U.S. Senators Putting Final Preparations On Cap And Trade Climate Change Law

Many people both inside and outside America have long wondered when the United States will finally pass a comprehensive federal climate change law, one that includes cap and trade.  As one of the world's largest carbon emitting economies, the ultimate direction that America takes will have a significant impact on the carbon markets, green business and the environment as a whole.

Until recently, the climate subject has been relegated to secondary importance compared to the health care subject that has ensnared Congress and monopolized public thoughts and opinions.  Now that the Obama Administration has made progress in that area with the support of Congressional Democrats, climate change has an opportunity to regain traction in American politcs.

The road is not an easy one.  Major energy utilities and fossil fuel companies can be expected to lobby very hard to avoid any future climate change penalities and costs until the final possible moment.  Also, while climate change is not nearly half as polarizing as the recent health care debate in Congress, the Democrats have spent a lot of their political bullets to get the health care legislation passed and there are many fences that will need to be mended -- both inside the party and with Republicans also -- in order to pass another major piece of legislation anytime soon.

It is encouraging that climate change has always had bi-partisan support from Congressional thought leaders such as John McCain, Joe Lieberman and John Kerry (among others).  The climate change problem affects everyone equally, regardless of your politics -- nobody wants their grandkids to face severe global problems as a result of their inaction and squabbling.  Certainly the European Union and Japanese economies are helping matters by being examples of environmental consciousness and stewardship through the Kyoto Protocol.

Here is a recent update from Bloomberg and BusinessWeek on the American effort to pass some form of climate change and cap and trade legislation this year.  It seems from the article that there are some controversial offshore drilling elements to the draft bill must be resolved in the near term. Hopefully the Kerry-Lieberman efforts will equate into some tangible results in the not too distant future... in the meantime, I will continue to monitor this subject and provide updates as they occur.  One can find the original article at http://www.businessweek.com/news/2010-03-26/senators-outline-u-s-utility-carbon-market-for-climate-bill.html


Senators Outline U.S. Utility Carbon Market for Climate Bill

March 26, 2010, 12:02 AM EDT


By Simon Lomax and Kim Chipman


March 26 (Bloomberg) -- Senators Lindsey Graham and Joseph Lieberman outlined U.S. climate-change legislation that would have power companies buy and sell pollution rights in a carbon market and force oil companies to pay fixed fees for emissions.

While the bill is “a work in progress” and won’t be ready until next month, emissions from utilities will be regulated through a restricted trading system for pollution rights, Graham, a South Carolina Republican, told reporters after meeting with industry representatives in Washington yesterday.

“Nobody’s signed on, but I think we’ve got them engaged,” Lieberman, a Connecticut independent, said, referring to the meeting with industry groups that included the U.S. Chamber of Commerce and the Edison Electric Institute.

The outline marks the most Senators Graham, Lieberman and John Kerry, a Massachusetts Democrat, have said about their months-long attempt to revamp stalled legislation that would curb carbon dioxide and the other greenhouse-gas emissions linked to climate change. The next step is to convince other lawmakers, including Senator Ben Cardin of Maryland who yesterday questioned whether there is a “critical mass” of support.

While negotiations with other senators are getting better, the trio is “not there yet,” Graham said.

The senators yesterday only described their ideas for the legislation and have yet to submit a written proposal.

Coastal Senators

Ten Senate Democrats including Cardin, Bill Nelson of Florida and Ron Wyden of Oregon said yesterday they won’t back climate-change legislation if it includes provisions that open U.S. coasts and oceans to “unfettered” oil-and-gas drilling.

“The votes of these 10 coastal senators are essential,” said Dan Weiss, director of climate strategy at the Washington- based Center for American Progress, a public policy group that advises Democrats. Weiss said there is “potential” for a compromise on the issue.

The coastal senators sent a letter to Graham, Lieberman and Kerry on March 23 and warned them of the potential for oil spills that would put coastal state economies and ecosystems in jeopardy. Graham and Lieberman didn’t say yesterday if drilling provisions are included in their proposal.

Legislation to establish a cap-and-trade program, in which power plants, oil refineries and factories would buy and sell emission rights, narrowly passed the House of Representatives in June. A similar plan, which was approved by the Senate Environment and Public Works Committee in November over a Republican boycott, failed to advance any further in Congress.

Under the new legislation, oil companies would pay a fixed fee for their emissions that is linked to the price that power companies pay for carbon dioxide allowances, Graham said. Some of the trading restrictions would include a maximum and minimum price for carbon dioxide allowances, or a “hard price collar,” Graham said.

While it’s not certain how the fee will be calculated, “it’s all related to the carbon market,” Lieberman said.

--Editors: Romaine Bostick, Steve Geimann.

US EPA Announces New National Threshholds for CO2 Emissions

The United States Environmental Protection Agency has recently announced its future plans to require new carbon emissions permits for pollution point sources (such as electric utilities) emitting over 75,000 tons of carbon annually.  This is a major development that should impact many companies and businesses in America.  The EPA seems to be acting in a manner intended to push the Senate and House to pass a federal climate change control regime (such as cap-and-trade).  These EPA measures are intended to be a baseline or fall-back regulatory position in lieu of similar or stricter Congressional legislation.

I believe that if the EPA continues to advance the ball on carbon emissions regulation, it will only be a matter of 12 months or so before the Congress responds with a more robust and business friendly version.  It is expected that the Congressional version will include some version of carbon trading in order to mitigate the costs of regulation and pump new money into the economy. 

In the meantime, it is exciting that the EPA is taking the steps that it is currently taking -- please see the short newsflash below from Dow Jones.  I will stay on top of all related developments as they occur.  Cheers.


EPA: CO2 Threshold At Least 75,000 Tons/Year Until 2013

By Ian Talley, Of DOW JONES NEWSWIRES

WASHINGTON -(Dow Jones)- The U.S. Environmental Protection Agency will set an emissions threshold of at least more than 75,000 tons a year--and possibly more than 100,000 tons a year--for power plants and other industrial projects for the initial stage of stationary-source greenhouse-gas regulations between 2011 to 2012, the head of the agency said Wednesday.

Importantly, EPA Administrator Lisa Jackson indicated the agency may still require projects such as power plants and refineries that applied in prior years--say in 2009 or 2010--to apply for new greenhouse-gas permits. Industry may view her comments as imposing de facto greenhouse-gas regulations on projects now under development, potentially stunting growth.

The new figure--multiples of what the agency proposed late last year-- gives the first indication of the new standards the EPA is planning to set under new regulations due out as soon as late this month.

The threshold level and time line is critical to thousands--if not tens of thousands--of businesses such as power plants, refineries, cement kilns, steel mills and chemical plants. The higher the level in the initial stages, the fewer facilities will be required to comply.

The EPA said it would raise the threshold after state regulators warned that the agency's proposed rules would cover substantially more facilities than it realized, potentially compromising not only businesses but also economic growth.

Asked by Senator Dianne Feinstein (D., Calif.) in an appropriations hearing if the first phase of the greenhouse-gas regulations would be more than 75,000 to 100,000 tons a year, EPA Administrator Lisa Jackson said, "That's absolutely true."

"It will probably be at least two years before we would look at something like, say, a 50,000 threshold," Jackson told a Senate appropriations subcommittee reviewing the agency's budget.

Later asked by reporters to clarify, Jackson said, "If you're smaller than 75, 000 tons for the next two years, you would not need a permit," and said her comments applied to the years 2011-2012.

Fully two thirds of the stationary-source emissions are from sources emitting more than 100,000 tons per year, she said.

But some industry experts warn the new thresholds and delayed start date may prove futile if the EPA requires facilities already in the permit process now to apply for new greenhouse-gas permits later.

Asked if the EPA would pursue such requirements, Jackson said "the permit requirements apply at the time that the permit is issued."

While Jackson said the EPA wouldn't intentionally hold up permits, she said, " the permitting process for major stationary sources ... can take years, so it isn't fair to say that at some point in there, there may not be changes in the regulatory environment."

Bill Wehrum, a former head of the EPA's air programs and now a partner at Hunton & Williams, said that EPA was urged in public comments against requiring companies already in the permit process to reapply. He said industry may view Jackson's comments as imposing de facto greenhouse-gas regulations on projects now under development and that if the EPA pursues that policy, it could stunt business growth.

"It doesn't make any sense," he said. "If EPA requires anybody who's applied for a permit but not obtained final approval to go back and get new greenhouse- gas permits, it will significantly delay any number of important projects already in the pipeline."

For example, a senior BP Plc (BP) official said last week that refinery modifications required to meet new fuel specifications could be put on hold or delayed in such a situation.

After a wave of state regulators warned the EPA that its initial threshold of 25,000 tons a year was too low and would cover far more facilities than the agency realized or regulators are able to process, the EPA said last week it would raise the threshold "substantially."

Jackson said she was making the decision to avoid absurd results and to aid the administrative process. State regulators say they lack the resources-- both money and staff--to handle the expected influx of new permit applications.

Industry groups, such as the U.S. Chamber of Commerce and the National Association of Manufacturers, warn that the regulations will lead to a cascade of lawsuits and damage the economy. The EPA said it will regulate with a sensitivity to the economy.

The EPA said it intends to pursue regulation of smaller sources after 2016. Some state regulators say that would cover up to six million facilities, including large bakeries, churches, hospitals and small mom-and-pop businesses.

Some legislators say that even with the higher thresholds and expected delay of implementation EPA announced, they're worried the agency's actions won't prevent damage to industry.

"I am quite concerned that EPA's action in this area will harm our economy at a time that we can least afford it," said Sen. Lisa Murkowski (D., Alaska). The Senator is leading a bipartisan effort to stop the EPA from regulating greenhouse gases.

-By Ian Talley, Dow Jones Newswires