July 15, 2007

The bumpy road to federal carbon dioxide caps

Craig Gannett and Dan Adamson, Davis Wright Tremaine

In January and February, members of the U.S. Congress introduced with great fanfare a dozen comprehensive carbon cap-and-trade bills that compete with each other to impose the most stringent standards possible. Soon afterward, Speaker of the House Nancy Pelosi called for consideration of a bill by the full House by this summer.

 

Then reality began to set in. House Commerce Committee Chairman John Dingell said his committee could not possibly refine such a complex piece of legislation so quickly. After considerable skirmishing, including the creation of a new House committee to advise on climate change, Pelosi scrubbed her timetable and turned her attention to less-complicated, less-contentious energy legislation. Senate Majority Leader Harry Reid has followed suit, and the prospects for enacting cap-and-trade legislation before a new president takes office in January 2009 now appear scant.

Consequently, congressional Democrats now have a choice. They can try to move legislation through both houses of Congress within the next 18 months and then try to make political hay out of an almost certain veto by President Bush. Or, they can spend the next 18 months developing a bill to be sent to the next president. All indications are that they will follow the latter course.

Two important issues may already have been resolved. First, any greenhouse gas (GHG) reduction program almost certainly will be mandatory, not voluntary. Second, it appears likely that regulation of the electric power sector's CO₂ emissions will be via a carbon cap-and-trade system—similar to the one used to address acid rain by reducing SO₂—rather than by a tax on the production of carbon. Although some respected economists and industry leaders favor a carbon tax for its simplicity and ease of administration, the success of the acid rain program and the political charge of the word "tax" make the cap-and-trade approach a better bet.

But those are only two issues, and many more of equal importance remain. Following are eight raised by carbon bills introduced in the Senate. Most are sure to be the focus of debate in the House as well.

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