New legislation could stake agriculture's claim on carbon offsets

House Agriculture Chairman Collin Peterson (D-Minn.) is attempting to stake a claim in the climate debate, with plans to move legislation through his panel that would give control of carbon-offset credits to agriculture regulators.

Peterson's move could add to a growing jurisdictional scuffle over which agency and congressional committee will oversee regulation of the new category of commodities that a comprehensive climate bill could create.

The climate language is part of a larger proposal to overhaul the regulation of commodities markets, according to committee aides. Peterson has circulated an outline of the proposed legislation to stakeholders and plans to move it through his committee before Feb. 13, when lawmakers are scheduled for a one-week recess.

The legislation is a second take on addressing speculation in energy futures markets. It would expand on a proposal the panel approved last year, when lawmakers rushed to address speculation after oil prices skyrocketed in the first half of the year. The House approved that bill from the Agriculture Committee last September, but efforts to address oil market speculation faltered in the Senate.

The steep drop in commodity prices sapped attention from the debate over whether speculators have an outsized influence on oil and farm commodity prices. But Peterson says the volatility in the market highlights an even greater need for legislation.


Peterson's new proposal would put new regulations on futures and derivatives markets. It would also define carbon-offset credits and emissions allowances as "commodities," placing them under regulation of the Commodity Futures Trading Commission. That move would also give more power to the Agriculture Committee, which oversees CFTC.

Jurisdictional battle

The House Energy and Commerce and the Senate Environment and Public Works committees have long been seen as the starting points for the major regulatory components to a cap-and-trade bill.

That said, jurisdictional disputes are common on Capitol Hill. And the climate debate is likely to generate a higher level of interest than most other issues given the trillions of dollars in potential revenue it could raise and the high-profile personalities engaged in the debate.

"We aren't even in the early chapters of the jurisdictional conversations that need to occur," said Eric Ueland, former chief of staff to Senate Majority Leader Bill Frist (R-Tenn.).

Democratic leaders on Capitol Hill have yet to say whether they will set up any type of special organizational system to oversee the climate bill's formation, something that several sources said would be useful to work through the rough patches as different panels grab onto specific issues.

"There will be a need for strong direction that helps each of the key committees to understand their piece of the puzzle," said Kevin Knobloch, the president of the Union of Concerned Scientists.

Last year's climate debate saw the early stages of a turf war.

A cap-and-trade bill from Rep. Lloyd Doggett (D-Texas) put the major oversight responsibilities with the Treasury Department, a move purposefully designed to see the legislation referred to the House Ways and Means Committee. Doggett's bill was also referred to nine other House panels, including Energy and Commerce, Agriculture, Natural Resources and Transportation and Infrastructure.

A climate bill from Rep. Ed Markey (D-Mass.) introduced last May, H.R. 6186, was sent primarily to Energy and Commerce and nine other committees. And Rep. Henry Waxman (D-Calif.) produced a climate bill in March 2007, H.R. 1591, that was sent both to the Energy and Commerce and the Foreign Affairs committees.

In 2009, Peterson's move is the earliest signal of members vying for jurisdiction and influence. His idea for putting the carbon markets into the hands of CFTC stands in contrast to a draft bill from Reps. John Dingell (D-Mich.) and Rick Boucher (D-Va.) unveiled last fall, which put that responsibility into the hands of the Federal Energy Regulatory Commission. Since that draft bill was introduced, Waxman replaced Dingell as Energy and Commerce Committee chairman and Markey replaced Boucher as chairman of the subcommittee overseeing climate and energy issues.

Several committees are poised to look into the carbon market oversight issue, including Markey's Select Committee on Energy Independence and Global Warming.

A Markey aide last week said the Massachusetts Democrat would use the panel to focus on climate issues that are outside the purview of his Energy and Environment Subcommittee, such as agricultural offsets, the carbon markets, research and technology funding and the U.S. negotiation position headed into Copenhagen.

The two jobs offer "a 1-2 punch that gives Chairman Markey an unprecedented capacity on Capitol Hill to investigate, legislate and educate," Markey's office said.

Knobloch said he sees a benefit in multiple committees working on the issue. "Hopefully, each of these committees owns a piece of the ultimate solution," he said.

Farms and offsets

Peterson's proposal could be the first of several attempts from agriculture interests to stake a claim on the climate front.

Agriculture groups were largely preoccupied with the farm bill prior to last year's climate debate in the Senate, but several key groups have tried to ramp up their presence for the next round on climate legislation.

The National Farmers Union and other farm lobby groups launched a campaign on Capitol Hill last summer to highlight farmers' contributions in existing carbon markets -- an attempt to grow their share of any future cap-and-trade legislation.

The farmers union wants to make sure U.S. farmers have a major role in any cap-and-trade system. And they want a bigger piece of the pie for offsets than the Lieberman-Warner-Boxer bill would have given them.

Some environmental groups, such as the Natural Resources Defense Council, are skeptical of agricultural offsets. They say the long-term benefits of the offsets are dubious -- if a farmer decides later to till his 'no-till' plot, for instance, he can release much of the carbon he was previously paid to store.

The other major criticism is that offsets might not reduce the carbon in the atmosphere, especially if they are going to farmers who were already doing some of these practices on their land. NFU's program with the Chicago Climate Exchange does not pay farmers for any practice started prior to 1999, in an effort to address that criticism.

A greater reach for CFTC

The climate language is one of several changes to the proposal to toughen federal oversight of commodities markets, according to committee aides.

The new proposal would expand CFTC's reach to over-the-counter derivatives -- private trades that do not currently require regulation. Peterson's proposal would force the over-the-counter trades through a CFTC clearinghouse, according to committee aides.

The bill his panel put forward last year, H.R. 6604, would require CFTC to set position limits on speculators in futures markets and obtain more information from some traders and dealers. It also expands CFTC staffing and mandates new oversight of trading on foreign exchanges, among other provisions.

Lawmakers -- mostly Democrats -- have argued the changes are needed because hedge funds, pension funds and other investors were causing price swings that were not supported by supply-and-demand fundamentals. Several industries affected by the run-up in energy costs, such as airlines and truckers, have pushed Congress for tougher controls on speculation.



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