Opening Moves Of Carbon Trading Gambit In Congress?

A couple of things have crept up in the last few days that make me think that a serious play for some form of carbon credit and/or trading scheme will come up in this Congress. First, the inside baseball bench moves from My DD's, Nancy Scola:

Pelosi's push this week to create a new Select Committee on Energy Independence and Global Warming was a fascinating peek into the inner-workings of the House and the relationships between the Speaker, Democratic leadership, and the rest of her caucus. Yep, the new panel lacks legislative jurisdiction, but is a platform for raising the profile of climate change. As to be expected, John Dingell -- chairman of the committee that loses ground in this new move and the representative from suburban Detroit -- found this whole reorganization business just simply unnecessary.

Motivating Pelosi? The knowledge that Dingell isn't too keen on the idea that there is a scientific consensus on global warming; the Speaker seems to really want movement on climate change this Congress, and this move puts pressure all around to squeeze something out of the House in the near future.

But oh, there's so much more in this mix! For example: Dingell's chief of staff was a lobbyist and strategist at DaimlerChrysler as late as November. Dingell's wife is the executive director of government relations at GM. Dingell favored Hoyer over Pelosi in the Whip's race in 2001. Pelosi backed Dingell's primary challenger Lynne Rivers in 2002. One House chairman, Henry Waxman is of the opinion that "existing committees can deal effectively with global warming," but worth keeping in mind is that Waxman is next in line for the chair of the Energy and Commerce Committee should the 81 year-old Dingell ever vacate the House.

Just in terms of structure, it's hard not to see this as an end run by Pelosi around the House's committee system and its chairmen. There just doesn't seem to be a whole lot of precedent for what she's done. (Of course, one might argue that there's not a whole lot of precedent for global warming.) The last "non-permanent select committee" was created by Republican leadership to blunt criticism after Hurricane Katrina. The one before that, Homeland Security, was created in the wake of September 11 and soon evolved into full standing committee. This new panel isn't as obviously event-driven and isn't yet designated permanent. Is the idea for it to be short-lived and for climate change and energy independence to revert back to Energy and Commerce when, say, Waxman pries the gavel out of Dingell's hands?

So, that's the House, where Pelosi seems to be laying the groundwork for a committee to talk serious shop about climate change. Over on the Senate, the EIA has just posted a response to a request (largish PDF document) by Sens. Bingaman, Landrieu, Murkowski, Specter, Salazar, and Lugar - a bipartisan lot you'll note -- for comment on draft legislation for a carbon trading regime. In the document, complete with the senators' request and draft legislation.

The draft legislation itself is pretty forward-thinking (at least compared to efforts to-date):

The program would establish annual emissions caps based on targeted reductions in greenhouse gas intensity, defined as emissions per dollar of Gross Domestic Product (GDP). The targeted reduction in GHG intensity would be 2.6 percent annually between 2012 and 2021, then increase to 3.0 percent per year beginning in 2022. To limit its potential cost, the program includes a “safety-valve” provision that allows regulated entities to pay a pre-established emissions fee in lieu of submitting an allowance. The safety-valve price is initially set at $7 (in nominal dollars) per metric ton of carbon dioxide equivalent (MMTCO2e) in 2012 and increases each year by 5 percent over the projected rate of inflation, as measured by the projected increase in the implicit GDP price deflator. In 2004 dollars, the safety valve rises from $5.89 in 2012 to $14.18 in 2030.

The proposal calls for initially allocating 90 percent of the allowances for free to various affected groups, but the proportion of allowances to be auctioned grows from 10 percent in 2012 to 38 percent in 2030. The revenue from the auctions and any safety-valve payments are accumulated into a “Climate Change Trust Fund,” capped at $50 billion, to provide incentives and pay for research, development, and deployment of technologies to reduce greenhouse gas emissions. The U.S. Treasury would retain any revenue collected in excess of the $50-billion limit.

Predictably, the EIA takes a dim view of the proposal. In essence they say that it would shave output in the early part of the program as industries pick the low-hanging fruit from a greenhouse gas (GHG) amelioration standpoint. But says the EUA, after that as gains get harder to come by, they would just pay more into the "saftey-valve" account and pollute away. However, the EIA predictions for future prices don't seem to take into account the increased expenses from either building non-GHG production, or paying the production penalty that the producers will incur and inevitably pass on to consumers.

All of EIA's prognostication abilities must be taken with a large grain of salt, considering for example their inability to predict (see: Natural Gas & Diminished Expectations) US gas production and imports over the last six years, or their utter failure to come to grips with North Sea peak oil.

Not saying that anything that reaches the floor will even remotely resemble the draft. But this at least shows that there are people on both sides of the aisle who are starting to think and -- more to the point -- plan seriously about making intelligent policy with regards to petroleum scarcity and global warming.