Getting Down to the Wire for Cap and Trade in the US

The US Climate Change bill, known as the Clean Energy and Security Act, will be voted on this week in Congress. It still looks doubtful that the democrats can secure the 218 votes necessary votes to pass the Bill, with some estimates that there are just 190 votes currently favouring the legislation. The legislation would require a 17 percent emissions reduction from 2005 levels by 2020, mandate electric utilities to meet 20% of their electricity demand through renewable energy sources by 2020, provide $90 billion for new investments in energy efficiency and renewable energy, along with $60 billion for carbon capture and sequestration. Another key provision, termed "cap-and-trade," would require industries and manufacturers to cut carbon emissions by setting up a system where they could buy and sell pollution credits.

Republicans are concerned that cap and trade will be a regressive taxation that will negatively impact the economic recovery, lead to higher energy costs and increase the number experiencing energy poverty. Warren Buffet, who now advises President Obama on economic matters, agrees.

It also contains a set of measures which should be of significant concern to Canada in general and Alberta in particular. Buried within the Bill are provisions for a levy on goods imported into the US which come from a country which is not seeking to limit CO2 emissions, as judged by the US Environmental Protection Agency. The idea behind this is simple: once the US regulates greenhouse gases produced by US companies, those companies won't be struggling to compete with foreign companies that have no such restrictions imposed on them.

The target of this provision within the legislation is China and India and it can be seen as part of the US bargaining position for the Copenhagen climate change negotiations to be held in December. China is already suggesting that this is an opening protectionist move which will trigger a trade war. It is also in breech, in China’s view, of the World Trade Organizations regulations.

Canada could be affected if our CO2 emissions regulations, which focus on intensity targets rather than absolute emissions, are deemed by the US to be inadequate when compared to their own measures. The target here would be oil from Alberta’s oil sands – so-called “dirty oil”.

As the US debates this Bill, there are interesting developments in Australia. They are, according to one report, proceeding at a Koala’s pace. The Australian Senate looks likely to reject its own version of cap and trade. This follows the Prime Minister Rudd’s announcement that, even if the cap and trade scheme passes the Senate, its introduction will be delayed by a year. On June 4, this delayed emission trading scheme passed the House of Representatives despite a solid vote against it by the opposition. But it now faces certain defeat in the Australian Senate. Whereas the Labor government controls 32 votes in the Senate, the opposition Liberal-National coalition controls 37 and is committed to vote against it if the Rudd government will not grant more time to consider the outcome of the Copenhagen climate conference in December and US Senate deliberations. Many of the coalition parliamentarians now want to vote unconditionally against an ETS in any form.

A key factor in the Australian context is the widespread public skepticism about the science of climate change. A new book, written by the experienced climatologist Ian Plimer, is having a major impact. Heaven and Earth, Global Warming: The Missing Science has caused several former cap and trade supporters to shift their views and has lead some leading journalist to recant their hitherto strong support of carbon sequestration and cap and trade. The book simply points to the absence of convincing scientific data, based on observations and measurements, that manmade CO2 is a primary contributing factor to climate change. It also offers a compelling critique of computer climate simulations – the basis of most of the global warming “science” that now informs policy. The book is in its fifth printing after just a month of publication. It is pushing others to “come out of the closet” and make their voice heard, which in turn is influencing the politicians faced with a crucial vote.
The developments in the US and Australia are all preludes to the Copenhagen conference to be held in December. Aimed at developing a new global agreement on climate change to replace the Kyoto accord, governments are positioning and maneuvering. It is not a pretty sight. What is becoming clear is that the campaigners seeking strong, tough measures to “save the planet” are losing ground to economic realists and to those who simply do not accept the simplistic “manmade” view of climate change.

The US vote this week, if it fails, will derail the Copenhagen talks. If it passes, it will make clear that the climate change agenda is as much about economic protectionism as about the climate. Either way, it will make agreement in Copenhagen more difficult to achieve – something evident from the several meetings that have taken place already in preparation for the December meetings. We are in for a stormy political summer.