A New Outside-the-Beltway Climate Bill Deserves Support; Why Won't Enviros Get Behind It?

Its first plus is that it's 39 pages compared to Waxman-Markey's 1,500 pages, and it just gets better from there.

Whatever President Obama promised in Copenhagen, Congress will have to deliver. The near-term prospects are dim. One key problem is that until recently, all climate bills have been assembled by hundreds of legislators trying to placate thousands of lobbyists. The results have been predictable. Virtually uninhibited carbon trading, a Wall Street delight, is at the core of most climate bills. The projected emission reductions are often more aspirational than real. Carbon allowances are dispensed freely and widely to buy off virtually every interest group.

Last June, by a vote of 219-212 a climate bill did squeak through the House. For all its weaknesses, most environmentalists came out in support because it marked the first time the United States Congress has legally committed this country to reducing greenhouse gas emissions. To some, including me, the bill's flaws exceeded its symbolic benefit. (See my analysis here.)

In the Senate, little progress has occurred in the last 12 months. In late October, Senators John Kerry, D-MA and Barbara Boxer, D-CA finally introduced a bill. Few think it has a chance. Apparently even Senator Kerry harbors doubts. In early December he joined with Senators Lindsey Graham, R-SC and Joseph Lieberman, I-CN to offer a new framework for a climate bill that encourages more oil drilling, expanded nuclear power and a continued reliance on coal.

While Democratic Party leaders have been talking to lobbyists inside the Beltway, Senator Maria Cantwell, D-WA and her staff have been looking for answers from activists and experts outside the Beltway. The result is the Carbon Limits and Energy for America's Renewal (CLEAR) Act. Co-sponsored by Susan Collins, R-ME, this groundbreaking bill avoids the compromises and subterfuges of existing climate bills and embraces a new philosophical and strategic approach.

What are the elements of that approach?

First, blessed brevity and transparency. CLEAR is just 39 pages compared to Waxman-Markey's 1,498 pages and Kerry-Boxer's 821 (a number that will grow considerably as it wends its way through a half dozen committees). You can read CLEAR in one sitting and understand how its pieces fit together. This is no small legislative accomplishment.

Second, an upstream rather than downstream focus. Rather than restrict carbon emissions CLEAR restricts carbon inputs. Rather than regulate a power plant or manufacturing plant's emissions it restricts the amount of carbon contained in the fuels used in that power plant or factory. This strategy dramatically decreases the number of regulated producers and even more dramatically reduces the cost and complexity of monitoring.

Third, a 100-percent auction of the carbon allowances. Polluters will have to pay for their pollution from the start.

Fourth, a significant restriction on carbon trading. CLEAR treats carbon trading as a necessary evil, not the core of an emission reduction strategy, thereby probably earning the senators the eternal hatred of a Wall Street salivating over the potential bonuses another multi-trillion-dollar global securities market would generate.

Fifth, a cap and universal dividend policy. CLEAR returns 75 percent of the money generated by the auction in equal per capita dividends to all Americans. Why is this important? Because Americans aren't stupid. Despite what the authors of other climate bills say, we know that reducing carbon means increasing the price of carbon and therefore the price of most goods. CLEAR's dividends ward off a potential uprising when prices do increase by offsetting the increase in prices for the majority of Americans no matter how high the price of carbon goes and potentially allowing low-income households to generate a "profit."

Regrettably, the major papers and media ignored the bill's introduction. Possibly they were overwhelmed by coverage of the dramatic health care debate or the machinations in Copenhagen, although they did find space for prominent coverage of the Kerry, Graham and Lieberman framework letter to the White House.

The environmental community has responded. That's the good news. The bad news is that much of the reaction has been negative. Frankly, that surprises me. CLEAR offers an approach and an architecture that even the critics concede is vastly superior to that which passed the House and was proposed in the Senate. It may not be perfect, but its imperfections pale into insignificance compared to those contained in the Waxman-Markey or Kerry-Boxer bills.

To critics the bill's very brevity is a bane, not a blessing. Alan Durning and Eric de Place of the Sightline Institute worry that the Act "lacks detailed guidance." "(W)e ended up wishing CLEAR were much longer," they said. David Roberts of Grist agrees that, "it fails to flesh out crucial details." The Union for Concerned Scientists (UCS) joins in the criticism.

Sometimes, the concern over a lack of details seems gratuitous. "Details are in short supply when it comes to enacting a border-adjustment tariff," Durning and de Place insist. But Cantwell and Collins straightforwardly explain how fees will be imposed on the carbon used in production processes for commodities imported into the U.S. and how the fees will be lifted for countries that have adopted comparable limits to fossil carbon use.

On the other hand, the Kerry-Boxer bill, which the critics support, has this to say about border tariffs. ''It is the sense of the Senate that this Act will contain a trade title that will include a border measure that is consistent with our international obligations and designed to work in conjunction with provisions that allocate allowances to energy-intensive and trade-exposed industries.''

In most cases the critics' concerns are modest and could and will be addressed in the normal legislative process. For example, Durning worries there is no "detailed plan for actually distributing" the per capita dividends and offers several improvements. Any of these could easily be adopted without changing the bill's structure or elements.

Joe Romm of Climate Progress believes the curbs on carbon trading are too restrictive. "The problem with CLEAR's approach is it tries to throw the baby out with the bathwater, tries to throw out the 'good' derivatives...along with the bad ones." Again one would expect a debate on this subject to occur as the bill moves forward. However, it is unlikely that Senator Cantwell, who has been one of the leaders in Congress in developing legislation to curb commodity and energy price manipulation would be sympathetic.

Many criticize CLEAR's carbon price ceiling. Romm and others think that its $21 per ton price ceiling is too low. They prefer the Kerry-Boxer ceiling of $28 per ton. But since both bills contain automatic price increases in the ceiling such that it will more than double in a decade, it is unlikely the ceiling will be breached in either case. However, this too would be a subject of legislative debate. It is hard to believe the difference between $21 and $28 is a showstopper.

A number of environmentalists criticize CLEAR for not providing clear direction as to how the 25 percent of the auction revenue that would be invested in a Clean Energy Reinvestment Trust (CERT) will be spent. Again, Durning and de Place worry that "the bill is very short on specifics." UCS too wants specifics. The Breakthrough Institute wants massive spending for energy research and development.

CLEAR does list a wide array of possible uses for CERT funds: transition assistance to workers and business and communities; region specific compensation for early retirement of carbon intensive machinery; training and development; investments in energy efficiency or renewable energy, etc. But there's no question Cantwell and Collins have consciously avoided specifically dividing up the money. They wisely, in my opinion, leave that to the appropriations process in the next Congressional session where the give and take of interest groups will not spill over to affect the rest of the bill.

The critics' strongest complaint is one I myself raised in my previous discussion of the bill: the slow pace of early reductions. The carbon cap in CLEAR is reduced by an increasing percentage each year, but it starts at a very low level, .25 percent. The result is that by 2020 the cap itself will result in only a 5 percent or so reduction. Critics compare this unfavorably to Waxman-Markey's 17-percent reduction mandate.

But the critics themselves realize there is much less difference here than meets the eye. Waxman-Markey allows virtually all of its early reductions to be achieved through purchasing international offsets. Durning himself criticizes the two billion tons of offsets contained in that bill. "That's too many by an order of magnitude. Offsets are too slippery; you can never be sure if you've reduced emissions overall or just moved them around. W-M's offsets could blow a hole in the cap...." I agree.

In any event, at the risk of redundancy, the pace of carbon reduction too would be the subject of negotiation, just as the pace of reduction under Waxman-Markey was. If it were raised to .5 percent per year, by 2025 CLEAR could result in real greenhouse gas reductions equal to or greater than Waxman-Markey's potentially phantom reductions.

It is hard to understand how environmentalists could declare CLEAR a worse bill than the House bill or the Kerry-Boxer bill and therefore to be opposed a priori, even as they concede its superior pioneering framework and architecture. That may itself be their reason for criticism. Much of the environmental community believes that as bad as the House bill was, it marks an historic step in the right direction and the profoundly different framework for the CLEAR bill could upset the legislative apple cart.

Grist's David Roberts makes this argument explicitly. Passage of CLEAR "would involve the Senate collectively bailing on a framework that's passed the House, has Obama's support, is consonant with the international approach, already reflects the concerns of dozens of stakeholders, and has a non-trivial chance of passing next year."

There's no question that CLEAR represents a significant departure for business as usual and is radically different from the House bill. However, I would argue that its transparency and universal dividend and upstream focus makes it more, not less likely to be passed by the Senate than the Kerry-Boxer bill. More importantly, Congress is creating an architecture framework, not just for the next five to 10 years, but for the next generation and beyond. We need to get it right or we may well regret it down the road.

David Morris is co-founder and vice president of the Institute for Local Self Reliance in Minneapolis, Minn., and director of its New Rules project.