U.S. carbon-market battle begins

By ROSALIE WESTENSKOW, UPI Energy Correspondent  |  April 1, 2009 at 6:29 PM
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The U.S. Congress kicked off a long-anticipated battle over climate-change legislation Tuesday, when two Democratic representatives released draft legislation that could dramatically cut emissions -- and raise energy prices, Republicans say.

The 684-page American Clean Energy and Security Act includes sweeping energy-policy changes, ranging from a mandate that 25 percent of U.S. electricity come from renewable sources by 2025 to a funding program for states that adopt energy-efficiency codes for new buildings.

The most controversial aspect of the bill is its proposal to place a price on carbon and other climate-changing gases by implementing a cap-and-trade system. The program would require any entity that emits more than 25,000 tons of greenhouse gases per year -- such as oil companies, electric utilities or large industrial plants -- to own a federal share, or allowance, for every ton they emit. The program would cover entities responsible for 85 percent of total U.S. emissions.

Each year the number of allowances available would decrease, forcing companies in the program to cut their emissions by 83 percent of 2005 levels by 2050.

"This legislation will create millions of clean-energy jobs, put America on the path to energy independence and cut global warming pollution," said House Energy and Commerce Committee Chairman Henry Waxman, D-Calif., who released the proposal Tuesday with Rep. Edward Markey, D-Mass., chairman of the Select Committee on Global Warming.

But Republicans say the bill will harm consumers.

Waxman and Markey "say this carbon-trading scheme will improve the economy, but I call it cap-and-tax for a reason," said Rep. James Sensenbrenner, R-Wis., ranking member of the global warming committee. "It takes money from the taxpayers and gives it to government to dole out to special interests."

Less than a year ago a similar bill reached the Senate floor, where it was blocked by a Republican filibuster after Majority Leader Harry Reid, D-Nev., tried to place a time limit on amending and debating the legislation.

Some Republicans, including Sensenbrenner, said they like this year's version even less than last year's.

"Studies conducted last year on a similar bill showed … the price of gasoline in Wisconsin could rise by 141 percent, while the electric bill might surge by as much as 177 percent, according to a study by the National Association of Manufacturers," Sensenbrenner said. "What's worse, last year's bill wasn't nearly as taxing as the newly released ACES proposal, so expect those numbers to grow even higher."

Free-market economists said these higher energy prices would hurt the poorest Americans the most, but the bill's proponents disagreed, saying the program would create new, green jobs and assist poor regions and families.

"We will create jobs by the millions, save money by the billions and unleash energy investment by the trillions," Markey said. "Chairman Waxman and I will work with our colleagues to ensure that we are protecting American consumers and that our clean-energy future helps all parts of the country."

The legislation provides ways to help consumers use less energy in an attempt to lower their utility bills. For instance, it would give low-income families living in pre-1976 manufactured homes rebates that could be used toward buying a new, Energy Star-rated manufactured home, which would use less energy. However, the draft does not include specific consumer-assistance mechanisms -- a section its sponsors say will be added later.

Energy prices aside, environmentalists are heralding the bill for its tough action on carbon emissions. Not only will it cut emissions at home, many environmentalists said, but if it's passed, the bill will give President Barack Obama the clout he needs to lead international talks this December. During that month, world leaders will meet in Copenhagen, Denmark, to draft a global climate-change treaty to replace the current agreement, the Kyoto Protocol, which expires in 2012.

"Successfully engaging developing countries in the international negotiations is within our reach," said Ned Helme, president of the Center for Clean Air Policy, a non-profit policy group. "Encouraging developing countries to take stronger unilateral actions to reduce their emissions greatly depends on strong U.S. reduction targets."

This bill does that in particular by addressing deforestation, said Richard Moss, vice president for climate change at the World Wildlife Fund, an environmental organization.

"The draft bill recognizes the need to reduce emissions globally by promoting clean-technology cooperation and providing incentives for reducing tropical deforestation … (which) accounts for roughly 20 percent of global greenhouse-gas emissions each year," Moss said.

So far, the international community has reacted positively to the bill.

"We very much welcome the draft legislation released today by Congressmen Waxman and Markey," said Antonio Palocci and Serys Slhessarenko, congressional leaders from Brazil attending this week's G20 summit in London, a gathering of the world's major economies. "Ambitious leadership by the (United States), as outlined in this bill, is essential if we are to secure an ambitious and effective post-2012 framework to tackle climate change."

If the bill passes, though, free-market economists say the rest of the world will be singing a different tune -- all the way to court. The legislation includes provisions that try to equalize the price of goods produced outside the United States, free from carbon-price mechanisms, with those manufactured domestically.

These measures are illegal under World Trade Organization rules and will likely incite other countries to challenge the law, said Iain Murray, a senior fellow at the Competitive Enterprise Institute, a think thank that promotes free-market policies.

"This is nothing more than a tariff aimed at eliminating the competitive advantage of other nations," he said. "These provisions represent the first shot in what is likely to prove a disastrous carbon trade war."



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