U.S. Senators Tackle Economic Impacts of Warming Bill

By J.R. Pegg

WASHINGTON, DC, January 26, 2007 (ENS) A global warming bill drafted to attract broad bipartisan support would have little impact on the U.S. economy but would do little to curb the nation's greenhouse gas emissions, experts told the Senate Energy Committee Wednesday. The hearing illustrated the difficulty Congress could have in constructing legislation to address global warming, despite the growing consensus that action is needed.

"I am aware that many in the scientific community are warning us that something needs to be done," said Senator Pete Domenici, a New Mexico Republican and ranking member of the committee. "We still have a lot of questions before us, though and it is clear to me that the development of a system of mandatory controls on carbon emissions could be a daunting task."

The burning of fossil fuels, such as coal, oil, and gas, emits greenhouse gases into the atmosphere. The most prevalent of these emissions is carbon dioxide, a greenhouse gas that traps solar radiation and warms the planet.

power plant

Indiana's coal-fired Rockport power plant emits greenhouse gases into the atmosphere. (Photo courtesy AEP)
Committee Chairman Jeff Bingaman, a New Mexico Democrat, convened the hearing to discuss recent analysis of his global warming bill by the U.S. Energy Information Administration, EIA.

Bingaman said that he is committed to developing bipartisan climate change legislation that can pass the Congress this year.

His plan would impose an annual economy-wide emissions cap based on reductions in greenhouse gas intensity - defined as emissions per dollar of Gross Domestic Product.

Bingaman

Senator Jeff Bingaman of New Mexico, a Democart, chairs the Senate Energy Committee. (Photo courtesy Office of the Senator)
The Bingaman bill includes an emissions trading program to lower compliance costs and aims to reduce greenhouse gas intensity by 2.6 percent annually between 2012 through 2021 and three percent per year beginning in 2022.

This measure of emissions reduction differs from that of the Kyoto Protocol, which requires 35 industrialized countries and the European Union to an absolute cut in the amount of greenhouse gases emitted of at least five percent from 1990 levels in the commitment period 2008-2012.

Based on a plan developed by the bipartisan National Commission on Energy Policy, NCEP, the Bingaman bill also includes a safety valve that allows companies to delay making reductions if costs are too high.

Analysis of bill by the EIA shows will cost the U.S. economy less than one percent of annual GDP by 2030 and will lead to modest increases in energy prices.

But emissions will continue to rise by nearly 25 percent between now and 2030 under the plan, according to the EIA's analysis.

Daniel Lashof, a climate expert with the Natural Resources Defense Council, said the bill's targets are too timid.

Lashof

Daniel Lashof is a senior scientist with the Natural Resources Defense Council. (Photo courtesy Congressman John Olver)
"Faster and deeper emission reductions are essential to prevent dangerous global warming," Lashof told the panel.

NCEP Executive Director Jason Grumet told members of the committee that the intent of the plan is cut emissions without harming the economy, but acknowledged that it may be too modest.

"There are opportunities to strengthen some aspects of the legislation while meeting the requirement not to harm the economy," Grumet said.

But he cautioned that a more stringent approach could prove politically difficult and could mean "everybody goes back to their Kyoto corners and yells at each other for another decade."

Anne Smith, an economist and vice president of the economics consulting firm CRA International, said the economic impact of the proposal is still significant, especially given the limited reductions in heat trapping emissions.

"If this is all the draft bill would accomplish does it make sense to even incur this small cost?" Smith asked. "It has the cart, but not the horse."

traffic

Traffic congestion in Boston, Massachusetts. Vehicles burning gasoline and diesel emit greenhouse gases such as carbon dioxide into the atmosphere. (Photo by Ian Britton courtesy FreeFoto)
Smith criticized the proposal's provision to use the proceeds from auctioning some of the carbon allowances to set up a trust fund for research and development of technologies to cut greenhouse gas emissions.

The provision fails to establish incentives that "align the motivations of researchers with finding the most cost-effective carbon emissions reductions," she told the panel. "It attempts to pick winners, an approach to research and development funding that has a long history of waste and failure."

But the proposal received support from Jeff Sterba, president and CEO of PMN Resources, a New Mexico-based energy holding firm and one of 10 major U.S. companies to join with environmental groups this week in calling for national legislation to limit carbon emissions.

The proposal is not perfect, Sterba said, but it is a realistic framework that sets up mechanisms to accelerate reductions as technology advances.

"More than any other proposal the draft recognizes the limits of today's commercial technology and the economic risks currently associated with addressing climate change for my industry and our ratepayers," Sterba told the panel. "It should be the focal point of the climate debate in the Senate."

Senator Bernie Sanders, a Vermont Independent, questioned whether the bill's targets are "commensurate with the magnitude of the threat."

"We all want a strong economy," Sanders said."But on the other hand we don't want to see a planetary catastrophe."

Sanders

Vermont Independent Bernie Sanders (Photo courtesy )
Sanders has introduced legislation calling for an 80 percent cut in greenhouse gas emissions by 2050 - several other bills have been authored by lawmakers keen to see quicker reductions than those in the Bingaman proposal.

The flurry of global warming legislation is more politics, than substance, according to Senator Larry Craig, an Idaho Republican.

"The sense of urgency is the '08 election for a good many people," said Craig, who also raised concerns about Bingaman's proposal.

"I'm not sure that I'm willing to accept a nose under the tent approach to cap and trade when it gets us so short a distance," he told colleagues.

"I'm not surprised with [Lashof's] testimony that we need to do more," Craig added. "We probably do. But I am not going to shut down this economy to accomplish it and I'm not going to create an artificial market where there are winners and losers."