Washington, DC (November 15, 2007)- Congress is now taking climate change fairly seriously. To see how the mood in Congress is changing on global warming, look no further than America’s Climate Security Act (ACSA). This is a bill that seeks to limit and ultimately slash America’s emissions of greenhouse gases. For one thing, it is sponsored by John Warner, a Republican who once opposed all such measures. For another, it has won the support of Max Baucus, a senator from Montana, whose coal-mining constituents hate the idea. It has already cleared more legislative hurdles than any of the many previous bills on global warming.
So will a law pass soon? Probably not; the Senate and the House of Representatives are already struggling to reconcile rival bills on energy, and will doubtless find global warming even tougher. The House is not yet properly up to speed on the subject, and in the Senate a global-warming sceptic has vowed to filibuster any bill that places firm limits on America’s emissions-a tactic that can only be overcome with 60 of the chamber’s 100 votes. Even then, George Bush, another critic of caps, would probably veto such a bill. Nonetheless, the current debate provides a good indication of the sort of horse-trading that will be needed to push a bill through in future.
Past bills have foundered either because they seemed too ambitious to Republicans worried about the effects of a cap on American industry, or too feeble to environmentally-minded Democrats. But Mr Warner and the bill’s co-author, Joe Lieberman, an estranged Democrat, have included something for almost everyone. To please the greens they have proposed severe cuts in America’s emissions, of about 60% by 2050. To please the business lobby, they have proposed measures to reduce the costs of compliance. To please everybody, they have included the magic word “security” in the bill’s title: keeping America safe from dangerous weather.
Like most other bills on climate change, ACSA involves a cap-and-trade scheme: the government sets an overall limit on emissions and then sells or gives away an equivalent number of tradeable permits to pollute. This allows the firms that find it cheapest to reduce their emissions to do so, leaving those for which cuts would be costlier to buy permits. All the leading Democratic candidates for president, along with John McCain on the Republican side, have endorsed this concept.
Supporters of a tax on emissions, an alternative to cap-and-trade advocated by many economists, are few and far between. Michael Bloomberg, the mayor of New York, who is rumoured to be considering an independent run for president, supports one, as does John Dingell, a prominent congressman. But most politicians are certain that no policy involving the word “tax” will prosper.
The details of the different cap-and-trade schemes vary wildly. Some involve giving most of the permits away to businesses-a notion that green groups denounce as corporate welfare. By contrast, in the Regional Greenhouse Gas Initiative, a scheme that will soon get underway in the north-east (see article), all the permits will be auctioned. Hillary Clinton, for one, wants any federal scheme to take the same approach. ACSA aims for the middle ground by proposing that the proportion of permits sold at auction should rise gradually, from 24% in 2012 to 73% in 2036.
How should the revenue from such auctions be spent? Most bills envisage compensation of some sort for dirty industries, which would suffer most from an emissions cap. Friends of the Earth estimates that ACSA would dole out $324 billion to the coal industry, for example, in addition to awarding it free permits worth hundreds of billions of dollars more. Beyond that, most congressmen want to funnel any spare cash to pet causes: renewable energy, biofuels and perhaps even nuclear plants, even though they produce no emissions and so should prosper under a cap. Mrs Clinton wants both to cut taxes and to help poor families cope with the higher fuel and power costs that an emissions cap would bring.
Some senators worry that the costs of a cap-and-trade scheme may spiral out of control. They suggest that the government should cap the price of permits by agreeing to sell more of them at a fixed rate if they get too expensive. That, in turn, has angered the green lobby, who say that it is the bill’s environmental benefits, rather than corporate profits, that should be sacrosanct. ACSA attempts to square this circle by setting up a sort of central bank of carbon, which would allow firms to borrow permits against their future allocations. That might help to smooth out spikes in the carbon price, without lifting the overall cap. The bill also allows firms to pay for “offset” schemes to reduce emissions in industries that do not have a cap, such as agriculture and forestry, in lieu of making cuts of their own.
ACSA’s biggest concession to industry, however, is a clause that would penalise imports from countries that do not have an emissions cap. To get such goods through customs, importers would have to buy permits to cover the greenhouse gases emitted during their manufacture. One of the biggest fans of this idea is the AFL-CIO, America’s trade union federation, which worries that a cap-and-trade scheme would further sap the competitiveness of American manufacturing and hasten the exodus of jobs to China, India and Mexico.
Yet, for all these sops to business, ACSA would still dramatically reduce emissions-although not by quite as much as most scientists think is warranted, according to the World Resources Institute, a think-tank. It would cover roughly 80% of the economy. To secure the support of one of the greener senators, Messrs Lieberman and Warner actually expanded its scope to include household consumption of natural gas, which they had planned to exempt. They also lowered the caps for the early years of the scheme, to make sure that its impact would be swift. And the bill provides for periodic reviews of the cap, in case it proves too generous.
Many of these ideas are copied from earlier bills. Indeed, ACSA is something of a synthesis of the most popular elements of its rivals. This might help it secure the support of the congressmen whose ideas it borrows. And even if that does not guarantee its passage, the next Congress and president are likely to use the bill as a starting point for further negotiations.
For the full article, visit The Economist.