How will the Waxman-Markey draft bill on energy and climate affect international climate negotiations? What progress was made at the most recent U.N. Framework Convention on Climate Change meeting in Bonn, Germany? During today's OnPoint, Ned Helme, president of the Center for Clean Air Policy, gives highlights from the Bonn meeting and reacts to the latest climate legislation coming out of the House.

Transcript

Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. Joining me today is Ned Helme, president of the Center for Clean Air Policy. Ned, it's nice to have you back on the show.

Ned Helme: My pleasure Monica.

Monica Trauzzi: Ned, you just got back from the UNFCCC's latest negotiations in Bohn, there were reports coming out of the meeting that the U.S. delegation was trying to sort of pare back expectations for Copenhagen. What was your sense of how the U.S. delegation came into the meeting, what their goals were, and how ultimately things panned out at this meeting?

Ned Helme: It was interesting. I think they really enjoyed a honeymoon. You know the delegates, it was a palpable sense that, oh, my gosh, we've now got some players that are really going to talk substance and participate. So they were received very well and I think it was interesting, the timing was such that President Obama was in Europe and he was making a speech in London, he made one in Prague, he made one in Turkey, always bringing up climate change, so it really created a lot of momentum and support. So I think it was really positive thing. Now, the honeymoon will be overcome June. June is the next round and at that point we have to have answers. At this point we were just listening and being positive, etc., and so I think we get to the real work when June arrives.

Monica Trauzzi: OK, and what might happen in June? Is there going to be some difficulty?

Ned Helme: Well, the issue is if you want a treaty that needs to be ratified, a change, the text has to be in place six months in advance. So June is a point when we have to agree on some real legal language that goes forward. And there's still quite a fight over what that might look like.

Monica Trauzzi: So, in terms of this bond meeting, what exactly came out of it? What progress was made? Where was there not enough progress?

Ned Helme: OK, in terms of progress, you remember we had, in Bali, the basic action plan was to developing countries agreed to take nationally appropriate mitigation actions in return for support for capacity building, for technology, for finance. That was sort of the two-track plan and I think at this meeting we made some progress on that. There's a lot of agreement about what nationally appropriate actions might look like, a lot of support the idea of technology. A little less progress on the finance, that number is still out there, how much money is still not decided. So we made some progress. We're on track for that stuff. Where we've got a problem is it also is a place where a number of developing countries decided to put very hard, tough targets on the table, asking Annex 1, the developed nations, to come in at 45 percent below 1990 levels, levels that really aren't achievable, and that sort of pushed the parties to the corner. So if you're in a boxing match, they're over in the deep corner and so while we made progress on some of the important details, we sort of polarized a bit on the target. So it's a mixed message I would say; positive, yes, but a mixed message.

Monica Trauzzi: Sixty-seven votes, that's what it's going to take to ratify a treaty in the Senate once something is decided upon in Copenhagen. That is going to be tough to get. Is the U.S. really caught between a rock and a hard place at this point, trying to please the international community, but also trying to please legislators back at home?

Ned Helme: I think you're right, I mean they really have to please two audiences. I think I was really encouraged by what we saw from Waxman-Markey this week. I mean they put in a bill, it's the first piece of legislation I've seen in the U.S. that really speaks to the international context and that will move us a long way. I mean we need that because our history, Clinton era, we didn't have that combination of the Congress being on the same page. And I think this Waxman-Markey bill is great in terms of sending the right set of signals to the international community in helping us bring that together, so I'm optimistic. I mean this is much better than I would have expected in terms of the understanding of what to push, the key buttons are for the developing countries and for the international process.

Monica Trauzzi: And is the Waxman-Markey draft also a good starting point for the house to begin the debate over a cap and trade?

Ned Helme: Absolutely, absently, I think so. And the value in terms of the international piece, the Waxman-Markey bill, is it sets a tougher target than the president has been talking about, which is of course what I'd hold you developing countries have been very concerned about. It sets, for the first time, it says we think we not only need a target in the United States, but we need reductions in developing countries that are on their own. So it sets a program to support reductions in deforestation in key countries. Now, deforestation is 20 percent of global emissions and this would be the first time we say we'll do this in the U.S. and we'll also support efforts in Brazil and Bolivia and Indonesia to reduce deforestation. That sends a great signal to this debate.

Monica Trauzzi: Did they hit the mark in terms of the numbers for emissions reductions? I know a lot of environmentalists were happy once the draft was released. Does it go far enough?

Ned Helme: I think it does. I mean obviously we'd like to go further, but I think in terms of the realities it's a good place to start. It's a very good place for this debate to begin in the House.

Monica Trauzzi: So Waxman-Markey and Markey left out details on revenue and allowances. What was the reasoning behind that move? I mean this is going to cause a lot of debate moving forward. Why did they leave these pieces out?

Ned Helme: Well, I think you ask why leave out the details on finance and allocation? I think that's the gravy, that's the oil that greases the wheels and so we know we're going to need to make some arrangements, we're going to need to line up support for members who are swing members based on that set of issues. So I think it was very smart. I mean they're basically saying that's putting the pie together. You know, the classic proverbial peas on the knife. I've got to have enough peas on the knife for the thing to work, that's what we're trying to do here and so I think it's the right move.

Monica Trauzzi: There's going to be a full committee markup of the Waxman-Markey bill the week of May 11. So once Congress gets back from recess in a week or so how are you expecting things to progress through the House through the summer?

Ned Helme: Well, I think you'll see first the hearings. We'll have a quick set of hearings the week of April 20 and then right to markup in the subcommittee and then to full committee and I think the goal is to have a markup on the floor, you know, finish the bill out of committee by Memorial Day and take this bill to the floor before the Fourth of July. I mean that's fast, but I think it's doable. It appears ...

Monica Trauzzi: Is it too aggressive?

Ned Helme: No, I think it's the right way. We may slip a little bit, I think it's the right way to push this process and, again, coming back to the international, this helps the negotiator because then you've got a signal, you've got a benchmark because the key is what is that target. So if we can get the Waxman target through the House that gives us some real room to negotiate in the lead up to Copenhagen.

Monica Trauzzi: There's a lot of talk particularly among Republicans about a cap and dividend approach. Could this serve as a solution for those members of Congress who are concerned about the high energy prices that might accompany a cap and trade? Is this the way to go to get more votes?

Ned Helme: I think it is. I think it is and I think it makes sense in two ways. One is, as you suggest, to help with the impact on prices in communities and I think the other thing is if you use a portion of that auction revenue to reduce other taxes you reduce the total social cost of the program. So you make it less expensive for everybody and that's in play as part of this debate and I think that's very important.

Monica Trauzzi: Final question here. How big of an impact is the economic recession going to have on the debate and moving forward once there's finally about on the final vote?

Ned Helme: No, I think the biggest impact is really on this question of cap and trade versus carbon tax and I think the reason is that people are afraid that creating a new market with allowances and a commodity, basically could lead to a lot of speculation and the kinds of issues we had with the mortgages and so on. And I think we'll have to address cost containment carefully. We put a proposal together that Congressman Doggett and Congressman Cooper and 19 other members have cosponsored, which would still have the hard cap, so you're talking about a cap and trade, but also have management of the price so that we don't see sudden fluctuations, we take out the risk of speculation and those kinds of things. It's called the safe markets approach and I think it's very promising as a compromise. It sort of takes the best of cap and trade and the concerns of those who want carbon tax to happen and put them in one place. So we're optimistic that this could be a pathway out of the difficulties that are the biggest part of what people are afraid of from the current economic crisis.

Monica Trauzzi: Any concerns though that that might artificially impact the markets, the carbon market?

Ned Helme: Actually, I think it helps in terms of protecting the carbon market and one of our fears is that we could see a lot of speculation. You know, this is big bucks, this is $200 billion a year, so there's an incentive for a lot of people to make a lot of money in this kind of market and I think this kind of approach, where you manage the price and you sell more allowances or less permits to help ensure that we stay, much like the Federal Reserve does now. The Federal Reserve now manages interest rates by selling more treasury bills or less depending on the flow in the market and this is the same principle. And I think it has worked very well in that context and it would really help us to avoid any of the kind of speculative risks that are out there.

Monica Trauzzi: OK, we'll end it right there on that note. Thank you for coming on the show Ned.

Ned Helme: My pleasure, thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

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