Climate change legislation now being considering by Congress unfairly targets Midwestern states and would force a disproportionately large portion of the cost of cap-and-trade on utility customers in those states, according to some panelists testifying during a hearing of the Senate Environment and Public Works Committee Wednesday.

“I understand the desire to reduce our carbon footprint, and I think we should, but I am concerned that this bill is not fair and I am concerned that it hurts consumers, especially Midwestern consumers, far more than it has to,” said South Dakota Public Utilities Commissioner Dustin Johnson. The Senate climate change bill (S 1733) would result in a 25% increase to utility bills in his state by 2012, Johnson said.

Cost associated with the bill would fall disproportionately on the Midwest, Johnson said, because the bill “picks regional winners and losers…under this bill California would receive 12 million more carbon allowances than it needs and little South Dakota would be left about 3 million allowances short. Other Midwestern states are left in similar situations, and that is going to mean a very real transfer of jobs and billions of dollars from our nation’s heartland to the coasts.”

Chairman Barbara Boxer’s (D-CA) mark of the Senate bill “is worse for consumers than the Waxman-Markey bill,” Johnson said. A “soft collar” included in the mark would not do enough to limit speculation or control price impacts to Midwestern ratepayers, he said.

According to Joel Bluestein, senior vice president of Fairfax, VA-based consulting firm ICF International, utility customers in Missouri would see rate increases of 42-77% if the Senate bill is passed in its current form.

Other panelists were more optimistic about the bill’s economic impact.

“Every credible economic analysis, and I’ve looked at them all, shows that we can grow our economy very robustly with a cap on carbon…the economy will be much larger in 2020 and 2030 and 2050 than it is today, regardless of what we do,” said Nathaniel Keohane, director of Economic Policy and Analysis for the Environmental Defense Fund. “What this is about is protecting our future and making an investment in the future…it is something we can absolutely afford.”

The Environmental Protection Agency (EPA) recently released a proposed rule that would allow for the regulation of greenhouse gas (GHG) emissions from large emitters under the New Source Review provisions of the Clean Air Act (see Daily GPI, Oct. 1a). The general opinion among energy and other interests has been that action by lawmakers is preferable to having GHGs regulated by EPA — a sentiment repeated by some of the panelists.

“What we have not seen is what the impact on our economy is going to be if we allow the EPA to act to regulate carbon,” said NRG Energy CEO David Crane. “From my perspective, while we are unable to quantify that right now, the consequences of that are very worrisome to our company.”

Boxer’s mark, which was issued Friday, is an updated version of the climate change bill that Boxer and Sen. John Kerry, chairman of the Foreign Relations Committee, introduced in late September (see Daily GPI, Oct. 27; Oct. 1b). Boxer has indicated that she plans for the committee to vote, possibly in the first week of November, on the legislation, which would seek to reduce GHG emissions by 20% below 2005 levels by 2020. But the odds are quickly diminishing that the full Senate will be able to pass climate change legislation this year, let alone reconcile its bill with the House’s proposed Waxman-Markey legislation on climate change (HR 2454) and send it to President Obama.

Like the House climate bill, the centerpiece of the Senate legislation is a system to cap carbon emissions and allow polluting industries to purchase and trade emission credits to comply with the cap. Also like the House measure, the Boxer “mark” would provide a number of industries with emission allowances, which are aimed at protecting consumers from energy price hikes; assisting industry in the transition to a clean energy environment; and spurring energy efficiency and development and deployment of clean energy technology.

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