Just one week after taking office, President Barack Obama has taken steps to improve fuel economy requirements and allow states to regulate vehicle emissions. How will these actions affect the broader goal of passing cap-and-trade legislation? During today's OnPoint, Ned Helme, president of the Center for Clean Air Policy, previews this year's House and Senate action on climate legislation and discusses expectations for Obama's first address before a joint session of Congress. He also comments on the U.S. Climate Action Partnership's emissions reduction plan.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Ned Helme, president of the Center for Clean Air Policy. Ned, it's great to have you that on the show.
Ned Helme: It's a pleasure, Monica.
Monica Trauzzi: Ned, the Obama administration has just announced that it has plans to move on fuel economy requirements and state regulation of emissions for vehicles. It's a departure from the Bush administration's policies. What do you think about these first moves and what it says about the broader discussion of climate under the Obama administration?
Ned Helme: I think it's a real signal and a very important one that they are dead serious about this. This is one of the first actions they take is to do this and I think it has big benefits. We're talking, I think, 18 states would follow California. All the states could, but 18 have done it, so we'll see this very quickly in affect. I think the other piece that's important here is when you do the standards you need both the standards and the overall cap-and-trade system and this shows as we start with programs and standards. And I think over the weekend he also said something about the stimulus package and renewable energy was a big piece of that. So I think you want a combination of policies like the car standards, like the renewables, coupled with an overall cap and that's where you really roll. So I think it's very encouraging.
Monica Trauzzi: All right and speaking of climate legislation and a cap and trade, there was some concern at first that this legislation was at risk because of the economic downturn and maybe there wouldn't be as much of a focus on it this year. But it looks like in both the House and Senate there are plans to move forward, like Chairman Waxman in the House Energy and Commerce Committee. He set a deadline for May for legislation to move out of his committee. I mean is he really just trying to set more of a tone here or is that deadline likely in order to get legislation out?
Ned Helme: I think he's serious about trying to meet that deadline and I think it would be very desirable. From the international perspective, you know, we have Copenhagen in December and we'd love to see a bill out of the committee in May or in early June and then on the floor in September. That would give us a signal for the international negotiations and allow Mr. Obama's negotiators to have a real base for participating actively. So I think it's very important. I think he's serious about it.
Monica Trauzzi: Right and just a couple of weeks ago Speaker Pelosi was saying that we wouldn't see cap and trade on the floor until next year. Now she's saying pre-Copenhagen vote. What do you think accounts that change in timelines?
Ned Helme: Well, I suspect partly she's very clear now the Obama administration is dead serious. Its first pronouncement on policy back in November was on -- the first thing he did specifically was on climate change. I want 1990 levels. Reduce emissions to 1990 levels by 2020, a very important signal. I think she's seeing that and she's also seeing she has the votes. I mean we have a different game this year. We've got Chairman Waxman, which we didn't have, nice surprise. Chairman Markey, another nice surprise in terms of where we're going on this legislation. And she has another 20 seats and another 20 votes on the floor. So we're in a much better position legislatively to move a package than we were a year ago. And certainly a year ago I would have said the Senate is a place where we'll get our high watermark. In the House we'll struggle, but we'll get something done. It's now shifted and I think now we say the House will be the first and most important move. And then the Senate, we have more room to negotiate with some of the swing Democrats and so on in the Senate. So this bodes very well for a strong bill I think.
Monica Trauzzi: Even if the House bill is a lot more stringent than what the Senate might vote on? I mean will the international community understand that but still accept what the U.S. presents in Copenhagen?
Ned Helme: I think so. I mean I think the key is if you think about these issues, the cap, the amount of reduction we get is the most important piece, because we've got to be on track to stay at the 2 degrees increase in temperature. So we've really got to do a lot by 2020 and 2030 if we're going to stay on track. So the cap and the level of reduction, most important, the place where there's room for negotiation is on sale of the allowances, who gets that money. There's a lot of money on a table in this deal. What happens on technology, what happens on cost containment, and that's where the compromises can lie. You know, I think back to 1990 when we were doing the Clean Air Act and the administration came in with a very tough proposal for the cap and that never changed. What the fight was about was who got how much of the pie and what happened with technology and was there enough liquidity in the market and all that sort of stuff. And I think we're going to see the same game unfold this time.
Monica Trauzzi: And all eyes were on the Senate last year with the Lieberman-Warner debate. What are your expectations for the Senate this year on cap and trade?
Ned Helme: I think it's going to be a little more complicated. I mean it's clear Mrs. Boxer has said she's going to do a streamlined bill. She'll put out some guidance this week, some guideline principles. I think she's going to stick with the environmental piece of this and let some of the other committees do more on how we handle the auction, how we handle the cost containment and those issues. And I think that's the right way to go. But I mean that signals it will take a little longer in the Senate. We've got more players, but, again, if I've got a tough bill out of the House I can afford to be more accommodating in the Senate and still get a good package at the end of the day.
Monica Trauzzi: The U.S. Climate Action Partnership recently released a cap-and-trade plan that environmental groups and industry have both signed onto. Some critics say though that the emission reduction targets in this plan are not stringent enough. What are your thoughts on the plan? Is it workable?
Ned Helme: I think it is workable and I think these guys still deserve a lot of credit. I mean we've done this before. It's tough to get a diverse set of players together. You know, they had a good agreement a year and a half ago. It was general. This one is quite specific and it's powerful in that sense. And I think on the target they're little weak in the 2020 target, not bad. 2030, a single number, a very tough number, at least one third reduction in emissions below 1990 by 2030, that's a powerful signal. There are some other things in there that are very good, some new ground they've broken. But I think the most important thing to say is this coal, oil, environmentalists, utilities, car companies, big GE producers, you know, vendors, all coming together around a pretty tough, when you step back from it, pretty good package. So I think it's an impressive achievement.
Monica Trauzzi: It has also sort of reignited the discussion on offsets and whether they should be allowed, whether they actually yield environmental benefits. Is there a way to do this without offsets? I mean does it make sense to include them in a plan like this?
Ned Helme: I think my criticism would be they've gone a little too far in the amount of offsets. It's 1.5 billion tons of offsets, that's a lot. I think you could do it more elegantly and more simply. You know, the Federal Reserve has a system for managing prices that's much more elegant, much simpler than what we're seeing here. We've done some work on this and I think their idea is right. We have to have something on cost containment. It's clear after the crisis with home mortgages and derivatives and so on people aren't going to accept cap and trade unlimited. We now have to talk about what do we do to prevent big volatility in prices, that sort of thing? So we need to deal with it. I'm not sure their solution is the best solution. I think there's some other more elegant and simpler solutions, but the idea is they are right in saying this is a key issue. We can't run this under the rug. This is something everybody is concerned about.
Monica Trauzzi: The economic recovery package is going to be debated on the House floor this week. How do you think the outcome of that debate and that vote sort of sets the tone for the other legislative goals that Democrats have for this year?
Ned Helme: I see two things about it. When you get into the specifics the president has put a lot of renewable energy and energy efficiency incentives in that package, very powerful stuff. That's a down payment on our climate effort. So that's a very important piece and I think that will survive. That will progress well. I think the other thing to watch is how partisan does this get? Are we able to get some Republicans on board? I mean clearly Mrs. Pelosi could slam this through, no question, and she may decide to do that. It would be nice to have some Republicans along and it would be nice in terms of the climate does well because last year you remember Republicans in Energy and Commerce wouldn't even talk about this issue. Hopefully, this time, this is now serious. We're going to legislate and it's time to start talking about the specifics and not this global, oh, climate doesn't exist, etc. So I think, my hope is, we'll see a much more engaged set of minority party players in this and that will signal that we'll have that as well in the debate on climate.
Monica Trauzzi: Was such a focus on the economy though, what do you think some of the president's economic advisers like Larry Summers are saying to him about moving forward on a cap and trade?
Ned Helme: Well, they are very much on this idea of green jobs and the new green technologies, sort of building on that as a new growth opportunity. So the critique is, you know, we made all our money in the last 10 years on playing games with derivatives and mortgages and not really building anything new. And here we've got a chance to grow our economy in a carbon friendly way that means new jobs and new investment and leadership in the world. So I think there's a very positive economic message that can be played out here about climate change. The other thing to remember is we're not talking about impacts before 2015. So the immediate crisis will be over ostensibly, hopefully, in a couple of years, and we'll be -- you know, we're not talking about something that's going to threaten us. This package is 2015, 2020, 2030. So I don't see that as such a problem.
Monica Trauzzi: Final question here. What are you looking for President Obama to say in his first speech to a joint session on Congress that's expected to take place in February, specifically to set the tone on climate? What does he need to say? What are the points that he needs to touch on?
Ned Helme: I think he has to draw out what the threat is. In fact, what level of reduction we need to make globally, how big this challenge is and that we're ready to do it and that there's a green answer to this. That this isn't high cost. This is about a combination of new jobs, new technologies we were just talking about and doing our part in the world. I think it's important because he's sending a signal globally that we are re-engaging. This is a different administration. This is a serious administration in terms of multilateral activity and that's a very important signal. So he's got two audiences, he's got the domestic audience, but he's also got an international audience that's very favorable to us.
Monica Trauzzi: All right. We'll end it right there. Thanks for coming on the show again.
Ned Helme: My pleasure, I really enjoyed it.
Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.
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