Jay Rockefeller

Spinning the Defeat of Cap-and-Trade

by Marlo Lewis on August 11, 2010 · 1 comment

in Global Warming

Barring the trickery of a lame duck conference committee, cap-and-trade is dead in the 111th Congress. Some blame Obama for not taking a more hands-on role. Others blame environmental groups for waging a $100 million lobbying campaign without winning a single GOP convert to the Kerry-Lieberman cap-and-trade bill. Others blame the allegedly “well-funded denial machine,” even though proponents, who include major corporations like British Petroleum, must have outspent CEI and its free-market brethren by more than 100 to 1.

Today’s Climatewire (subscription required) features interviews with Exelon Corp. VP Betsy Moler and Phil Sharp, President of Resources for the Future, who lament that Republican lawmakers, the “inventors” of “market-based” environmental policy, have turned against their own “invention.” If I catch their drift, Moler and Sharp are trying to spin GOP opposition to cap-and-trade as self-contradictory, hence as unstable, hence as reversible. As Climatewire reports, Moler is not ready to “throw in the towel” and Sharp entertains the hope that a “new kind of coalition” will emerge in the next Congress.

Now, let’s look at this notion, peddled by Moler and Sharp, that Republicans betrayed themselves and besmirched their own legacy by blocking cap-and-trade. Here’s how it’s discussed in Climatewire:

In an interview, Moler said that her deep disappointment was the rejection by Republican leaders in Congress of a market-based strategy for raising the price of carbon emissions, to speed transitions by power plants, industry and consumers to cleaner energy.

The Democrats called it “cap and trade.” Republicans labeled it “cap and tax,” and the change in one word proved lethal.

“The thing that just amazes me, confounds me, surprises me is how successfully the Republican leadership and a lot of the people who would be potentially negatively impacted have been in vilifying what have historically been market-based solutions,” Moler said.

Inventors Turn on Invention

“Cap and trade is really a Republican instrument that grew out of a lot of the Republican thought leaders as a market-sensitive, market-friendly, anti-command-and-control mechanism” to reduce sulfur- and nitrogen-based air pollution in the 1990 Clean Air Act amendments. “Now, some of the same people who invented it have turned on it as an energy tax,” she said. “It’s a huge missed opportunity. I don’t know where you go next.”

Moler’sregret is seconded by Philip Sharp, president of Resources for the Future, who, as a Democratic House member from Indiana, stood with Moler in the 1990s in the energy deregulation campaign. Sharp was a pivotal factor in Congress’ adoption of the 1990 Clean Air Act amendments and the 1992 Energy Policy Act, which opened the way for FERC’s electricity market orders four years later.

“I’m not here to say cap and trade is the only way to do this,” Sharp said in an interview. “It worked magnificently with SO2 and a couple of other instances.” Scaling it up massively to deal with economywide carbon emissions is another question. “We don’t know we can manage it as effectively,” he said.

“But what is really unfortunate in the public debate is that the current Republican leadership has overthrown one of the great Republican successes in this country [under President George H.W. Bush], to capitalize on the flexibility of the marketplace” in achieving regulatory change, Sharp said.

“I don’t think people appreciate the extraordinary challenge that represented and the difficulty of getting it done” in the 1990s, he said. Now, with the demise of that approach, Congress has invited U.S. EPA to step in on the climate front “and regulate the living [daylights] out of everything and see how well a modern economy works doing that.”

Moler and Sharp miss several key points.

First, the Title IV acid rain cap-and-trade program enacted under President George H.W. Bush is not the “magnificent” success they suppose it is. As Kenneth Green, Steven Hayward, and Kevin Hasset of the American Enterprise Institute note, prices of tradable sulfur dioxide (SO2) emission permits have been highly volatile: “SO2 trading prices have varied from a low of $70 per ton in 1996 to $1500 per ton in late 2005. SO2 allowances have a monthly volatility of 10 percent and an annual volatility of 43 percent over the last decade.”

Second, utilities participating in the SO2 emissions trading program could meet all or part of their obligations by purchasing low-sulfur coal and/or installing scrubbers, a commercially-proven emission control technology. In contrast, there is no low-carbon coal, and no commercially-proven technology to “scrub” carbon dioxide (CO2) emissions out of power plant exhaust streams.

Third, unlike sulfur, which is an impurity or contaminant in coal and oil, carbon is intrinsic to the chemistry of fossil fuels. Consequently, whereas emission control requirements for SO2 do not logically entail an unlimited agenda aiming at total abolition of the fuel, emission control requirements for CO2 do imply abolition as the ultimate objective. Such extremism is reflected in the apocalyptic rhetoric of the global warming movement, in petitions demanding that EPA establish national ambient air quality standards (NAAQS) for CO2 at 350 parts per million and for other greenhouse gases at pre-industrial levels (not even a global depression lasting several decades would be sufficient to lower CO2 concentrations to 350 ppm), and in Al Gore’s campaign to “repower America“ with “zero-carbon energy” within “ten years.” More pertinently, pull-out-the-stops, sky-is-the-limit regulation lurks in the Waxman-Markey and Kerry-Lieberman bills’ escalator clauses, which all but ensure that the explicit emission reduction target (83% below 2005 levels by 2050) would be superseded by more aggressive requirements.

Fourth, just because a “market-based” approach is more efficient, in principle, than command-and-control regulation does not in any way obligate Republicans to support Waxman-Markey or Kerry-Lieberman if those same Republicans oppose all regulatory climate policies.

Fifth, every Republican in the Senate voted for the Murkowski resolution to block EPA regulation of greenhouse gases via the Clean Air Act. So it’s silly to say that Republicans “invited U.S. EPA to step in on the climate front ‘and regulate the living [daylights] out of everything. . .’” President Obama threatened to veto both the Murkowski resolution and the much weaker Rockefeller bill, which would merely postpone EPA regulation of stationary sources of greenhouse gases for two years. It’s the Democratic leadership, not the GOP, that has “invited” EPA to make climate policy through the regulatory back door.

Finally, Republicans betray themselves (ask President George “Read My Lips; No New Taxes” Bush) when they vote for rather than against higher taxes. Because carbon is intrinsic to the chemistry of fossil fuels, a carbon cap-and-trade scheme is a virtual broad-based energy tax. The same cannot be said of the SO2 program, which was merely a virtual pollution tax. Moler and Sharp would like GOP lawmakers to believe they can win elections by becoming the Party of Energy Taxes. Fortunately, most Republicans don’t need much coaching to realize that is complete bunk.

Rockefeller Bill – Is It Good Enough?

by Marlo Lewis on July 23, 2010

in Odds & Ends

Barring the trickery of a lame-duck conference committee, cap-and-trade is dead as a door nail in the 111th Congress. As you’d expect, there is much wailing and gnashing of teeth, with Obama officials, Democratic leaders in Congress, and environmental lobbyists all saying it’s all the other guy’s fault.

Columnist Darren Samuelsohn provides several juicy quotes in Politico today. My favorite is from an unnamed “exasperated Administration official who lambasted environmentalists — led by the Environmental Defense Fund — for failing to effectively lobby GOP senators”:

They spent like $100 million and they weren’t able to get a single Republican convert on the bill.

Sure, it was just a matter of poor lobbying skills! The fact that nobody knows how to power the economy with solar panels, wind turbines, and cellulosic ethanol had nothing to do with it! The fact that energy taxes kill jobs and jobless rates remain shockingly high had nothing to do with it! The blame gamers are in denial.

Having failed to snooker Senate Republicans into providing bipartisan cover for cap-and-tax, Democratic leaders must now take sole responsibility for EPA’s endangerment rule and the ensuing regulatory cascade. Waxman-Markey and most other cap-and-trade bills contained language preempting EPA regulation of greenhouse gases under various Clean Air Act provisions. The sponsors repeatedly tried to sell their bills as the only way to avoid heavier and more unpredictable regulation under the Clean Air Act.

This was always a lame sales pitch. Its success depended on Rs being too dumb to figure out that Democratic leaders were actually promising to commit political suicide rather than wielding a mighty legislative hammer. Colorado State University Prof. Roger Pielke, Jr. and the Breakthrough Institute’s Michael Shellenberger warned more than a year ago that threatening to sic EPA and eco-litigators on the economy unless Rs lined up behind cap-and-trade was a strategy that could easily backfire:

Pielke, Jr.: Republicans must be drooling over the possibility that EPA will take extensive regulatory action on climate change. Why? Because the resulting political fallout associated with any actual or perceived downsides (e.g., higher energy prices) will fall entirely on Democrats and the Obama Administration. Far from being an incentive for Congress to act on its own, the looming possibility that EPA will take regulatory action is a strong incentive for Republicans to stalemate Congressional action and a nightmare scenario for Democrats.

Shellenberger: In other words, the White House “threat” to Republicans and moderate Democrats to regulate carbon is the equivalent of threatening your enemy with suicide. (“Don’t make me raise energy prices! You’ll really be in trouble with your voters when I raise their energy prices!”)

On June 10, the Senate voted 53-47 against S.J.Res.26, Sen. Lisa Murkowski’s resolution of disapproval to overturn the legal force and effect of EPA’s endangerment rule. Had S.J.Res.26 become law, it would have stopped EPA and the trial lawyers from imposing unlegislated climate policy on the nation. President Obama threatened to veto the resolution. All 41 Senate Republicans and six Democrats voted for S.J.Res.26. It failed because 53 Democrats voted against it.

Thanks to the vote on S.J.Res.26, the Democratic leadership has become the Party of Endangerment — the party endangering America’s economic future by taking exclusive ownership of EPA’s endangerment rule and the regulatory chain reaction it has set in motion.

Unsurprisingly, congressional Democrats are now looking for a way to have their cake and eat it — claim to protect their constituents from regulatory excess while actually protecting EPA’s purloined power to make climate policy. “The time has come to prevent EPA from going forward next year with regulations on stationary sources [of greenhouse gases],” Rep. Rick Boucher (D.-Va.) told Energy and Environment News (subscription required). Other Ds are making similar noises.

Their vehicle of choice is a bill sponsored by Sen. Jay Rockefeller (D.-W.Va.), which would postpone EPA regulation of stationary sources of greenhouse gases for two years. Some key points to keep in mind.

  • Most energy-intensive investments have much longer planning horizons than two years. Thus, the Rockefeller bill would leave a cloud of regulatory uncertainty hanging over the economy, deterring many firms from starting new projects this year and next. 
  • To provide real protection, re-enacting the bill would have to become an annual ritual on Capitol Hill. That, however, is not something any of its sponsors indicate they intend or want to happen.
  • The bill would leave the endangerment rule intact, setting the stage for money-is-no-object regulation of greenhouse gases under the National Ambient Air Quality Standards (NAAQS) program.

The Rockefeller bill’s chief purposes are not economic but political. It was designed to siphon off Democrat support from the Murkowski resolution, and it may well have provided the legislative margin of victory for the Party of Endangerment.

The bill’s main purpose now is to obscure what the vote on S.J.Res.26 made so clear — namely, which Members of Congress actually oppose regulatory excess and which do not, and which Members actually want politically accountable policymaking and which do not.

My unsolicited advice to the friends of democratic accountability in Congress is to safeguard and refresh the hard-won political clarity they achieved in the vote on S.J.Res.26. They can do this by seeking votes on amendments to toughen and improve the Rockefeller bill. Here are two obvious ideas:

  1. An amendment to suspend stationary source regulation of greenhouse gases until Congress votes to remove the suspension. A vote on this amendment would clearly distinguish those who want the people’s representatives to determine climate policy from those who want non-elected bureaucrats, trial lawyers, and activist judges to be in charge.
  2. An amendment to suspend stationary source regulation of greenhouse gases until the rate of unemployment falls to 5.5%.  A vote on this amendment would clearly distinguish those whose priority is to grow the economy from those whose priority is to grow EPA’s power.

What if the amendments are defeated? Congress could still pass the Rockefeller bill, which at least would put EPA on hold for two years. More importantly, even if defeated, such amendments would separate the real champions of prosperity and self-government from the pretenders.

What Happens If Congress Blocks EPA?

by Marlo Lewis on March 9, 2010 · 2 comments

in Global Warming

That’s the topic of this week’s National Journal energy blog. In my contribution, I argue that EPA has been playing a mischievous game that endangers democracy, and that Sen. Lisa Murkowski’s legislation to veto the agency’s endangerment finding would remove this threat. 

In a Feb. 22 letter to Sen. Jay Rockefeller (D-WV), EPA Administrator Lisa Jackson warns that enactment of the Murkowski legislation would scuttle the joint EPA/National Highway Traffic Safety Administration (NHTSA) greenhouse gas/fuel economy rulemaking, which in turn would compel the struggling auto industry to operate under a “patchwork quilt” of state-level fuel-economy regulations.

Ms. Jackson neglects to mention that the patchwork threat exists only because she, reversing Bush EPA Administrator Stephen Johnson’s decision, granted California a waiverto implement its own GHG/fuel economy program. Had Jackson reaffirmed Johnson’s denial, there would be no danger of a patchwork, hence no ostensible need for the joint EPA/NHTSA rulemaking to avert it.

As my blog post explains, EPA should not have approved the waiver in the first place. The California GHG/fuel economy program violates the Energy Policy and Conservation Act, which prohibits states from adopting laws or regulations “related to” fuel economy. Worse, the waiver creates a reverse right of preemption whereby states may nullify federal law within their borders — an affront to the Supremacy Clause. 

Specifically, the waiver would allow California, and other states opting into the California program, to nullify within their boundaries the reformed national fuel economy program that Congress enacted in the 2007 Energy Independence and Security Act (EISA). That leads straight to a patchwork of state-by-state compliance regimes inimical to a healthy auto industry.

The game EPA is playing is a classic case of bureaucratic self-dealing.

First, EPA endangers the U.S. auto industry by authorizing states to flout federal law and the Constitution. Then, EPA proposes to avert disaster via a rulemaking that just happens to put EPA in the driver’s seat in regulating fuel economy – a power Congress never delegated to EPA when it enacted and amended the Clean Air Act.

Nor is that all. The joint GHG/fuel economy regulation will compel EPA to regulate CO2 from stationary sources – another power Congress never delegated to EPA. By expanding its control over the transport sector, EPA will then have to expand its control over manufacturing, power generation, and much of the commercial and residential sectors, too, because all emit CO2.

In addition, the motor vehicle GHG rule sets the stage for EPA to “tailor,” that is amend, the Clean Air Act so that the agency can delay imposing pre-construction and operating permit requirements on small business, which would surely ignite a political backlash.

So thanks to the endangerment finding, EPA not only gets to play in NHTSA’s fuel-economy sandbox, and extend its tentacles throughout the economy, it also gets to play lawmaker, violating the separation of powers.

In light of all the new powers EPA now expects to wield, it is hardly surprising that EPA never made the strong case against Clean Air Act regulation of CO2 in Massachusetts v. EPA. Here’s what EPA should have argued:

  • EPA cannot regulate GHG emissions from new motor vehicles under Sec. 202 of the Clean Air Act without regulating CO2 under the Act as a whole. 
  • Aplying the Act as a whole to CO2 leads ineluctably to “absurd results” that contravene congressional intent.
  • Therefore, Congress could not have intended for EPA to regulate GHG emissions under Sec. 202.

Did EPA throw the fight in the 11th round? I dunno, but losing the Massachusetts case was surely sweet victory to those in the agency who long to regulate America into a ”clean energy future.” The Massachusetts decision laid the groundwork for EPA to deal itself into a position to bypass the people’s elected representatives, impose its will on the auto industry, and, in time, dictate national climate and energy policy.

What happens if Congress enacts Sen. Murkowski’s resolution, nixes the endangerment finding, and mothballs the GHG/fuel economy rule? The authority to make law and national policy returns to where the framers of the Constitution intended — the people’s elected representatives.