Thursday, October 15, 2009

Senate Hearings Explore Climate Change Cost & Compromise

Oct 14: While the Senate Committee on Environment and Public Works (EPW) has announced its schedule for considering climate change legislation including critical testimony during the week of October 27, and a Committee markup in early November [See WIMS 10/14/09], the Senate Energy & Natural Resources Committee (ENR), Chaired by Senator Jeff Bingaman (D-NM) is also conducting a series of climate change hearings.

On October 14, ENR held a hearing on the economic effects of global climate change legislation which included testimony from experts from the Congressional Budget Office (CBO), the Energy Information Administration (EIA), the Congressional Research Service (CRS) and U.S. EPA on energy and related economic effects of global climate change legislation [See details below]. On October 21, ENR has scheduled another in its series of hearings on energy and climate change. The focal point will be on costs and benefits for energy consumers and energy prices associated with the allocation of greenhouse gas emission allowances.

On September 15, ENR examined potential costs and price volatility in the energy sector as a result of a greenhouse gas trading program, plus ways to reduce/contain those costs [
See WIMS 9/16/09]. Also, on June 17, 2009, the ENR approved on a voted 15 to 8 to a bipartisan energy bill that was several months in the making. The bill, the American Clean Energy Leadership Act of 2009 (S.1462) was based on six major bills -- all with bipartisan sponsorship -- and five other bills with either Republican or Democratic sponsorship that were introduced in this session of Congress [See WIMS 6/17/09].

The October 14, ENR hearing included testimony from CBO, EIA, CRS and U.S. EPA. Chairman Bingaman indicated in an opening comment, “As the Senate continues to consider ways to deal with the global environmental problem of climate change, much of the discussion centers around the overall costs and benefits of such a program, and how the costs and benefits will be distributed throughout our economy. Addressing the issue of climate change will require a radical transformation of our energy sector, so this Committee will continue to take a great interest in this topic in the months ahead. . . in today’s hearing we will receive testimony on the various economic models and analyses of the American Clean Energy Security Act, or ACES, that was passed by the House of Representatives this past June.

“While no one can say for certain what the future holds, scientific and economic models can be used as tools to approximate reality and help us understand how the environment, or the economy, may react to policies we enact. Models can be very useful tools for estimating what a particular program may cost, showing how particular goals may be best achieved, and revealing where the economy may be most sensitive to the choices we make. They are imperfect tools, however, and models have often been used or manipulated to make a pre-determined point and show favorable or unfavorable results for any given policy. . .

“In the case of cap-and-trade programs and climate legislation, we can use real-world experiences alongside model analysis to keep us grounded in reality. For example, the cap-and-trade system for sulfur dioxide set up by the 1990 Clean Air Act Amendments was an unprecedented environmental success in combating acid rain, and cost only about a quarter of the price that economic models were projecting. The greenhouse gas emissions trading program in Europe has shown that emissions trading can be successful at reducing emissions without having a disastrous effect on the economy. While it is true that the European Emissions Trading program experienced significant volatility in its initial, experimental phase, they have learned from their trial period and made important improvements to their system. We should keep these experiences in mind as we consider projections for the future under cap-and-trade. Today the witnesses will explain the strengths and weaknesses of the different models that have been used to analyze the ACES legislation . . .”

Senator Lisa Murkowski (R-AK), ENR Ranking Member issued a statement saying, “We must ensure that climate change does not endanger our recovery, and we must seek to reduce energy prices, not drive them up. . . Economic assessments of climate change bills vary greatly. However, every analyses projects two things in common: higher energy prices and lower economic growth. The proposals before us will affect not only climate change, but every facet of our economy for decades to come. It’s incredibly difficult to conduct a sensitive and comprehensive analysis of climate change bills, but it’s equally important to know how those bills might work and what they may cost.”

Senator Murkowski also noted that she hoped the framework for climate policy laid out by Senators John Kerry (D-MA), and Lindsay Graham (R-SC), would mark a turning point in the climate debate. Referring to an October 11, op-ed published in the New York Times entitled, "Yes We Can (Pass Climate Change Legislation)," by Senators Kerry and Graham; Murkowski said, “They wrote a column, not a bill, and I do believe it could be improved. But in my opinion, the framework they laid out in those 1,000 words is already better than the policies it took the House 1,400 pages to impose. Instead of cutting emissions at any cost, we should be working on policy that incorporates the best ideas of both parties -- a policy that accounts for our near-term energy needs, limits costs, and is flexible enough to work under different economic circumstances." In closing, Murkowski indicated she "supports addressing climate change in an economically safe and environmentally meaningful way."

The "Yes We Can. . ." column by Senators Kerry and Graham, indicated in part, ". . .we refuse to accept the argument that the United States cannot lead the world in addressing global climate change. . . Our partnership represents a fresh attempt to find consensus that adheres to our core principles and leads to both a climate change solution and energy independence. It begins now, not months from now -- with a road to 60 votes in the Senate. . ." In should be noted that Senator Graham was severely criticized by conservatives at a townhall meeting following the op-ed for "jumping in bed with" Senator Kerry.

The op-ed indicates that the two Senators are agreeing on the following: (1) that climate change is real and threatens our economy and national security; (2) while we invest in renewable energy sources like wind and solar, we must also take advantage of nuclear power; (3) climate change legislation is an opportunity to get serious about breaking our dependence on foreign oil; (4) recognize that for the foreseeable future we will continue to burn fossil fuels; (5) committed to seeking compromise on additional onshore and offshore oil and gas exploration; (6) cannot sacrifice another job to competitors overseas and should consider a border tax on items produced in countries that avoid environmental standards; and (7) developing a mechanism to protect businesses -- and ultimately consumers -- from increases in energy prices.

The Senators conclude, "The message to those who have stalled for years is clear: killing a Senate bill is not success; indeed, given the threat of agency regulation, those who have been content to make the legislative process grind to a halt would later come running to Congress in a panic to secure the kinds of incentives and investments we can pass today. Industry needs the certainty that comes with Congressional action. We are confident that a legitimate bipartisan effort can put America back in the lead again and can empower our negotiators to sit down at the table in Copenhagen in December and insist that the rest of the world join us in producing a new international agreement on global warming. . ."

Access the ENR October 14 hearing website for links to all testimony and a webcast (click here). Access a release from Sen. Bingaman (click here). Access a release from Sen. Murkowski (click here). Access the compete op-ed from Sens. Kerry & Graham (click here). Access legislative details for S. 1462 (click here).