US climate bill: An uncertain Senate path

Kyoto & climate politics
Thursday, 6 August 2009
US climate policy has come along way in 2009 under an Obama White House and a Democrat-controlled Congress. But there is still a way to go before proactive, nationwide climate laws are in place in America and the US offers a substantive positive lead on efforts to secure a new international climate accord required in a few short months.A US cap-and-trade bill has passed the House of Representatives and is now being considered in the Senate. As such, its biggest obstacle still lies in front of it along with some big question marks with global implications. Can the Democrats muster enough numbers in the Senate to pass the bill? If so, what inevitable changes will be required to gain the majority support needed? And how long will it take to achieve, given the bill’s importance to global climate talks scheduled to settle a new post-Kyoto treaty by December?To pass a bill in the Senate effectively requires 60 per cent support; a ‘yea’ vote from 60 out of the 100 Senators is the hurdle required to avoid filibuster tactics from opponents to indefinitely delay passage and effectively kill the bill. US legal and policy firm Van Ness Feldman says 50 to 54 votes for cap-and-trade are fairly sure leaving 6 to 10 further to be won from wavering Democrats or moderate Republicans. But it is hard to see where the votes are going to come from, if they come at all, at this as yet early stage. It’s impossible to see how the vote is going to fall given the complexities of the wide-ranging bill that will be the subject of heavy debate among Senators and the various interest groups knocking on their doors.The doubts are reflected in the US carbon market – represented in the voluntary and the regional state-based RGGI markets – where early optimism over the House bill’s progress saw prices and volumes on the rise only to wilt by July when the reality of the Senate challenge hit home. That challenge is illustrated by the number of contentious aspects of the House bill which include:
free allocation vs auctioning of emissions permits – the House bill provides 85 per cent free while Obama’s original position was 100 per cent auctioned
how the free permit component gets distributed among states, industry and consumers – high emitting sectors are battling to maximise their share; the House bill has wide discrepancies in allocations between states for bankrolling low-carbon investment
regulatory control of the carbon trading - in post-financial-crisis America the idea of speculators profiting from emissions trade is unpalatable; Senator John Kerry is leading a push to ban complex derivatives trading in carbon
carbon tariff trade penalties to be levied on other countries – a minimum requirement in the manufacturing states, yet already attracting stiff opposition over the risks such action poses of a new trade war and undermining a global treaty
the role of domestic and foreign carbon offsets – the House bill would allows a large proportion of US energy and industry emissions to be offset by farm and forestry activity at home and abroad
the impact on the farm sector – the powerful farm lobby has won big concessions in the House bill with opportunities for lucrative carbon offset incomeThe Democrats’ hoped-for timetable would see an prototype Senate bill drafted by the Environment and Public Works Committee in early September. It would then have to be considered, and likely amended, by five others; the Agriculture, Commerce, Energy, Finance and Foreign Relations committees. Senate majority leader Harry Reid has called for that process to be completed by the end of September to enable a vote in October. This looks optimistic at the moment with the Senate currently consumed with an equally contentious health care bill that takes precedence. Most members are yet to come to terms with the House’s 1400-page American Clean Energy and Security Act and are some way from taking a firm position. Even if it were to pass in October or November, inevitable differences between it and House version mean that a new round of horse-trading would have to ensue to reconcile the two to an agreed form in both houses. It could be early 2010 before a final Congress bill arrives on the President’s desk for cap and trade laws to be signed into law, political observers say.