Kyle Danish, Shelley Fidler, Kevin Gallagher,
Megan Ceronsky, Tomás Carbonell, Harold Bulger, Van
Smith
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Commentary
The Senate rejected the Murkowski Resolution by a vote of 53 to 47. Six Democrats and all 41 Republicans had supported the Resolution . . . The rejection of the Murkowski Resolution has not clarified the path forward on energy/climate legislation. Majority Leader Reid's meeting with six committee chairmen did not yield a final plan. Senators Kerry and Lieberman agreed to work with Senators Baucus and Bingaman on possible further changes to their bill (utility-sector-only cap?). The Majority Leader has scheduled a meeting of the entire Senate Democratic caucus this week. The goal is to arrive at a decision on how to proceed after the July 4 recess . . . In the meantime, other designs continue to get attention. Senator Lugar's no-carbon-price bill has attracted interest from Senators Graham and Murkowski. Senator Graham said the Lugar bill has the best chance of success of any designs . . . Senators also want a closer look at the Cantwell-Collins bill. Senators Bingaman and Murkowski have asked the EPA to do an analysis of the bill . . . EPA may have more time on their hands after the release of their analysis of the Kerry-Lieberman bill, which is scheduled for Tuesday, June 15.
Executive Branch
- White House Applauds Vote on Murkowski Resolution After Threatening Veto. The White House remained engaged with the Senate vote on a resolution (S.J. Res. 26) introduced by Sen. Lisa Murkowski (R-AK), which would have disapproved the Environmental Protection Agency's (EPA) December 2009 "endangerment finding" (see discussion below). On June 8, the White House issued a rare, formal "Statement of Administration Policy" (SAP) expressing "strong" opposition to the Murkowski resolution, saying the resolution would "increase the Nation's dependence on oil and other fossil fuels and block efforts to cut pollution that threatens our health and well-being." The SAP contained the information that the President's advisors would recommend vetoing the resolution were it to pass both houses of Congress. Following Thursday's vote, the White House issued a press statement applauding the defeat of the Murkowski resolution. President Barack Obama said that "The Senate chose to move America forward, towards that clean energy economy – not backward to the same failed policies that have left our nation increasingly dependent on foreign oil." The Statement of Administration Policy can be viewed at http://www.whitehouse.gov/omb/assets/sap_111/sapsjr26s_20100608.pdf .
- President Presses Congressional Leaders for Action on Comprehensive Energy Legislation. On the same day that the Senate voted on the Murkowski resolution, the President met with Senate Majority Leader Harry Reid (D-NV), Speaker of the House Nancy Pelosi (D-CA), and Senate Minority Leader Mitch McConnell (R-KY) to discuss Congressional plans for taking up climate change and clean energy legislation this summer. After the meeting, the President made a public statement urging lawmakers "to move on an energy agenda that is forward-looking, that creates jobs, [and] that assures we are leaders in solar and wind and biodiesel."
- EPA Delays Release of Economic Analysis of Kerry-Lieberman Bill. EPA announced that it would defer the release of its long-awaited economic analysis of the Kerry-Lieberman bill until Monday, June 14. The original release date was to be June 11.
- Energy Secretary Responds to Lugar Energy Bill. Secretary of Energy Steven Chu responded to the introduction of the Practical Energy and Climate Plan Act of 2010 (discussed below) in a letter to Senator Richard Lugar (R-IN), the bill's sponsor. Chu said he appreciated the "ideas for reducing America's oil dependence" reflected in the bill, and complimented the bill's focus on energy efficiency. However, Chu also said he favors "comprehensive legislation that puts a price on carbon and makes clean energy the profitable kind of energy." The Lugar bill does not include policy mechanisms to explicitly price carbon. The letter is available at http://www.energy.gov/media/Chu-Lugar-Letter.pdf .
Congress
- Murkowski Resolution Defeated. On a procedural vote that determined whether the resolution would proceed to an up-or-down vote, the Senate rejected by a count of 53 to 47 Senator Lisa Murkowski's (R-AK) Resolution of Disapproval of EPA's finding that GHG emissions endanger public health and welfare. If passed by both chambers of Congress and signed by President Obama, the Resolution would have vacated EPA's endangerment finding and thereby removed EPA's legal authority to regulate GHG emissions under the Clean Air Act. All 41 Republicans voted in favor of the Resolution, as did Democrats Evan Bayh (IN), Mary Landrieu (LA), Blanche Lincoln (AR), Ben Nelson (NE), Mark Pryor (AR), and Jay Rockefeller (WV).
- Reid Meets with Chairmen. Senate Majority Leader Harry Reid (D-NV) met with key committee chairmen to discuss how to move forward on climate-energy legislation. The group discussed but did not reach agreement on whether to bring an energy-climate bill to the Senate floor for debate or to use an energy bill as the primary vehicle and offer the Kerry-Lieberman bill as a floor amendment. Sen. John Kerry (D-MA) told reporters that he was asked to work with Finance Committee Chairman Max Baucus (D-MT) and Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) "to try to see what we can help do to work through some of the issues people have." Commerce Committee Chairman Jay Rockefeller (D-WV) told reporters that "there was a very real worry about cap and trade and about the effect" of the bill, and questioned whether it made sense to bring a bill to the floor before 60 votes had been secured. The Senate's Democratic Caucus will meet this week to discuss possible paths forward.
- Graham Supports Lugar Bill. Sen. Lindsey Graham (R-SC), who until April was working with Senators John Kerry (D-MA) and Joseph Lieberman (I-CT) to draft a comprehensive climate-energy bill, announced that he would vote against the Kerry-Lieberman bill in its current form and believes the energy bill introduced by Sen. Richard Lugar (R-IN) has the best chance of any climate bill of passing the Senate this year. See http://www.vnf.com/news-policyupdates-469.html for a description of the Lugar bill (S. 3464), which does not—unlike the Kerry-Lieberman bill—put a price on carbon. Sen. Lisa Murkowski (R-AK) joined Sen. Graham in co-sponsoring the Lugar bill. Sen. Graham said that he would like to work with Sen. Lugar to "see if we can find common ground with other people like Senators Kerry and Lieberman who are interested in the same goals" such as ensuring clean air and water, creating jobs in low-carbon industries, and breaking U.S. dependence on foreign oil. Sen. Graham also told reporters that, next year, he will advocate for a bill that establishes a utility-only emissions cap.
- Bingaman, Murkowski Ask for EPA Analysis of Cantwell-Collins. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) and Ranking Member Lisa Murkowski (R-AK), joined by Senators Maria Cantwell (D-WA), Susan Collins (R-ME), and George Voinovich (R-OH) have asked EPA to do an economic analysis of the Cantwell-Collins cap-and-dividend climate bill. A description of the bill can be found at http://www.vnf.com/news-policyupdates-420.html . The letter also asks EPA to model potential changes to the bill, including modifying the dividend allocations to minimize regional impact disparities, adjusting the price collar, incorporating emission reductions projects in uncapped sectors of the economy ("offsets"), and incorporating a clean energy standard.
Judicial
- States, Automobile Manufacturers, and Environmentalists Move to Intervene in Defense of EPA's Vehicle GHG Emission Standards. Separate motions to intervene on behalf of EPA were filed by thirteen states, the Association of International Automobile Manufacturers, the Alliance of Automobile Manufacturers, and three major environmental organizations in a lawsuit challenging EPA's recently-finalized GHG emission standards for light duty vehicles in model years 2012 through 2016. The states that moved to intervene were led by California and included: Delaware, Illinois, Iowa, Maine, Maryland, Massachusetts, New Mexico, New York, Oregon, Rhode Island, Vermont, and Washington. The Pennsylvania Department of Environmental Protection and the City of New York also joined the states' motion. A separate motion was filed by the Environmental Defense Fund, the Natural Resources Defense Council, and the Sierra Club. The underlying suit challenging EPA's vehicle GHG standards was filed on May 7 by various industry groups and mining companies.
- Mirant Sues to Overturn Montgomery County Carbon Tax. Launching a case that could have implications for efforts to impose state and local carbon taxes, Mirant Mid-Atlantic LLC filed a complaint against Montgomery County, MD, in the United States District Court for the District of Maryland to overturn the County's recently-enacted carbon tax policy. The tax requires a payment to the county of $5 per ton of CO2 emitted by any facility emitting at least 1,000,000 tons of CO2 per year. A coal-fired power plant owned by Mirant is the only facility in the county that exceeds this emission threshold. The complaint levels several constitutional claims, arguing that the tax is a "bill of attainder" forbidden under Article I, Section 10 of the U.S. Constitution; that the tax violates the Equal Protection Clause of the Fourteenth Amendment; and that the tax constitutes an "excessive fine" prohibited by the Eighth Amendment.
States and Cities
- New Mexico Supreme Court Authorizes State Environmental Agency's Review of GHG Cap. The New Mexico Supreme Court's ruling in favor of the state Environmental Approval Board ("EAB") will allow the EAB to continue considering a statewide GHG emission cap. A lower court issued a preliminary injunction on the matter in April, based on the argument that the EAB did not have authority to regulate greenhouse gas emissions. The ruling allows public hearings on the proposed regulations to resume. The proposed cap would affect electricity, oil, and gas providers emitting more than 25,000 metric tons of GHG a year.
Industry and NGOs
- UCS Critiques Lugar Bill as Inadequate. The Union of Concerned Scientists (UCS) issued a statement objecting that a climate proposal by Sen. Lugar (R-IN) does not sufficiently reduce greenhouse gas emissions or spur "clean energy transformation." UCS criticized the bill's target of a 9 percent decrease in 2005 emissions levels by 2017 as insufficient when compared with the Kerry-Lieberman goal of a 17 percent reduction from 2005 levels by 2020, and found the bill does not add much to current law to reduce transportation emissions. The organization also argued that the bill's "diverse energy standard," which would require electric utilities to obtain an increasing percentage of their sales from certain qualifying energy sources, would not adequately encourage renewable energy. UCS stated that the diverse energy standard "would give credit to new, non-renewable sources of energy such as retiring coal plants, carbon capture and sequestration projects, and capacity additions to nuclear power plants," and would allow utilities to meet the standard by paying a fee rather than purchasing renewable energy. The UCS statement is available at http://www.ucsusa.org/news/media_alerts/lugar-weak-energy-plan-0405.html .
- IETA Opposes Possible "Holding Limits" in WCI Cap-and-Trade Program. The International Emissions Trading Association (IETA), an organization of 170 companies and institutions that actively participate in GHG markets, submitted comments to the Western Climate Initiative (WCI) opposing a proposal to impose firm limits on the quantity of allowances or offset credits that a covered entity could hold. IETA claimed that the restrictions would increase compliance costs; interfere with the proper establishment of prices for allowances and offset credits; and be difficult to enforce. As an alternative, IETA suggested an "accountability limits" policy under which entities that hold allowances or offset credits in excessive quantities would be subject to increased regulatory scrutiny and oversight. IETA's comments also noted that clearinghouses already establish position limits that fluctuate according to market conditions, obviating the need for additional state or provincial level holding limits. The WCI is an effort to establish a cap-and-trade program for GHG emissions among four Canadian provinces and seven Western states. IETA's comments are available at http://www.ieta.org/ieta/www/pages/getfile.php?docID=3479 .
- NGOs Oppose World Bank Oversight of UN Adaptation Fund. Over 300 nongovernmental organizations (NGOs) have signed a letter requesting that President Obama withdraw his Administration's support for a proposal to have the World Bank administer a United Nations climate change adaptation fund established at last December's climate change summit in Copenhagen. The fund is scheduled to start disbursing funds next year. Citing the Bank's history of imposing policy conditions on loan recipients, developing country underrepresentation in Bank governance, and the Bank's role in fossil fuel lending, the letter called for the U.S. negotiation team to state publicly that the World Bank and regional development banks should not play a role in global climate finance. Instead, the letter called for the United States to support creating a multilateral climate fund under the United Nations Framework Convention on Climate Change. The letter is available at http://www.foe.org/sites/default/files/world-bank-no-role-in-climate-funds.pdf .
Studies and Reports
- Study Finds Rainfall Could Offset Glacier Melt Impact in Asia. A study published in Science projected that diminishing snow melt will impact up to 60 million people, significantly fewer than the hundreds of millions the Intergovernmental Panel on Climate Change (IPCC) projected would be impacted in a 2007 report. The Science study suggests that decreasing meltwater from glaciers will be offset by increased rainfall in certain river basins. According to the study, the Indus and Brahmaputra basins are highly dependent upon snowmelt and would be severely adversely affected, while the Ganges and Yangtze would only be modestly impacted. The study estimated the Yellow River would actually be able to support a larger population in the future as a result of climate change.
- Study Shows Cap-and-Trade Progressively Impacts Income. A report by MIT's Joint Program on the Science and Policy of Global Change assessed the distributional impact of various domestic cap-and-trade legislative proposals on income. Waxman-Markey, Kerry-Lieberman, and Cantwell-Collins were all found to progressively impact the lower half of the income distribution and proportionately impact the upper half. Cantwell-Collins was found to be the most distributionally neutral and the least costly overall. Redistribution in Waxman-Markey and Kerry-Lieberman was found to result in net economic benefits for poorer households and the South Central states. Carbon pricing in general was found to be proportionately to modestly progressive because government transfers, which constitute a larger portion of income for the lower half of the income distribution, are unaffected by carbon pricing, unlike wages and income. Using auction revenues to offset deficit impacts of the proposals improved efficiency by avoiding the need to increas labor and capital taxes. The report is available at: http://papers.nber.org/papers/w16053 (subscription required).
- Fossil Fuel Subsidies Rose 63% in 2008. Data released by the International Energy Agency in advance of the June 26-27 G-20 summit in Toronto documented $557 billion in global fossil fuel subsidies in 2008, including $312 billion for oil consumption, $204 billion for natural gas, and $40 billion for coal. Despite a September 2009 pledge by G-20 leaders to phase out fossil fuel subsidies, factors including rising world energy prices, domestic pricing policy changes, and demand shifts caused subsidies to increase. The IEA concluded that a complete phase out of fossil fuel subsidies would cut energy-related carbon dioxide emissions by 6.9 percent, or 2.4 gigatons, by 2020, and reduce energy demand by 5.8 percent. Iran distributed the most subsidies, followed by Russia, Saudi Arabia, India, and China. The data are available at: http://www.worldenergyoutlook.org/subsidies/index.asp .
International
- UN Negotiating Session Concludes In Bonn, Germany. Two weeks of international climate change negotiations in Bonn, Germany concluded with little progress on the development of a final treaty text. Delegates from 182 nations attended the UN-sponsored May 30-June 11 meetings, titled the "Meetings of the Convention Bodies under the United Nations Framework Convention on Climate Change." The final day of negotiations saw the release of a new draft treaty text that will serve as the basis for on-going negotiations. Developing nations, including Brazil, China and India, criticized the draft for its inclusion of new commitments from developing nations to reach peak GHG emissions by 2020 and its failure to incorporate continued commitments under the Kyoto Protocol.
Harold Bulger and Van Smith, Summer Associates at the firm, contributed to this Update.
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