Climate Change Bill: The Economist

The climate-change bill

May 13th 2010 | WASHINGTON, DC | From The Economist print edition

“KERRY-GRAHAM-LIEBERMAN”—it sounded so promising. One Democrat, one Republican and one independent (senators John, Lindsey and Joe) have been busily writing a new energy and climate bill taking in ideas from both sides of the partisan aisle. Alas, the unity was shattered last month when Mr Graham, the Republican, refused to come to the bill’s press launch, after hearing that the Senate would consider immigration first. Then the spill in the Gulf of Mexico fouled the waters: one of the bill’s key elements is an expansion of domestic offshore oil exploration. Mr Graham says the bill does not have the votes, though he may still vote for it. Messrs Lieberman and Kerry unveiled it nonetheless, on May 12th.

The new bill makes extensive changes to earlier versions, which have been marooned in the Senate for more than a year. They are mostly aimed at deferring the economic pain, and offering treats to woo Republicans who are wary of an enterprise that, along with health-care reform, has been one of Barack Obama’s most cherished goals. Two-thirds of the revenue raised by the proposed bill from the sale of carbon permits is to go to reducing electricity customers’ bills straight away. From 2026, that money will return to customers as cash.

On the supply side, power-generating utilities are to get a long phase-in period, with generous initial allowances to emit CO²; these taper away until 2030, when all emissions permits must be bought. Expansive nuclear-power and “carbon capture and storage” (CCS) provisions have been retained from earlier drafts of the bill. Near-zero-carbon nuclear power is popular with conservatives, while unproven CCS is meant to seduce the many coal states. In short, goodies all round.

But offshore drilling may get the most attention in coming weeks. Those focusing on building a consensus consider the spill a rarity that can be avoided in future, and stress using more American oil, rather than importing it from unfriendly climes. The bill would require tougher preliminary studies of the impact of spills, and lets states block new drilling up to 75 miles off their coast. (The incentive not to is that those states get 37.5% of the oil revenue.) But opponents of new offshore drilling include both of New Jersey’s senators and Bill Nelson of Florida, all Democrats. The bill will need several Republican votes to pass, with Democrats already one vote shy of a filibuster-proof majority.

Aside from Mr Graham’s, can it get them? The bill’s title (the “American Power Act”) obscures a crucial fact: it is still a cap-and-trade bill that seeks to reduce greenhouse-gas emissions by 17% on 2005 levels by 2020, and 83% by 2050. Many Republican senators still consider this a job-killing energy tax. Messrs Kerry and Lieberman have tried to be generous, and aides called the bill an invitation to further negotiation. But any change that can win one vote may lose another.

How many minds can be changed may depend on the spill’s progress (see next story). If the weather keeps the spill from devastating the coast, the bill’s chances are improved. Not since Hurricane Katrina have the political winds depended so much on the real ones.