As the House Energy and Commerce Committee marks up the "American Clean Energy and Security Act" this week, what are the most contentious issues up for debate? During today's OnPoint, Emilie Mazzacurati, manager for Carbon Market Research at Point Carbon, discusses a recent analysis of the legislation and assesses who are the biggest winners and losers. She also gives her take on the tight deadlines set in the House for moving this legislation.
Monica Trauzzi: Welcome to the show. I'm Monica Trauzzi. With us today is Emilie Mazzacurati, manager for Carbon Market Research at Point Carbon. Emilie, thanks for coming on the show.
Emilie Mazzacurati: Thank you.
Monica Trauzzi: Emilie, lots of attention from the administration and on the Hill on pushing through cap-and-trade legislation this year. And recently the EPA proposed an engagement finding for greenhouse gas emissions. The thought behind that being that it would sort of spur Congress to act more quickly on legislation. Despite EPA's move, however, we're already seen some hurdles come about in the House, in getting through the Waxman-Markey draft. What are your thoughts on the inter-party squabbles that we're seeing among Democrats on climate?
Emilie Mazzacurati: Well, moderate Democrats and Democrats from coal states, manufacturing states are just making sure that they get, you know that they don't get too much in trouble with a bill. But their states get some rebates or some kind of compensation to the extent that they might get hurt by a cap.
Monica Trauzzi: And one of the concerns that we've heard also is about reelection and that certain Democrats don't want to force a vote on cap and trade, you know, because it might hurt their chances of being re-elected.
Emilie Mazzacurati: True, true, but reelection is still quite a ways down the road and we have seen that there is support from the American population at large for cap-and-trade action. It was clearly one of the priorities of President Obama. He got elected with a very large majority, so it would only make sense that legislators also want to act on that.
Monica Trauzzi: How much of a pull do you think the White House has in all of this? You know, President Obama has been meeting with top Democrats in the House and Senate, but how much can he sort of force their hands to actually get this legislation through?
Emilie Mazzacurati: He cannot really force their hands. He can put pressure on them politically and he can also do a little bit of horse trading and maybe if he wants the bill passed he may have to give up on some other topics. Will cap and trade be his priority is not quite sure yet.
Monica Trauzzi: Not quite sure if this is ...
Emilie Mazzacurati: Well, there's also the healthcare reform and a number of other topics that are high on his agenda, so he may not be able to fight all the battles, but at this stage he hasn't sent a signal yet that the cap-and-trade bill was not going to make it. So there's still a good chance that he will use his political capital to help the bill to go through.
Monica Trauzzi: How much do you think he's feeling international pressure to get something through before Copenhagen?
Emilie Mazzacurati: There is international pressure, but more than that I think there is a genuine desire from his administration to give back the U.S. its role on the international stage and play a really constructive role in these negotiations. There is also the will to get China and India on board so that it will make it easier to pass a cap-and-trade bill domestically.
Monica Trauzzi: On the proposed endangerment finding, if Congress does not pass legislation this year, how would you expect EPA to start acting in order to regulate emissions?
Emilie Mazzacurati: I think the EPA would do something pretty different than what Congress would do and the EPA would probably make a mix of standards and some market-based mechanisms. And I would expect the EPA to start with the standards to put a little bit of pressure on Congress and to start with what they do best and then keep on moving with market-based mechanisms. But I believe Congress would rather do their own thing and make sure that it served the interests of their constituents best.
Monica Trauzzi: And Point Carbon just released an analysis of the Waxman-Markey draft. Who are the biggest winners and losers in that legislation?
Emilie Mazzacurati: Well, there's different ways to look at it. The power sector would be under pretty strict regulation, more renewables, more energy efficiency, and it's not so much a matter of winning or losing, but they would have to reduce their emissions a lot through standards and cap and trade. The industrial sectors, especially the ones that are exposed to international competition might come out with quite a bit of subsidies in the form of rebates to help them meet their compliance requirements and they would probably come out all right.
Monica Trauzzi: The House is really seen as a lab for creating some type of workable legislation that could also be passed on and worked on in the Senate. Is this draft too aggressive for lawmakers to agree on, particularly in the manufacturing states?
Emilie Mazzacurati: Well, I think you have to start with something aggressive so that at the end of the day you have something that still holds water and has a little bit of teeth. Manufacturing states and industrial sectors, in particular chemical sectors, cement, metals, pulp and paper, are very well taken care of in the bill. The bill includes a provision that was drafted by Representatives Inslee and Doyle that really addresses the concerns of those industries. And, of course, they're still asking for more, but at the end of the day, if the draft stays as it is they'll be fine, they're covered.
Monica Trauzzi: What do you see as the main sticking points? What do you see as the main issues that will come up as the draft has being discussed?
Emilie Mazzacurati: Well, the huge issue is obviously allocation. Two questions, how do you distribute the permits? Do you sell them or do you give them away for free? If you sell them who gets the money? Does the federal government keep it? Is it redistributed to states, to utilities? There's a lot of open questions and of course it's a really huge pie of money. We're talking $75 billion potentially. There's a lot of people that want to get to this money.
Monica Trauzzi: And is there any sense on how the House might go with the allocation issue?
Emilie Mazzacurati: Markey and Waxman have really kept the negotiations behind the scenes, so we don't quite know what's going on. We know they're negotiating on this topic right now and that's why the bill has not gone through markup yet, but they haven't put out anything.
Monica Trauzzi: And, as you said, the bill has not gone through markup yet and there is this Memorial Day deadline looming that Waxman has set. How feasible is it that the Democrats will actually make that deadline and is it a big deal in the grand scheme of things if they don't?
Emilie Mazzacurati: It's becoming really tough to make that deadline and it doesn't really matter. As long as the bill continues and is voted on, hopefully in June, then it's fine. I think setting a target was sending a signal that they wanted things to move quickly, but whether they make it or not for the Memorial Day recess doesn't really matter.
Monica Trauzzi: OK, we'll end it right there. Thank you for coming on the show.
Emilie Mazzacurati: Thank you so much.
Monica Trauzzi: And thanks for watching. We will see you back here tomorrow.
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