CLIMATE:

Graham suggests emissions bill focusing only on power plants

A key Senate Republican voice on climate legislation is floating yet another alternative way to price carbon emissions by focusing just on power plants.

Sen. Lindsey Graham (R-S.C.) said yesterday that the electric utility industry is most in need of a market signal for pricing greenhouse gases, while other major industries could be left out of a new U.S. carbon market, especially if it means finding enough votes to pass a bill in the Senate.

"We do need to price carbon to make nuclear power and wind and solar and some alternative technologies economically viable," Graham said. "On the transportation side, maybe you can reduce emissions without a cap. I don't know. But you need to put a price on carbon in the power production area at a minimum to jump-start these other technologies."

Graham spent about nine months negotiating key pieces of the Senate climate and energy bill with Sens. John Kerry (D-Mass.) and Joe Lieberman (I-Conn.) before dropping out of the talks in April over an unrelated political battle involving immigration. Just days before he walked, Graham said he thought the legislative effort was in good shape when it came to power companies and major manufacturers, but the transportation emission section remained a sore spot.

In the end, Kerry and Lieberman released a bill without Graham that started first with emission limits on electric utilities, followed six years later by limits for heavy industrial plants. Transportation emissions would face their own limits, but the industry cannot participate in any trading with the other industrial sectors. Critics have pounced on the provisions dealing with motor fuels and labeled them a "gas tax" despite repeated dismissals from the bill sponsors.

Speaking to reporters earlier this week, Kerry insisted the bill he authored with Lieberman should remain intact as Majority Leader Harry Reid (D-Nev.) and other top Democrats begin to plot floor strategy for later this summer or fall.

"We thought this through 20 times, saying, 'How can we do this differently?'" Kerry said at a forum hosted by the Christian Science Monitor. "We'd sit there and say, 'Is there any way to get this out of there and not have it be part of it?' But it's a puzzle. Every time you take one piece away, you make it more expensive for the other pieces to do it alone. And if you take certain pieces away, there's no money to be able to help people transition and cushion for it."

But others say that Graham may be onto something.

Electric utilities are responsible for about a third of the country's annual emissions of heat-trapping pollutants, and they have been involved for about 15 years in a similar market-based mechanism that has successfully reduced acid rain. The power industry is also the most threatened by the prospect of U.S. EPA regulations under the Clean Air Act.

Members of the U.S. Climate Action Partnership lobbying group discussed the power plant-only option this week during a private conference call. And a power industry source said today that the prospects for a broad, economywide bill remain uncertain, but there could be enough interest around legislation that deals solely with utilities and then takes on transportation emissions by codifying several existing Obama administration fuel economy rules and other incentives.

"At the end of the day, I think the decision has to be made whether you want 100 percent of nothing or whether you want 60 percent of something," the source said.

Beyond Graham, several other Senate Republicans seen as critical for passing a climate bill have also expressed an interest in a less sweeping plan for controlling greenhouse gases, including Sens. Judd Gregg of New Hampshire, Lamar Alexander of Tennessee, George Voinovich of Ohio and Richard Lugar of Indiana.

Lugar plans to introduce his own legislation after the Memorial Day recess that includes titles on efficiency, stronger vehicle fuel standards, a minimum "clean energy" requirement for utilities, including nuclear power, and incentives to shut down the highest-emitting coal plants.

Mark Helmke, a senior aide to Lugar, said he doubts Kerry and Lieberman have 60 votes for their approach. But he acknowledged that a proposal with limits on power plants coupled with other incentives for other industrial sectors may represent a path to 60. "It could be," he said. "But it's a political decision to be made by the White House and by Reid."

Brian Wolff, vice president for communications and government affairs at the Edison Electric Institute (EEI), acknowledged the difficulty Senate sponsors have in overcoming the "gas tax" label.

"I think everybody had a thought that the transportation part of it, the gas tax part of it, was really going to be hard for people politically," he said. But Wolff said he hasn't had any discussions with his trade group members about the power plant-only option.

"It's not been baked at all," he said.

EEI plans CEO calls to key senators in the coming weeks on the Kerry-Lieberman legislation. The group welcomed that bill's release during a press conference earlier this month because it included valuable allocations that help the industry compensate customers for otherwise higher energy prices, as well as pre-emption of both existing state climate laws and EPA's ability to write its own greenhouse gas rules.

"We've been focused on each legislative effort, whether it's the House effort or the Senate effort, what we can do to improve it and what we can do to support it," he said.

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