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Senate Climate Change Bill Dead in 2008; Tune in Next Year

Senate Democrats' efforts to pass climate change legislation this year came to a screeching halt Friday when the chamber failed to obtain the required 60 votes needed to move forward with the bill. But that's not the end of the story.

By 48-36 the Senate rejected cloture on the climate bill (S. 3036), effectively ending any chance for the measure this election year. The vote broke largely along party lines, with only a handful of Republicans joining Democrats to support cloture.

The bill is finished in the Senate for this year, said Martin Edwards, vice president of legislative affairs for the Interstate Natural Gas Association of America (INGAA). "There's a long way to go in terms of developing political support to move the bill forward." It'll be 2010 or later before Congress passes legislation that will reduce heat-trapping greenhouse gas (GHG) emissions, he said.

Energy analysts Christine Tezak and K. Whitney Stanco of Stanford Group Co. agreed. "It is unlikely that the Senate will take up climate legislation again this year. We believe that mid-2010 is the earliest we could see a final bill emerge from Congress," they said.

"In an era of $4 gas, it's not easy to move a bill forward that would further increase prices," Edwards said. "The economic impacts of the bill are difficult to understand, but everybody realizes they are huge."

The climate bill, sponsored by Sens. Joseph Lieberman (I-CT) and John Warner (R-VA), now goes back on the Senate calendar and could be called up later this session, but that isn't likely to happen, said Bill Wicker, spokesman for Sen. Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee.

"The reality is that this is the end of climate change in this Congress," which will go out in early October and possibly return in either November of December for a lame-duck session, he said. Most analysts had not expected action on climate change from this Congress. Most major energy legislation -- such as the Energy Policy Act of 2005, first proposed in 2001 -- take an extended trip through the Congress with much fine-tuning along the way.

One vigorous proponent of climate control legislation, California Gov. Arnold Schwarzenegger Friday blasted the Senate for pulling the proposed Lieberman-Warner Climate Security Act after it failed a vote test. He accused senators of playing politics rather than exercising leadership.

"When it comes to climate change and protecting our environment, what the people want is leadership -- not politics -- but [politics] is exactly what the Senate gave them by failing to act on this climate change legislation," Schwarzenegger said. "Washington has failed the people and our environment once again, but California will continue to lead the fight against global warming, with or without Washington."

Notwithstanding the Senate roadblock, the House is expected to hold some hearings later this month on the Lieberman-Warner bill and the $8 trillion measure sponsored by Rep. Edward Markey (D-MA), said Tezak and Whitney in a policy research paper. The objective of the hearings is to "build some kind of consensus" around the climate issue, according to INGAA's Edwards.

The Senate measure proposed cutting carbon dioxide (CO2) and other GHG emissions from affected industries -- such as power plants, refineries and transportation sources -- to 19% below current levels by 2020, and to approximately 70% below current levels by 2050.

The legislation would limit the amount of CO2 that affected industries could emit. It would set up a program for trading allowances. Companies would buy allowances if they were unable to meet the emissions cap or sell allowances if they were successful in meeting the cap.

One issue still to be resolved is the cost of emissions control, including its impact on the preferred "transition" fuel, natural gas. A report by energy consulting firm Wood Mackenzie said the aggressive CO2 reduction targets in the Senate climate change legislation would result in large-scale utility fuel switching that could send natural gas prices soaring during the next decade. That impact already is visible in the high natural gas prices today, as new coal-fired power plants are cancelled one after another, and replaced by gas-fired generation because of the threat of expensive emissions limits. It demonstrates that even pending legislation carries a big stick.

Specifically the analysis, which was released last week, showed that the bill would result in allowance costs of $2.3 trillion to the U.S. natural gas and power sector and cause delivered domestic natural gas prices to climb upwards of $6-9/MMBtu -- an increase of up to 90% from previous average levels. The power sector also would need incremental investment of $500 billion in baseload, zero-emission technology, for a total impact of $2.8 trillion through 2030, it said. Other key findings in the Wood Mackenzie study included:

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