The New Senate Energy Bill: A Preview

Despite the odds, Senate Democrats are determined to pass a comprehensive energy bill by year's end. Their best vehicle is likely to debut on April 26, when Sens. John Kerry, Lindsey Graham, and Joseph Lieberman unveil their long-awaited legislation. The senators crafted the bill with the politics of climate change clearly in mind -- along with what appears to have been a somewhat successful campaign by climate change deniers to influence public debate about the wisdom of a massive bill during a recession.

Skepticism about the trade-offs between new energy policies of any sort, on the one hand, and jobs, jobs, jobs, on the other, is high -- even if the correlation between the two isn't well established. Conventional wisdom holds that no climate change/energy bill can be passed in an election year, but there are solid reasons for Democrats to be hopeful. The Senate effort is truly bipartisan, with bona fide conservative Graham playing a lead role. The structural factors pushing Congress to act, meanwhile, remain the same: industry wants certainty, not ambiguity, and the EPA will begin to regulate in the absence of congressional action. It's worth remembering, too, that many landmark environmental laws, including the Clean Water Act, Clean Air Act, and Superfund, were passed days ahead of Election Day.

Although the three senators have been relatively leak-proof about the bill's details, the outline and some details of its provisions have been revealed. The bill would set as a target a reduction in greenhouse gas emissions by 17 percent below 2005 levels in 2020. The bill takes a sectoral approach to industry: utilities, which generate the most greenhouse gases, would have to start limiting their emissions in 2012. Industrial facilities, which are regionally concentrated and therefore politically contested, would have several more years to adjust before caps were imposed. These would kick in by 2016 -- well after the recession has ended, and presumably after job growth has pulsed. Forcing them to cap emissions now would probably lead to apocalyptic predictions of job losses and entrench opposition from senators and representatives from the states where these legacy factories are keeping people employed. Nota bene: this is one reason why the White House proactively rolled out its nuclear power plant and domestic oil drilling initiatives before the Senate took up the bill.

A moving part, as of today, is pollution reductions from transportation fuels -- the second-largest source of global warming pollution. Many oil companies are lobbying for a tax to be applied after the fuel is refined, which they believe would be a more efficient system compared to including transportation fuels as part of the cap and trade system in the House-passed bill.

Already, Democrats are nervous about having to rebut charges that they're imposing a "gasoline tax," with predictions of $3-per-gallon prices by summer. The bill would link the tax -- or fee -- to the cost of emissions reduction for the utility industry, which could, in theory, more widely distribute the "pain."

Even though President George H.W. Bush pioneered the "cap and trade" concept, Republicans and other opponents of last year's House bill were able to turn the innocuous "cap and trade" phrase into a politically poisonous "cap and tax" formulation. That prompted Democrats to find ways of modifying an emissions credit trade system to return money back to the taxpayer. Sen. Maria Cantwell calls her proposal "cap-and-dividend," with the idea that a bunch of the money would be returned directly through a complex mechanism. Kerry, Graham, and Lieberman are probably going to direct that a large portion of the money earned by the cap-and-trade system be returned to ratepayers, with the remaining portion paying for investments in new energy technologies and reducing the deficit. The program will be designed to ensure that heavily coal dependent states do not bear a huge economic burden. In theory, and this is all in theory, that should help mitigate disproportionate impact that any cap-and-trade scheme would have on regions that depend significantly on non-clean energy sources.

The "tripartisan" bill would tightly regulate the market for emissions credits, preventing the creation of a secondary market that would put distance between the producer of the emission and its cost -- much like the derivative market functioned before the stock market collapse.

Are there 60 votes? Assuming that at least five Democrats could oppose the blll, proponents are targeting Senators Collins and Snowe from Maine, Sen. Scott Brown from Massachusetts, Sen. George LeMieux of Florida (whose calculus on this may be influenced by what Charlie Crist does), and Sens. Richard Lugar of Indiana and Judd Gregg of New Hampshire. Missing from the list is Sen. John McCain of Arizona, the co-author (along with Lieberman) of global warming bills voted on by the Senate in 2003 and 2005, and an advocate for a program to address global warming during his 2008 presidential campaign.