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Domenici Assails Senate Cap-and-Trade Legislation

A leading Republican senator on energy issues last Tuesday criticized the cap-and-trade legislation proposed by Sens. Joesph Lieberman (I-CT) and John Warner (R-VA) that seeks to reduce heat-trapping greenhouse gas (GHG) emissions.

"While America can and should take steps to reduce our carbon dioxide emissions, without international cooperation any progress made within our borders will have little to no positive impact on the environment and quite negative effects on our nation's economic strength," Sen. Pete Domenici of New Mexico, the ranking Republican on the Senate Energy and Natural Resources Committee, wrote in the Washington Times on Earth Day.

This is why the Lieberman-Warner bill "is so troubling to me," he said. "While cap-and-trade has not been implemented in the U.S., we now have empirical evidence from abroad that demonstrates its ineffectiveness. In 2006 carbon dioxide emissions in the U.S. declined by 1.5%, while the European Union, under a cap-and-trade system, saw increases of up to 1.5%."

Moreover, an Environmental Protection Agency report found that the economic impact of the Lieberman-Warner measure, as passed by the Senate Environmental and Public Works Committee last year, "would be staggering," Domenici said (see NGI, Dec. 10, 2007). The report estimates that in 2030 the legislation could decrease the gross domestic product by up to $983 billion a year and raise the price of electricity by 44%, he noted.

Another study, conducted by SAIC Corp., concluded that "higher energy prices would have ripple impacts on prices throughout the economy and would impose a financial cost on households," according to Domenici.

"I believe it would be foolish for our nation to pursue a policy that takes a domestic regulatory approach to a global problem. If the U.S. were to undertake such strict carbon caps, we would be placing American companies -- and jobs -- at risk. I am not opposed to America taking a position of leadership in the fight against carbon emissions. I am opposed to doing it in a way that will benefit our foreign competitors at a time when there is widespread agreement that America's competitiveness is being challenged."

The Lieberman-Warner bill seeks to reduce total U.S. GHG emissions by as much as 19% below the 2005 level by 2020 and by as much as 63% below the 2005 level by 2050. It proposes to control compliance costs by allowing companies to trade, save and borrow emission allowances, and by allowing them to generate credits when they induce businesses, farms and others to reduce their GHG emissions or capture and store GHG emissions.

The bill would provide free allocations of 20% of the emissions cap to manufacturing facilities in 2012, phasing out the free allocation by 2036, and it provides free allocations of 9% of the annual emissions cap to states. It would phase in up to 73% of the annual emissions cap for auction by 2036, distributing 20% of the proceeds to low- and moderate-income energy consumers. Set-aside emissions credits and money raised by the auction of emission allowances would also be invested in deploying emission-reducing technologies and practices.

The full Senate is expected to take up the measure sometime in June.

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