Agriculture should understand that safety valve = NO AG OFFSET MARKET. Right now, there is only a limited number of folks in the ag industry who are weighing in at all on this -- and yet, that doesn't stop the issue -- it just means the issue will be decided without ag's input.
Environment & Energy Daily
Sponsors of Senate emissions bill seek compromise on cost provisions (02/20/2008)
Darren Samuelsohn, Greenwire senior reporter
Senate sponsors of a major global warming bill are trying to find compromise on the vexing question of how to cap U.S. emissions of heat-trapping greenhouse gases without damaging the economy.
Legislation expected on the Senate floor this spring already includes a provision establishing a Federal Reserve-like board designed to monitor a new U.S. carbon market and make changes if the system gets too rocky.
While that idea satisfies some key constituents, it is not enough for other players on and off Capitol Hill.
Electric utility companies, labor groups and several senators who hold critical votes on the measure still want to set some type of price ceiling on the annual price of a carbon credit.
In recent weeks, a small group of Senate staff, academics and members of the U.S. Climate Action Partnership started holding informal and formal talks in search of a deal. But they must convince environmental groups that any new cost provisions do not undermine the integrity of the new climate program.
"There's a really serious conversation going on in a lot of venues about how this doesn't become that last issue standing, and it's a take-it-or-leave-it for environmentalists," said Tim Profeta, a former senior aide to Sen. Joe Lieberman (I-Conn.) who now runs Duke University's Nicholas Institute for Environmental Policy Solutions.
Finding the winning formula won't be easy.
Senate Environment and Public Works Chairwoman Barbara Boxer (D-Calif.) opposes the inclusion of a "safety valve" in the climate bill originally drafted by Lieberman and Sen. John Warner (R-Va.).
The safety valve is a favored concept among economists and business types who maintain that a set carbon ceiling gives them enough certainty that the new global warming program would not sink their businesses. They insist it can also help to assure nervous lawmakers about the limited economic effects of the legislation.
In one bill introduced last year from Sens. Jeff Bingaman (D-N.M.) and Arlen Specter (R-Pa.), carbon prices in the cap-and-trade system would not go above $12 per ton in the first year. After that, the ceiling would rise 5 percent per year above the rate of inflation.
Three Republican senators -- Specter and Alaska's Ted Stevens and Lisa Murkowski -- crossed a major threshold by signing up as cosponsors for the bill in part because of the safety valve.
But Boxer and her traditional allies in the environmental community argue a safety valve would send the wrong message to industry. A price limit on CO2 would discourage companies from making investments in new low- or zero-carbon technologies.
"Any legislation that would move forward would have to have very strong market signals," a Boxer aide said yesterday. "It'd also have to ensure that the greenhouse gas reductions are achieved."
The closed-door talks on a solution to the cost debate are in the early stages. But some ideas already are being kicked around that signal some of the key features of the Bingaman-Specter approach are open to modification.
"There seems to be a general agreement that cost certainty, or confidence about costs, are most important in the early years of a new program," said Jason Grumet, executive director of the nonpartisan National Commission on Energy Policy, an early supporter of the Bingaman-Specter bill's safety valve.
Grumet said one idea under discussion involves "how you can start with a more fixed system that could phase out or be more flexible over time."
And he also left open room for the $12-per-ton figure to change. "I've never seen a number in Congress that's nonnegotiable," he said.
Environmental groups have been united in their opposition to the safety valve concept since it first surfaced more than a decade ago during the Clinton administration.
"This is a cap-buster," Jennifer Havercamp, a former senior Clinton trade official now working as counsel to Environmental Defense, said last week during testimony to the Senate Finance Committee.
Brent Blackwelder, president of Friends of the Earth, said he expected Boxer to pull the Lieberman-Warner legislation from the Senate floor if a safety valve were added to the legislation.
"It's got to get stronger," said Blackwelder in an interview. "Safety valves are a way of copping out. It'd absolutely derail the entire process."
Yet some longtime climate policy observers predict the negotiations over a cost provision may still yield agreement.
"I've had the sense in informal conversations that when it comes to a deal, if there's really a deal on the table, they could live with that," Richard Morgenstern, a senior fellow at Resources for the Future, said of environmental groups.
Morgenstern, who worked at U.S. EPA and the State Department during the Clinton administration, added, "They don't want to offer it up too soon."