coal-fired power plants. Coal currently fires about half of U.S. electricity.

The big unknown is whether lawmakers from coal states, like Sens. Jay Rockefeller (D-W.Va.) and Evan Bayh (D-Ind.), will hear the arguments of such pro-coal groups or get behind the bill's billions of dollars in incentives to deploy CCS technology at coal plants.

The new Senate text incorporated recommendations from a clean coal working group led by Sen. Tom Carper (D-Del.) that go beyond the House bill in providing assistance to implement CCS, which could be as much as a decade away from full commercialization.

"In a good faith negotiation, no side gets everything it wants. But our clean coal group reached compromises that reflect the priorities of different parts of the country, and that will help move the climate bill forward," Carper said in a statement.

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