The New Energy Bill May Create a 'Super Lobby' of Powerful Opposition

By Teryn Norris, AlterNet. Posted July 8, 2009.

Indeed, a significant issue that arose during deliberations on ACES was which agency or agencies would oversee what could become trillion-dollar markets for trading in emissions allowances and offsets, and related financial products. The ACES bill would authorize the Federal Energy Regulatory Commission to oversee emissions allowance and offset markets. But it leaves it up to an interagency working group to decide where jurisdiction over the larger derivatives market will lie. According to a recent investigation by Mother Jones:

"[The] bill leaves many vital specifics to the White House, directing the president to form a task force to determine precisely how to avoid "fraud, market manipulation and excess speculation." Andy Stevenson, finance adviser at the National Resources Defense Council, says, "I would feel comfortable if much more of it were explicit."

The financial industry is one of several industry groups that may join in opposition to future policy reform, particularly around the use of carbon offsets. Utilities and fossil fuel industry groups are likely to continue lobbying for an increase in the authorized volume of relatively cheap domestic and international carbon offsetting to avoid the more expensive task of reducing their own emissions. The demand for an increase in offsetting is likely to grow increasingly large after the lowest-cost emission abatement options are used in the early years of cap and trade.

The use of offsets to meet emissions reduction targets has very large implications when evaluating the impacts of ACES. Offset utilization may in fact be the single greatest variable in the proposal determining both economy-wide emissions reductions and reductions in capped sectors of the economy, established carbon prices, revenues raised through auctioning allowances and the revenues dedicated to clean energy, levels of private investment in clean energy driven by the program, and the revenues transferred from households and other domestic energy end-users to international interests through offset purchases.

In addition to utilities and fossil fuel firms, producers and sellers of carbon offsets will push for weaker evaluation standards in order to increase their potential sales. This was on full display during the House debate over ACES, with numerous agricultural interests successfully lobbying for the sympathetic Department of Agricultural to have jurisdiction over domestic agricultural offsets, instead of the Environmental Protection Agency.

It wasn't only the agricultural lobby pushing for weak oversight of the new carbon offset industry, however. The largest proponent was the House Committee on Agriculture itself, with Chairman Collin Peterson deftly maneuvering to strike a deal with Congressman Waxman, holding his committee members' votes hostage unless his demands were met. This example is testament to the fact that many policymakers will oppose future measures to strengthen oversight over carbon offsets and other provisions in order to protect domestic industries.

Carbon offsets are just one example of how ACES could create a powerful lobby opposed to future policy improvements. Similar principals will apply to other areas of the legislation, such as allowance distribution, emission reduction targets, renewable portfolio standards, and more. For example, reducing the free allocation of allowances to utilities and other incumbent energy industries in order to increase funding for clean energy technologies may be increasingly difficult in the future. The bill doesn't begin phasing out these free allocations until the mid-2020s, and existing subsidies have a long track record of producing entrenched interests -- agricultural subsidies being just one example. Free allowances will also shield the profits of these industries, ensuring they remain powerful lobbying forces. And as the cheapest, low-hanging fruit of emissions reductions becomes depleted, the calls for weaker legislation may only grow stronger.

The current moment may offer progressives and climate advocates the single best opportunity in a generation to achieve the policies necessary to overcome climate change and build a clean energy economy. Unfortunately, progressives have so far failed to seize the moment, and the result is a critically weak climate bill which sows the seeds of its own weakening by creating a new climate super-lobby. ACES must be strengthened now, or our climate opportunity will be jeopardized.

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Teryn Norris is a Project Director at the Breakthrough Institute, a public policy think tank based in Oakland, CA. William Oman, a Breakthrough Fellow, contributed research toward this article.

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