All Sides Gird for Cap-and-Trade Fight

Posted March 28, 2008 at 5:40pm

With midsummer debates over climate change looming in the House and Senate, a wide range of interest groups are rushing to sway Members and the public on historic legislation that could affect every sector of the U.S. economy.

“The prospect of federal legislation is a very real one,” said David Hayes, a former deputy Interior secretary during the Clinton administration who now heads the environmental division of Latham & Watkins. “This will be one of the most far-reaching environmental laws in history.”

Proponents of “cap-and-trade” legislation spent much of last year meeting with key Senators to lay the groundwork for December’s passage of America’s Climate Security Act, sponsored by Sens. Joe Lieberman (ID-Conn.) and John Warner (R-Va.) through the Environment and Public Works Committee.

“What’s happening now is the education of everybody else,” said Mark MacLeod, director of special projects for Environmental Defense Fund’s National Climate Campaign, one of numerous stakeholder groups that have stepped up their lobbying in anticipation of the Senate floor debate, which could happen as early as June. “April and May are the time when Members really try to firm up where they are.”

The outreach efforts also are intended to shape debate on the other side of the Capitol, where House Energy and Commerce Chairman John Dingell (D-Mich.) is writing a cap-and-trade bill he intends to send to the full House in time to conference with a Senate bill.

The surging interest in the issue underscores the complexity involved in creating an economy-wide regulatory regime for greenhouse gases like carbon dioxide. Under cap-and-trade, the federal government sets annual emission limits — the cap — and allocates emission allowances to companies that can be bought, traded or sold, thereby creating financial incentives to reduce pollution. The cap is lowered over time, ultimately stabilizing atmospheric levels of the gases.

Cap-and-trade was successfully used to reduce acid rain in the Northeast during the 1990s but has never been employed on the scale currently envisioned. The unfolding public debate largely centers on its economic implications.

Opponents say enacting new greenhouse regulations in the absence of commercially available carbon-reduction technology will be devastating to the U.S. economy.

“You can’t mandate a new regulatory scheme based on technologies that don’t exist,” said Bruce Josten, executive vice president for government affairs at the U.S. Chamber of Commerce. The group has been meeting with Members and staff to highlight its many concerns with the Lieberman-Warner bill.

Both the chamber and the National Association of Manufacturers in recent weeks have publicly highlighted the costs of controlling carbon through a dozen forums in states that could see job losses from cap-and-trade, such as the coal-producing states of Montana and North Dakota.

“You’re always better off if you can get constituents talking to [elected officials],” Josten said.

On the other side, proponents point to studies predicting costly economic losses that would result from inaction on global warming, while also highlighting the potential for economic growth that could accompany the “greening” of the economy.

“We want to tell the story that there is this potential for tremendous economic opportunity,” MacLeod said. To that end, the Environmental Defense Fund is sponsoring ads featuring CEOs of manufacturing companies, a campaign that highlights some of the unusual alliances that have emerged in the climate debate.

Such partnerships, as well as the intricacies of developing a cap-and-trade program, complicate the response by interest groups, as individual members and subset organizations press their own agendas behind the scenes.

For instance, trade groups representing electric utilities — the sector that will be most affected by a climate regime — must tread carefully in the debate because different power sources would see vastly different outcomes under a cap-and-trade program.

“We walk a fine line on this,” said Derrick Freeman, senior director of legislative programs for the Nuclear Energy Institute, the trade group for the industry. While nuclear power plants — which produce zero greenhouse gas emissions — would be the big winners under cap-and-trade, many NEI member companies also own coal-fired power plants — the big loser.

“If we sat them in a room, they would each have a different view of the bill,” Freeman said of NEI members.

Such internal divisions extend to the labor movement as well, where impacts vary widely by union.

Bob Baugh, executive director of the AFL-CIO Industrial Union Council, said the many member unions are united in support of cap-and-trade, if not the details. “It’s been a balancing act,” he acknowledged.

Manik Roy, director of Congressional affairs for the Pew Center on Global Climate Change, a think tank that strives to bridge the divide among interest groups, said the industry and labor divisions over climate change are in part due to their longtime opposition to global warming controls.

“A lot of these groups are only really contemplating negotiating for the first time,” he said.

But even the environmental community has seen dissent over strategy. One group, Friends of the Earth Action, has spent hundreds of thousands of dollars since January on an ad campaign calling on Senate Democrats to “fix or ditch” the Lieberman-Warner bill. Spokesman Nick Berning last week said new ads are planned ahead of the Senate floor debate on the bill, which the group said lacks aggressive emission reduction targets and is too friendly to industry.

Many observers see the myriad interests and views involved in the climate debate ultimately as a recipe for legislative gridlock, ensuring the issue will be punted to a successive Congress.

However, some optimists are holding out hope, pointing to the sweeping energy law enacted in December as evidence of the potential for compromise.

“This is going to be painful,” Roy said, “but this is a Congress that has shown it’s capable of doing painful things.”