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Senate Duo Forges Agreement to Pass Climate Change Bill

Sens. Lindsey Graham (R-SC) and John Kerry (D-MA) have outlined a framework for reaching agreement on comprehensive climate change legislation in the Senate, which would include provisions on promoting nuclear generation and expanding oil and natural gas development.

"Our partnership represents a fresh attempt to find consensus that adheres to our core principles and leads to both a climate change solution and energy independence. It begins now, not months from now -- with a road to 60 votes in the Senate," wrote Graham and Kerry in a recent op-ed article in the New York Times (NYT). Kerry is co-sponsor of the Senate climate change bill, which is pending in the Environment and Public Works Committee (see NGI, Oct. 5).

Climate change legislation "requires honest give-and-take and genuine bipartisanship. In that spirit, we have come together to put forward proposals that address legitimate concerns among Democrats and Republicans and other constituencies with stakes in this legislation. We're looking for a new beginning, informed by the work of our colleagues and legislation that is already before Congress," they said.

Graham's negotiations with Kerry and other key Democrats raise the odds to 40% that 60 votes will be found in the Senate to pass climate change legislation before the end of the year, said energy analyst K. Whitney Stanco of Concept Capital's Washington Research Group. However, even if the votes are found, it's unlikely that there will be time for the House and Senate to conference the bill, vote on it and send it to the president by year-end.

"We believe that if the Southern Republican [Graham] ultimately supports a climate bill it may help moderate Democrats like Sens. Ken Conrad (North Dakota) and Blanche Lincoln (Arkansas) and Republican 'hoped-fors' such as Dick Lugar (Indiana), George LeMieux (Florida) and George Voinovich (Ohio) vote for the legislation," Stanco said.

In the NYT piece, both Graham and Kerry said they agreed that climate change "is real and threatens our economy and national security. That is why we are advocating aggressive reductions in our emissions of the carbon gases that cause climate change. We will minimize the impact on major emitters through a market-based system that will provide both flexibility and time for big polluters to come into compliance without hindering global competitiveness or driving more jobs overseas."

Second, "while we invest in renewable energy resources like wind and solar, we must also take advantage of nuclear power, our single largest contributor of emissions-free power. Nuclear power needs to be a core component of electricity generation if we are to meet our emission-reduction targets," the senators said.

And "we must recognize that for the foreseeable future we will continue to burn fossil fuels. To meet our environmental goals, we must do this as cleanly as possible. The United States should aim to become the Saudi Arabia of clean coal. For this reason we need to provide new financial incentives for companies that develop carbon capture and sequestration technology.

"In addition we are committed to seeking compromise on additional onshore and offshore oil and gas exploration -- work that was started by a bipartisan group in the Senate last Congress. Any exploration must be conducted in an environmentally sensitive manner and protect the rights and interests of our coastal states," the senators said.

Graham supports the "Gang of 10" proposal, which sought to open additional Gulf of Mexico areas and allow the states of Virginia, North and South Carolina and Georgia to opt into leasing off their shores. Graham was a member of the "Gang of 10." Billions of dollars of offshore revenues would go toward the development of renewable fuels, efficiency and conservation initiatives (see NGI, Aug. 4, 2008).

Moreover, to protect the U.S. from overseas competitors that do not comply with environmental standards, "we should consider a border tax on items produced in countries that avoid these standards.

"Finally, we will develop a mechanism to protect businesses -- and ultimately consumers -- from increases in energy prices. The central element is the establishment of a floor and a ceiling for the cost of emission allowances. This will also safeguard important industries while they make the investments necessary to join the clean energy era," Kerry and Graham said.

"Failure to act comes with [a] cost. If Congress does not pass legislation dealing with climate change, the administration will use the Environmental Protection Agency to impose new regulations," which are likely to be "tougher and they certainly will not include the job protections and investment incentives we are proposing.

"The message to those who have stalled for years is clear: killing a Senate bill is not success; indeed, given the threat of agency regulation, those who have been content to make the legislative process grind to a halt would later come running to Congress in a panic to secure the kinds of incentives and investments we can pass today," the senators said.

The potential cost of the House climate change bill (HR 2454) still has some senators shaking their heads.

"We believe that investment and innovation, rather than taxes and regulation, is the way to go to address this," Sen. Sam Brownback (R-KS) said last Wednesday during a Senate Energy and Natural Resources Committee hearing on the economic effects of HR 2454. "You should go on a different model than this, and one that I don't think involves near the speculation nor the market manipulation that this panel is talking about. You're talking about a massive market manipulation here on a grand scale that has significant impact...particularly on the Midwest and the South in this country."

Implementation of HR 2454 could add 20% to electricity bills by 2030, according to an analysis of the legislation performed by the Energy Information Administration (EIA). The study's basic reference case foresees electricity prices of 12 cents/kWh by 2030, 20% higher than current EIA projections. Other scenarios used in the EIA study pointed to 11.1-17.8 cents/kWh electricity prices by 2030.

The House climate change bill would reduce gross domestic product below what it would otherwise have been by as much as 0.75% in 2020 and by as much as 3.5% in 2050, according to a recent Congressional Budget Office (CBO) study (see NGI, Sept. 28). The bill, which seeks to cut greenhouse gas emissions by 83% in 2050, would take a toll on oil and gas producers, the CBO study said. A separate study by Congressional Research Service (CRS) dismissed many of the cost studies for the House cap-and-trade bill.

In testimony Wednesday officials from CBO, EIA, EPA and CRS said forecasting the long-term economic impact of legislation "is tenuous at best."

"Assessing the economic impacts of climate change in that quantitative way is very, very difficult," said CBO Director Douglas Elmendorf. "Our view is that over the next few decades the economic losses from policies to avert climate change would exceed the economic gains in terms of climate change. At some point over the longer term those lines may cross as the expected cost and the risk of climate change rise, but we're just not able to quantify those and the crystal ball really just does get too hazy for us to want to be attaching exact dollar values to that."

Some energy analysts have said it's unlikely that there will be time for the House and Senate to conduct a conference on the bill, vote on it and send it to the president by year-end.

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