Senate climate bill under a cloud

Seldom have we encountered a bill that we hated to love as much as the American Power Act, the long-awaited climate and energy bill unveiled last week by Sens. John F. Kerry (D-Mass.) and Joe Lieberman (I-Conn.). It is simultaneously a gift to polluters and the most significant step ever taken by this nation to solve the world’s most pressing environmental problem. It is a gorgeous mess.

Despite the increasingly shrill denials by conservatives who are allowing their traditional distrust of government to trump common sense, there is overwhelming scientific evidence that climate change is happening and that the greenhouse gases resulting from industrialization are the cause. The mass migration, warfare, famine, disease, infrastructure loss and economic catastrophe that are the predicted results of unmitigated climate change can still be avoided if the U.S. and other industrialized nations act now by putting a price on carbon.

The Kerry-Lieberman bill would do that by capping the total amount of greenhouse gases large polluters such as power plants and refineries could emit, and requiring them to buy carbon allowances (an allowance grants the right to emit a ton of carbon-dioxide or its equivalent) in a carefully regulated market. The bill contains some smart provisions for minimizing the damage to businesses and consumers from higher energy prices and avoiding Wall Street manipulation of carbon trading. But in order to drum up support in the Senate, it has been loaded up with counterproductive handouts to utilities, polluting industries and individual senators that would limit its effectiveness and probably lead to a host of unforeseen negative consequences.

If the bill were stripped of those provisions, its passage would probably become even less likely than it already is — the sole Republican involved in its crafting, Sen. Lindsey Graham of South Carolina, has withdrawn his support; there is no sign that any other Republican will back it; and some Democrats are reluctant to sign on. But there is a glimmer of hope. The healthcare reform bill signed into law in March was greatly improved during the committee process, as many of the back-room giveaways were eliminated. With enough public attention and pressure, the same could happen with the climate bill. Here are some of its biggest offenses:


Offshore drilling. The bill would for the first time grant states a 37.5% share of the revenues collected by the federal government for drilling in federal waters off their coasts. Kerry and Lieberman appear not to have noticed that the devastating spill in the Gulf of Mexico has exposed the risks of offshore drilling; their sole concession to that risk is a provision allowing states to veto projects within 75 miles of their shores. In other words: Here’s a huge pile of money to allow drilling — but you don’t have to take it if you don’t want to. The climate bill should focus on weaning the U.S. off of carbon-intensive fuels such as oil, not encouraging more environmentally destructive drilling.

Nuclear power. The bill seeks to loosen safety and environmental safeguards to expedite the construction of new nuclear plants, which is both unnecessary and dangerous. Further, it calls for billions of dollars in additional loan guarantees for nuclear power even though the nation still hasn’t solved the problem of what to do with its radioactive waste, most of which is stored at the country’s 104 nuclear plants. Until we have a better way to dispose of a waste stream that remains potentially deadly for thousands of years, we shouldn’t invest massive federal resources in new nuclear facilities.

Offsets. Many schemes targeting carbon emissions around the world allow offsets, in which polluters invest in projects that would absorb or avoid CO2 rather than buying carbon allowances. Offsets can take a lot of different forms, such as energy-efficiency projects, tree-planting initiatives or methane-reduction measures at landfills; polluters like them because they are often cheaper than allowances. But most existing offset programs are controversial, because it’s nearly impossible to verify their emission reductions or demonstrate that the projects wouldn’t have been launched even without the outside investment. The bill allows offsets for up to 2 billion tons of CO2 every year, which is too high.

Allowance allocation. The arcane process of distributing and auctioning carbon allowances under the bill reminds us why we’ve long favored carbon taxes over cap and trade. The most equitable and effective, and least economically disruptive, way to handle allowances would be to sell 100% of them at auction and distribute the proceeds to taxpayers via refunds. That’s not the way it would be done under the American Power Act, at least initially. In the early years, only about a quarter of the allowances would be sold at auction. Most of the rest would be given away to heavy manufacturers (giving the government the opportunity to pick winners) and utilities. The latter are supposed to pass the benefits on to their customers in the form of refunds or energy-efficiency programs. We suspect some of that allowance money will be improperly diverted. Plus, if consumers get refunds on their power bills they won’t get a price signal encouraging them to lower their electricity use or invest in solar panels.


There’s more not to like, yet all the bill’s negatives still don’t come close to outweighing its positives. Although the carbon-trading scheme at its heart would probably run into snags in the early years, eventually it should mature into an effective and economically viable way of turning down the Earth’s temperature. The carbon allowances provide an opportunity to reduce the federal deficit as well as fund worthwhile projects that would create jobs and spur clean-energy innovation. We hope negotiators can improve the bill, but even if they can’t we’d urge the Senate to approve it. The perfect is the enemy of the good, and incremental change is better than no change at all.