Will Washington Embrace the Senate Energy Bill?

The new climate change bill from Sen. John Kerry and Sen. Joseph Lieberman called the American Power Act aims to reduce carbon emissions by 17 percent by 2020 and 80 percent -- or below 1990 levels -- by 2050. That's on par with proposals from the House and administration, but environmentalists aren't so happy.

First a bit of background. The general theory behind cap-and-trade is straightforward: the federal government puts a cap on polluting emissions and allows companies to trade each other permits under the cap. Companies that struggle to clean up their technologies pay more. Companies that make early strides pay less. Essentially, this puts a price on pollution and encourages companies to shift away from cheap, dirty technologies toward "cleaner" energy sources.

From the consumer's perspective, cap-and-trade would probably raise energy prices for some families (although the Power Act has a provisions to ease that burden for low-income folks). You can think of it as a tax. Or you can think of it as an insurance policy. Essentially, putting a price on pollutants we know are warming the planet is like asking the American economy: "Would you rather risk being 1-2 percent poorer while investing in insurance against the likelihood of global climate catastrophic change, or would you prefer to be 1-2 percent richer while risking the melting the ice caps, devastating some food growing regions, and strengthening climate disasters?"

Now back to the legislation. This is Washington, not a classroom, so naturally the legislation is carved to pieces with exceptions and mitigating circumstances to make it more palatable for powerful special interests. These include (via Mother Jones):

• Heavy emitters that are especially energy intensive or vulnerable to international trade will also receive a significant number of free allowances to help them adjust to the carbon limits.

• $54 billion in loan guarantees for up to 12 new nuclear reactors.

• Free allowances for coal-fired power plants to help them cover the expense of developing technoology to capture and store carbon emissions. New coal plants permitted between 2009 and 2019 will be required to cut emissions by at least 50 percent; plants permitted in 2020 and beyond will be required to reduce emissions by at least 65 percent.

The most important constituency is the American consumer (theoretically, at least). So the APA sells permits to energy companies and returns two-thirds of those revenues to consumers -- more than the House or White House plans.

But environmentalists aren't all happy. First, they claim the bill doesn't go far enough on drilling. Second, the bill is pretty weak on renewable energy mandates (that is, requirements to produce a certain percent of energy from natural resources like sun, wind and water). Bradford Plumer explains:

The Senate bill is a lot weaker on renewable energy mandates and efficiency standards. In fact, it's worth reiterating that the Senate bill's renewable targets would do less (yes, less) than what we could expect to happen if no bill passed at all. If environmental groups want to strengthen the bill, this is, far and away, the most promising place to do so, especially since these items will make a big difference in the short term.

To learn more, check out this extremely handy comparison of White House, House and Senate plans from Wonk Room.

This article available online at:

http://www.theatlantic.com/business/archive/2010/05/will-washington-embrace-the-senate-energy-bill/56664/