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The U.S. Senate Environment and Public Works Commit-tee November 8 continued its deliberations on climate change legislation, with some Democrats seeking to toughen the measure, S 2191, to guard against fraud in a carbon trading. Republicans urged the panel to postpone approval of the bill until economic impact studies can be completed. “We would be embarking on something that would be a huge economic disaster for our country,” said Senator James Inhofe (R-OK), the ranking minority member on the panel. “The impacts will be terrible, climbing steadily until costs reach up to a $1 trillion per year and 2 million jobs lost within the 8 years.” Senator George Voinovich (R-OH) joined Inhofe in expressing concern over the cost of the measure. “Slow it down,” he said, asking for the committee to delay action, which is expected in time for the full Senate to vote on the bill before adjourning for the year. Senator Joe Lieberman (I-CT) countered that the legislation would result in only slow and minimal costs to the economy, for instance, raising the nationwide average price of electricity by just 1.3 cents/kWh over the next 25 years. “In short, the costs are manageable,” said the independent lawmaker, who is a cosponsor of S 2191 with Senator John Warner (R-VA). He said that even if the bill is passed the U.S. gross domestic product still would double by 2030. While Congress set out this spring to pass global warming legislation by July 4, no bill passed muster. Now, the Lieberman/Warner bill is the only one in play as the year wears on. While conservative in its approach to cap-and-trade and reducing global warming, apparently seven Republican senators are in total opposition. Another seven Democratic senators want stronger legislation than what this bill provides. S 2191 seeks to cut greenhouse gas emissions from their 2005 level by 19 percent by 2020 and 63 percent by 2050. To do so, it would establish a carbon cap-and-trade program in which major sources would be placed under an emissions limit that would decline over time. At first, companies would receive mostly free emissions allowances they could trade in an open market. Those that stayed under their cap could sell their excess allowances to those that chose to emit beyond the cap. Over time, the measure would phase in an annual auction for most of the allowances. The proceeds of the auction would be used to protect low and middle income residents from any energy price spikes under the bill. They also would fund research and development of greenhouse emissions reduction technologies. S 2191 would allow companies to satisfy emissions reduction requirements through offset projects carried out within the U.S., for instance, by cutting greenhouse gas emissions from abandoned coal mines or hog farms. Farms could be treated as carbon sinks under the measure--that is, they would be considered an offset to greenhouse gas emissions. In testimony to the panel, Pacific Gas & Electric president and chair Peter Darbee lauded the bill as a “good starting point,” adding that the “country has an historic opportunity to change the way we produce and use energy in ways that will lower the threat of climate change.” In response to questions from Democrats about how to guard against fraud in the carbon market, Darbee suggested that the bill model enforcement provisions based on the Securities and Exchange Commission, which oversees the stock market. The PG&E executive also suggested that the bill incorporate a “collar” that would create both a price floor and price cap for trading of emissions allowances. The collar would rise gradually as the emissions deadlines approach under the measure. Darbee said that the bill would establish a Carbon Market Efficiency Board. The board would act much the like the Federal Reserve Board in seeking to control both the supply and price of the nation’s currency. Through it, Darbee said a “collar” could guide market operations. The board could buy credits when the market threatens to dip below the collar and sell credits when it overheats. “This type of price collar approach can help manage overall volatility and macro-economic costs, while at the same time provide a clear path for technology investors,” said Darbee. Combined with the price collar, he said a cap-and-trade program is one of the best ways to provide for sustained emissions reductions and spur technological innovation. Not all agreed. “The cap-and-trade system may not be the most appropriate way” to cut emissions, said Margo Thorning, American Council for Capital Formation senior vice president. She said that most economists think that imposing a carbon tax is the best way to achieve greenhouse gas emissions reductions. Thorning pointed out that the Lieberman bill would effectively require Americans to cut their per capita carbon emissions by 50 percent by 2030. She questioned if technology exists to accomplish that level of reduction. The panel is set to continue hearings on the bill next week. Meanwhile the $42 billion farm bill is being debated over its energy impact in the Senate. Congress is considering whether to give the oversight over natural gas commodity trading in the bill to either the Federal Energy Regulatory Commission or the Commodities Futures Trading Commission. Editors’ note: For more details on the Senate climate change legislative hearing, check our sister publication E=MC2 – Energy Meets Climate Challenge. You can find it at www.energymeetsclimate.com.

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