Senate Climate Bill Revives Complaints of Coal-Dependent States

The U.S. Senate Committee on Environment and Public Works begins three days of full committee hearings on S. 1733 the Clean Energy Jobs and American Power Act this morning at 9:30 am. Sen. Boxer issued a press release outling the line-up for the first hearing. A link to a live webcast of the hearing will be available from the committee website.

Reprinted from http://www.bloomberg.com/apps/news?pid=20601103&sid=aJeInYe72Uvw#

By Daniel Whitten and Jim Efstathiou Jr.

Oct. 27 (Bloomberg) -- Climate change legislation proposed in the U.S. Senate has revived a fight over the cost of combating global warming between coal-dependent states and those that get energy from cleaner sources.

In a draft of a letter to the climate legislation’s sponsors, Senator Tom Harkin, an Iowa Democrat, said the House and Senate bills put coal at a disadvantage and that he wants to revise how free pollution permits would be distributed.

Senator Barbara Boxer, a California Democrat who is chairman of the Environment and Public Works Committee, on Oct. 23 proposed a climate bill that requires emissions cuts of 20 percent below 2005 levels by 2020, 42 percent by 2030 and 83 percent by 2050. Limits passed in the House are similar, except the 2020 reduction target is 17 percent.

Both bills would establish carbon dioxide emission limits, and require major polluters to buy pollution credits after the government initially gives many away to ease the cost during the transition. Utilities that don’t use coal would get more of the credits they need for free than coal-burning plants, according to Harkin.

The coal industry’s complaint with how permits are given away will complicate efforts to pass legislation aimed at reducing global warming. Oil refiners have joined the coal industry in opposing the legislation, and nuclear-energy producers say the measures should have more incentives to build new plants.

The distribution of permits is important and “can help build a constituency for support of the proposal,” Robert Stavins, director of the Harvard Environmental Economics Program in Cambridge, Massachusetts, said in an interview.

Boxer’s committee will begin three days of hearings on the 923-page bill today and may vote on it next month.

Manufacturers, Refiners

In the Senate bill, utilities would get 35.5 percent of all allowances for free, manufacturers up to 15 percent and refiners 2.25 percent, the same as the House breakdown.

The allocation formula for utilities uses a plan agreed to by members of the Edison Electric Institute, the utility industry’s Washington trade association, which bases free permits half on historical emissions and half on the amount of electricity sold.

Harkin is concerned that the formula “will unfairly and disproportionately raise electricity costs in certain regions of the country,” his spokesman Grant Gustafson said in an e-mail. The problem can be resolved by distributing free permits based on historical emissions, he said.

Harkin “plans to work with his colleagues in the Senate to address this issue as they move forward with the climate change bill,” Gustafson said. Coal-fired plants produce more than 80 percent of Iowa’s electricity, according to the Energy Information Administration.

Draft Letter

Harkin detailed his concerns in a draft letter to Boxer, Senator John Kerry, a Massachusetts Democrat who cosponsored the bill, and Senate Majority Leader Harry Reid of Nevada. The letter hasn’t yet been sent, Gustafson said.

“Utilities that are more coal dependant will need to purchase even more allowances than they would have if all allowances were allocated based on emissions, and those higher costs will be passed on to customers,” Harkin wrote.

Paul Rosengren, a spokesman for Public Service Enterprise Group Inc., said that his company supports the so called 50-50 agreement hammered out by EEI.

“No one is helping our customers to offset the extra costs,” said Rosengren. New Jersey and New England have invested substantially in providing cleaner energy sources, and as a result power costs are already 40 percent more expensive than in some states that are heavy coal users, he said.

Loan Guarantees

The nuclear industry is seeking up to $100 billion more in loan guarantees for nuclear power plants, on top of the $18.5 billion allocated, more favorable tax treatment for nuclear power production and a faster permitting process for new plants.

“Nuclear has a very high profile and it will be necessary for there to be some agreement on nuclear provisions for climate legislation to progress in the Senate,” said Alex Flint, the chief lobbyist for the Nuclear Energy Institute.

The Senate bill “promises more pain to consumers but also imposes much greater burdens on some parties than others,” American Petroleum Institute President Jack Gerard said in an e- mailed statement.

Democratic senators from industrial states that depend on coal-fired plants for a majority of their electricity have opposed the similar measure the House passed in June.

Democratic senators such as Kent Conrad of North Dakota and Blanche Lincoln of Arkansas have raised doubts about passing climate legislation this year.

Senate Democrats

Evan Bayh, of Indiana, Sherrod Brown of Ohio, and Ben Nelson of Nebraska, are among a group of Senate Democrats who have objected to the House cap-and-trade provisions endorsed by Boxer.

“This bill is very much a work in progress, and there are many more pieces to the congressional process before we will have a final and complete package,” said Erin Streeter, a spokeswoman for the National Association of Manufacturers, which represents many members in coal-heavy industrial states.

To contact the reporter on this story: Daniel Whitten in Washington at dwhitten2@bloomberg.net ; Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net .

Last Updated: October 27, 2009 00:01 EDT

This article brought to you by the Indiana Renewable Energy Association (InREA). The views expressed in this article are not necessarily those of InREA.