Emissions bill faces tough Senate fight

By Edward Luce in Washington
Published: May 22 2009 18:39

The US Congress has taken its first big step towards passing a cap-and-trade bill to tackle global warning but it faces a tough fight to get the legislation passed by the Senate.
The vote, which took place on Thursday night in the key House committee on energy and commerce, would reduce US carbon emissions to 17 per cent below 2005 levels by 2020 and by 83 per cent by 2050.

Barack Obama, president, who is pushing Congress for a bill to sign before the global climate talks in Copenhagen in December, described the committee vote as “historic” even though it has yet to be passed by either chamber.
In his statement, Mr Obama reflected the often messy compromises that were necessary to bring along the so-called “brown Democrats” from the mid-west and south whose input drastically changed the bill from the original version put forward by the president.
Mr Obama campaigned on the promise to introduce a 100 per cent auction for all carbon permits. Under the House compromise, more than 80 per cent of the permits would be given away to electricity utilities, energy-intensive manufacturers, car companies and the oil refining sector.
“The bill is historic for what it achieves, providing clean energy incentives that encourage innovation while recognising the concerns of sensitive industries and regions in this country,” said Mr Obama.
Some environmental groups also applauded the measure which they said reflected the best possible deal in the current political climate. In recent polls, tackling climate change has dropped sharply down the agenda of public concerns for ordinary Americans.
“You should not let the perfect be the enemy of the good,” said one environmental advocate. “If you look at the big picture, this would put a cap on carbon emissions, which is the main purpose.”
However, the bill, which is likely to be put to a full House vote before the summer recess in late July, faces continuing criticisms from both left and right. On the left, some environmentalists say that the decision to give away, rather than auction off, the bulk of the carbon trading permits would blunt the price signals needed to get consumers to change their behaviour.
Under one estimate, the permits given to local electricity distribution companies would result in a $750bn (€534bn, £471bn) subsidy to consumers between now and 2030 when the system would have moved to a full auction. Proponents of the bill say that step is essential to win public support by avoiding sharp rises in their electricity bills at a time when the economy is contracting.
The bill is also designed to avoid the windfall that European energy companies received by ensuring that the value of the free permits is passed on to the consumer, rather than producers. On the right, Republicans say they will continue to oppose the bill. Only one Republican voted for it, which passed the committee by a majority of 36 to 22.
A number of influential Democrats expressed doubts about the bill’s merits. “This stuff is going no place in the Senate,” said Collin Peterson, the Democratic chairman of the House agriculture committee.
“They can do whatever they want with this, but I can tell you, there is no way this is going to pass.”
Charlie Rangel, chairman of the House ways and means committee, which also has jurisdiction over the bill, hinted he might not co-operate unless healthcare reform had first been enacted.
In addition, Mr Rangel, along with many economists, has argued that a simple carbon tax would be more efficient.
“There are those who want a simple tax who have this platonic ideal in mind rather than a focus on the political realities of what it takes to get something passed,” said Steve Cochran, from the Environmental Defense Fund, an advocacy group.
Copyright The Financial Times Limited 2009