After months of negotiation, Senators John Kerry and Joseph Lieberman unveiled their long-awaited climate and energy bill last week. As efforts continue to contain the oil spill in the Gulf of Mexico and midterm elections approach in November, there are doubts that movement on climate change legislation will occur.
In a Q&A, David Burwell evaluates the new energy and climate bill and its chances for moving forward this year. Burwell argues that despite an unfavorable domestic political environment, the United States urgently needs to adopt new climate and energy policies in order to reduce its dependency on oil and maintain its leadership in the global economy.
- What is the goal of the climate bill? Will the bill help reduce emissions, lessen oil dependency, and create new jobs?
- Does the United States need new energy and climate policies?
- What are the key elements included in the text?
- Is the bill likely to move ahead this year? What are its biggest hurdles?
- How does the legislation compare to the climate bill passed by the House last year?
- Did the oil spill in the Gulf of Mexico have any impact on the text of the bill or the chances of its eventual passage?
- How could this climate bill impact transportation in the United States?
- How is transportation related to climate change?
What is the goal of the climate bill? Will the bill help reduce emissions, lessen oil dependency, and create new jobs?
The new energy and climate bill put forward by Senators Kerry and Lieberman seeks to reduce carbon pollution by 17 percent (from 2005 levels) by 2020 and by over 80 percent by 2050. Reductions will come from all sectors—commercial, residential, power generation, and transportation, with limits on industrial sources of carbon pollution being delayed until 2016.
In order to reduce American dependence on oil, the bill specifically targets transportation carbon emissions because the transportation sector is responsible for over 70 percent of domestic oil consumption. The bill allocates more than $8 billion annually in new investments in transit—higher speed rail, green freight, and smart growth (bikeable/walkable) community grants—tax credits for creating a new generation of heavy duty trucks fueled by natural gas, and incentives for building electric and hybrid vehicles. It also embraces President Obama’s proposals for increased vehicle fleet efficiency.
The bill’s sponsors claim it will create millions of new jobs that will not easily be exported because building the new, low-carbon energy grid must happen within U.S. borders. The bill also aims to reduce the potential economic costs for industries focused on fossil fuel production and industrial workers by both delaying the imposition of limits on these industries and funding worker training programs for new clean energy jobs.
Does the United States need new energy and climate policies?
Absolutely. The Deepwater Horizon oil spill catastrophe in the Gulf of Mexico and the recent mine disaster in West Virginia that killed 29 miners underscore the need for new U.S. energy sources that are clean, green, and safer than our existing energy portfolio. The United States also exports over $300 billion annually to buy foreign oil–this money would be better spent stimulating the domestic economy.
Carbon emissions represent more than 80 percent of America's greenhouse gases and the United States currently produces over 20 percent of global carbon emissions. These emissions are the primary driver of global warming and in the long term, the problems caused by climate disruption—including the loss of coastal areas and desertification of arid lands in the western United States—will cause major and on-going problems to America’s economy.
Globally, if current trends continue, the impacts will be even worse, with hundreds of millions of environmental refugees moving across borders and exacerbating social and resource conflicts. Health risks will increase as tropical diseases move into communities that lack natural immunity to these diseases. And up to 35 percent of all species will be lost as the habitats needed for their survival disappear.
Kerry and Lieberman’s bill is a step in the right direction, but more is needed to minimize the negative effects of climate change.
What are the key elements included in the text?
The critical element of the legislation is that it puts a price on carbon and thus discourages carbon emissions, which cause global warming. Carbon pricing is applied to all sectors of the economy in different ways and in a phased process to reduce any potentially negative impacts for the U.S. economy, household finances, and the national budget.
A second important element is that the bill calls for two-thirds of all revenues generated by carbon pricing to either be paid back to consumers or be used to reduce the national deficit. Since wealthier households have higher carbon emissions than low-income households, the rebate program has the effect of turning a flat, regressive carbon tax into a progressive tax that allows medium- and low-income households to benefit from carbon pricing.
And finally, the bill’s focus on investing in low-carbon technologies will ensure that the United States remains competitive in a changing global economy. The United States, which has long been the global leader in investing in new technology, now lags behind China in terms of its investment in green and clean technology—and by a substantial margin. Pollution is waste and waste is economically inefficient. By reducing carbon pollution and thus reducing waste, the United States can maintain its position as an economic leader.
Is the bill likely to move ahead this year? What are its biggest hurdles?
The biggest hurdle is politics—it will be difficult to move the bill forward with elections approaching in November. Opponents of the bill will say that the price on carbon raises taxes. It is easy to call carbon pricing a tax, and to gain political points by opposing all taxes (over 200 members of Congress have signed a pledge to “never” vote for a new broad-based tax).
But, if the United States is serious about reducing the deficit and government spending, both new taxes and budget cuts will have to be adopted. In a recent poll, members of the U.S. public were asked which programs they were willing to cut to reduce the deficit. Only one program, foreign aid—which represents less than one percent of the federal budget—was cut by more than 50 percent of respondents. So, if budget cuts are unacceptable, the United States is going to have to face the reality of higher taxes in order to get our fiscal house in order. There are difficult choices ahead.
The carbon pricing scheme included in the Kerry-Lieberman bill is quite progressive due to its rebate provisions. Also, it targets more transportation choices as an investment priority. Since the average cost of owning and maintaining a car in the United States is now over $8,300 per year per car, more choices means less total households costs for travel. Americans now pay, on average, 19 percent of their household budget on transportation—more than on health care. Kerry-Lieberman helps to reduce these costs.
The argument for rapid enactment of the energy and climate bill is simple economics. The economic risks of continuing dependence on fossil fuels make structural changes necessary. Energy will need to come from biofuels, solar, wind, nuclear, clean natural gas, and (if possible and economically efficient) clean coal.
How does the legislation compare to the climate bill passed by the House last year?
The two bills have similar features including two key components: one, setting up a carbon pricing structure and, two, establishing a variety of rebates, allowances, and offsets to reduce economic hardship to industries, communities, and individuals. And both bills have the same target, a 17 percent carbon reduction below 2005 levels by 2020 and 80 percent reduction by 2050.
The Senate bill differs from the House bill in four primary ways. It calls for the phasing in of the carbon cap to buffer the impact on the manufacturing sector; it has a greater focus on nuclear power and offshore oil drilling; it allocates more revenues to rebates and deficit reduction, and it has a different mix of recipients for the revenues generated by carbon pricing (for example; it allocates more for green transportation and less for habitat protection). Green, low-carbon transportation investments benefit more from the Senate bill versus the House-passed bill.
Did the oil spill in the Gulf of Mexico have any impact on the text of the bill or the chances of its eventual passage?
It’s difficult to tell how the spill impacted the bill’s text. By the time the bill was finally presented by Senators Kerry and Lieberman after numerous stops and starts, the spill may have increased its focus on the need to reduce oil consumption—particularly from the transportation sector—and provided more emphasis on funding green transport and green fuels. Exactly how much, though, is difficult to measure.
Beyond this year, the spill surely moves the United States toward greater recognition that a legislative fix is needed to reduce dependence on energy. The world is moving away from dependence on fossil fuels and the United States will do the same. The real question is whether the United States will lead in the efforts or follow other countries.
How could this climate bill impact transportation in the United States?
Without a doubt the United States is facing a transportation crisis. The transportation program is internally broken and financially broke. Congress has not enacted an increase in the gas tax since 1993, and the tax’s buying power has been reduced by 40 percent due to inflation. In short, the Highway Trust Fund is penniless.
The bill makes a new, clear link between climate protection and transportation reform. It provides funding for green transportation infrastructure, creates discretionary investment programs designed to reduce transportation carbon; funds green transportation technologies; such as moving trucks from diesel fuel to natural gas and promoting new electric vehicle technologies; encourages increased fuel and vehicle efficiency; and seeks to reduce demand for energy through better coordination between land development and transportation investments.
Transportation agencies have traditionally failed to consider the climate implications of transportation planning and investment. They argue that transportation agencies don’t make environmental policy, they implement it. This bill removes that argument by directly linking climate policy to transportation policy.
How is transportation related to climate change?
Transportation is responsible for about 30 percent of carbon emissions in the United States. And the figure is even higher if the costs of producing, refining, and distributing transportation fuels to the consumer are included. Moreover, transportation continues to be the fastest growing source of domestic carbon emissions—growing over 25 percent since 1990. By comparison, during that same timeframe, total domestic carbon emissions increased at a rate of only about 16 percent.
And developing economies are in a rapid stage of motorization, with car sales in China growing more than 50 percent annually and total Chinese sales now exceeding total U.S. sales. India is not far behind. In short, unless countries radically change the global transportation paradigm climate change cannot be adequately addressed. Kerry-Lieberman, though it has hurdles left to clear, is the first necessary step in that direction.
