CLIMATE

GOP fence sitters voice concerns over allocations

Several swing vote Senate Republicans are taking aim at a critical feature of global warming legislation that forces lawmakers to decide on how to distribute greenhouse gas emission allowances among regulated industries and a raft of well-financed interest groups.

Energy and Natural Resources Committee ranking member Lisa Murkowski (R-Alaska) opened a hearing on allocations yesterday by warning of the fight ahead if the Senate follows the House's lead in giving away valuable pollution credits to some 20 different categories of recipients, from electric utilities to petroleum refiners, states and international foreign aid workers.

Murkowski said the decisions on allocations in the House-passed climate bill (H.R. 2454) were, "an exercise akin to doling out pieces of a pie."

She added, "As climate legislation is developed in the Senate, we're faced with a harsh reality. There aren't enough pieces left to satisfy the groups vying for them to repeat this process a second time."

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Last weekend, Murkowski told C-SPAN she would "keep my mind open" when it comes to her vote on the Senate climate bill. But on this critical detail, Murkowski said she had significant concerns with giving away free permits that are "essentially decades-long earmarks."

Murkowski added, "Immediate decisions about who should receive them will have lasting consequences. Accordingly, we should view attempts to secure free permits with a healthy dose of skepticism and, frankly, concern."

Sen. Bob Corker (R-Tenn.) also bore into the allocation debate during the Energy and Natural Resources Committee hearing.

The first-term senator said he would be willing to support climate legislation if Democrats auctioned off all of the allowances and refunded all of the revenue back to taxpayers. Corker said he disagreed with the House bill's formula that compromised from President Obama's initial goal of a 100 percent auction and ended up initially giving away more than three-quarters of the cap-and-trade permits for free.

"If somehow the American people could trust, and that those of us involved in this legislative process could trust that not one penny at the end of the day was going to leave consumers, either going to corporate pockets or government coffers, but 100 percent of that would be returned, and we knew it was never going to be utilized as a source of funding additional sizes of government, I think it would go a long way toward mitigating some of the contentiousness over this," Corker said.

Sen. George Voinovich's (R-Ohio) concerns yesterday about the climate legislation took on a more immediate flavor. The retiring senator blasted Democrats for scheduling legislative hearings next week in the Environment and Public Works Committee even though the Senate climate bill remains blank on how it would distribute allowances.

"We're going to have hearings on Tuesday and I haven't seen the bill," Voinovich said. "If there are allowances, I'd be very interested in seeing the allowances in the bill for the simple reason that they have a great deal to do with projected costs of various aspects of our economy and to our citizens."

According to E&E's analysis of the Senate, Murkowski, Corker and Voinovich are all "fence sitters" that are up for grabs headed into the winter push for 60 votes that sponsors of the climate bill need to overcome an expected Republican filibuster.

A road already traveled?

Senate legislation introduced last month (S. 1733) by Sens. John Kerry (D-Mass.) and Barbara Boxer (D-Calif.) did include details on an auction for 25 percent of the emission allocations every year between 2012 and 2050, with the proceeds dedicated to the Treasury to keep the bill deficit neutral.

But the bill is also blank on which firms would get allowances, and the only hint came earlier this month when Boxer told reporters that she plans to follow the House's lead in directing 70 percent of the revenue back to consumers to help them pay higher energy bills (E&E Daily, Oct. 2). Boxer, the chairwoman of the Environment and Public Works Committee, has said she will release all of the details on allocations as soon as next week as part of her chairman's mark on the Kerry-Boxer bill.

Another focal point for the climate debate is the Finance Committee, which has jurisdiction over trade matters and also how to distribute emission allocations. Chairman Max Baucus (D-Mont.) has revealed only scant details about his plans for the legislation, namely that Senate dynamics -- including a stronger contingent of coal-state lawmakers -- may be reason for him to make changes to the House legislation.

Baucus said yesterday that he hopes to begin his next round of hearings on the climate bill before Thanksgiving. As for a markup, Baucus said, "We'll see."

But Kerry, a senior member of the Finance Committee, signaled yesterday that Baucus could make quick work of the climate legislation. "He has now I think diminished the amount that will have to be tackled," Kerry said. "So I don't think it's going to have to be as time consuming as it once was thought to be."

Kerry also said he plans to meet tomorrow with Senate Majority Leader Harry Reid (D-Nev.) to map out a strategy for the climate legislation, including discussion of a Thanksgiving deadline for committees to complete their work on the comprehensive measure (E&ENews PM, Oct. 21).

Energy and Natural Resources CChairman Jeff Bingaman (D-N.M.) said he agreed with the Republicans that the House allocation formula could be more transparent. Bingaman, who also has a seat on the Finance Committee, also acknowledged that he was not ready to endorse any specific approach.

"I think the general idea of trying to simplify this is a good one," Bingaman said. "But exactly how we do that and still accomplish the emission reduction objectives, I'm not clear on."

Across the Capitol, authors of the House climate bill came to their measure's defense.

Energy and Commerce Committee member Rick Boucher (D-Va.) recalled several hearings over the last two years that explored the debate over auctions and free allocations. "We went down those same paths," Boucher said. "We looked at all these various alternatives. This is the process that works."

"Free allocations keep the program affordable," Boucher added. "If you start auctioning the allowances or require that utilities go into the market and buy them in some fashion, you're simply adding to the program's costs without doing anything to promote an environmental improvement."

Eben Burnham-Snyder, a spokesman for Rep. Ed Markey (D-Mass.), said the House-passed bill dedicates 80 percent of the credits "to public purpose, whether that's protecting U.S. jobs and consumers, or helping industries transition to a clean energy economy."

The House-passed bill sends 30 percent of the allowances to state-regulated local electric-distribution companies. These companies are instructed to use any revenue to protect consumers from electricity price increases. Other significant line items in the House bill include 10 percent of the allocations directed to states to implement building efficiency standards, building retrofit programs, and renewable energy and efficiency measures.

Combined, House Democrats say these programs would lower consumer costs on energy bills.

Natural gas local distribution companies also get 9 percent of the allocations with similar restrictions on their use of allowance values to help consumers. And the House bill requires U.S. EPA to auction off 15 percent of the allowances, with the proceeds directed toward low- and moderate-income families via tax credits, direct payments and electronic benefit payments.

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