Bridges Weekly Trade News Digest • Volume 14 • Number 28 • 28th July 2010
US Cap-and-Trade Plans Put on Ice
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Efforts by the Democratic Party to pass limits on greenhouse-gas emissions in the US Senate have come to a screeching halt.
On 22 July, Senate Majority Leader Harry Reid announced that the Democratic Party’s leadership would not seek to include a cap-and-trade scheme in the energy legislation scheduled to come before the Senate before that chamber’s August recess. Instead, the Democratic leadership will focus their efforts on a much narrower bill.
Last week’s announcement continues a trend of deepening uncertainty among Democrats on climate change legislation, particularly in the Senate. Since last May, when Senators John Kerry, a Democrat, and Joe Lieberman, an Independent, unveiled their climate change bill without the support of the bill’s Republican co-author, Lindsey Graham, the prospects for legally binding limits to greenhouse gases have steadily deteriorated.
The new version of the bill, which was released earlier this week, bears little resemblance to the original. (A summary of the bill is available here.) The focus has now shifted to the timeliest environmental issue in the US: the catastrophic BP oil spill in the Gulf of Mexico. In addition to proposed measures to improve safety on offshore oil and gas drilling projects, the bill could raise the US$75 million liability cap for companies involved in oil spills. Other measures that are addressed in the bill relate to land conservation, energy efficiency, and incentives for natural gas-fuelled vehicles.
Waning utilities support big blow to bill
In recent weeks, Senator Kerry has appeared to be gradually warming to the idea of compromising on the scope of greenhouse gas limitations. Though the original bill included greenhouse gas limits on the transportation, manufacturing, and utilities sectors, by the start of last week Kerry seemed prepared to negotiate away limits on the first two in favour of limits only on utilities.
After several meetings with prominent company representatives of the utilities industry, Kerry announced no breakthroughs. Utility companies had initially thrown their support behind the Kerry-Lieberman bill, but after learning that their greenhouse gas burden would not be shared by the transportation and manufacturing industries, the utilities balked. Instead, as a compromise, they seemed to ask for a weakening of the Clean Air Act, which Democrats were unwilling to concede. Consequently, no agreement could be reached.
However, the failure to include greenhouse gas emissions in a climate bill cannot be blamed on the utilities negotiations alone. Senate Republicans, with their ability to filibuster Democratic proposals, could have stopped most Democratic legislation from passing.
Democrats needed a unified caucus plus at least one Republican vote to put greenhouse gas limitations through the Senate. Yet many Democratic senators, such as Jay Rockefeller from West Virginia, refrained from endorsing greenhouse gas limitations, saying that such limitations could hurt domestic industries in their home states. Further, Republican senators have branded the most widely discussed emissions limitation scheme, cap-and-trade, as a jobs-killing “cap-and-tax”; the negative branding has paid off. As recently as 18 July, Majority Leader Reid said that the words cap-and-trade were “not in [his] vocabulary,” a testament to the toxicity the phrase has acquired.
Future of US cap-and-trade looking dim
It remains to be seen whether cap-and-trade, or some other scheme for a limit on greenhouse gases, might be able to make comeback. Senator Kerry still vows to include such a limit in a bill, and it is possible that such a measure could come up for a vote in the form of an amendment to the Senate bill. Alternatively, even if the senators pass a bill without greenhouse gas limitations, they will still have to negotiate a compromise version of the legislation with the House of Representatives, which included a cap-and-trade system in its climate change bill last year.
As a consequence, the House pressure could force the Senate to re-include an emissions limitation. In reality, however, such an outcome is unlikely. Further, with the August recess coming fast, senators will have little time to devote to climate issues. Mid-term elections are held on 2 November, and the season between the August recess and the November elections is fraught with campaigning, to the detriment of legislation stalled in Congress.
After the elections, Democrats might still use the “lame duck” period between the election and seating of new senators in January to pass the legislation as well. After the new Congress is seated in January, it will have another opportunity to take up the legislation
Much will rely on the actions of President Barack Obama. In the wake of the collapse of cap-and-trade from the Democrats’ legislative effort, some activists have blamed the president for a lack of leadership on the issue. Though he campaigned for emissions limitations in 2008, he has largely left the details of such measures to legislators.
ICTSD reporting.
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