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Press Release

    No Backroom Deals on CO2

    10/01/2003

    One of the larger tasks currently facing Congress is guiding an energy bill through conference. Both the House and Senate have passed versions that are now being reconciled. In some areas the differences are wide, which means there will be a certain amount of arm-twisting and cajoling to get the bill through conference. The Washington Post reports, for instance, that a loan guarantee for a power plant in Minnesota was included to sweeten the pot for Sen. Norm Coleman (R-Minn.) and that energy committee chair Sen. Domenici’s (R-N.M.) office has compiled a list of similar projects to woo additional support. Conference negotiations take place behind closed doors and far from the public, opening the potential to deals of all sorts.

    The latest draft includes language that would allow exploration in the Arctic National Wildlife Refuge, in recognition of the need to bolster domestic energy sources as well as the fact that new technologies leave a significantly smaller environmental footprint. Less than 2,000 acres, or 0.01 percent, of ANWR would be affected.

    The bill is also trying to resolve other contentious issues, such as regulating the electrical grid as well as doling out a mix of tax credits and subsidies to various energy interests. Also notable, the draft does not include the renewable portfolio standard that would have required electricity producers to use a minimum percentage of renewable fuels when generating power. Given the costs and additional research required for such alternative fuels as solar and wind energy, the renewable portfolio would have been a costly burden for consumers. Finally, the legislation does not include any language establishing caps on greenhouse gas emissions, but that does not mean the issue has been settled by Congress. In fact, it may be the next big fight in the Senate.

    Part of the bargain for passing the Senate version of the energy bill was to allow Sens. Joe Lieberman (D-Conn.) and John McCain (R-Ariz.) to introduce a stand-alone bill to establish caps for global warming emissions. Global warming remains an issue of scientific examination, with a number of uncertainties and controversies over the contribution of man-made greenhouse gas emissions to worldwide climate change. To put things in perspective, man-made emissions have been rising, mainly due to the use of fossil fuels, which generates carbon dioxide. However, this is only one of many contributors to the greenhouse effect, with water vapor being the most dominant and least understood greenhouse gas— responsible for 95 percent of the greenhouse effect. Examining carbon dioxide alone, man-made emissions account for less than 3 percent of total emissions.

    First and foremost, a bill to cap emissions is about rationing. In the short run, reducing greenhouse gas emissions is tantamount to restricting access to energy. The initial Lieberman-McCain approach does this in two phases. The first phase would require large companies (those that emit over 10,000 metric tons of carbon dioxide equivalent) to maintain emissions no greater than those in the year 2000. Phase two, which begins in the year 2016, would require emissions to be capped at 1990 levels.

    Proponents of the bill envision compliance to include both a reduction in overall energy use as well as a switch to alternative fuels that have lower greenhouse gas emissions. The Energy Information Administration, when analyzing the legislation assumes an increased use of nuclear fuel as one option. While the increase in nuclear-powered electricity generation would in fact lower greenhouse gas emissions, it is not obvious that nuclear power plants will be allowed to replace coal-fired power plants. There has been tremendous opposition to nuclear power plants in the past, and is unclear why opposition to nuclear power would lessen in the future. Failure to expand electricity generated through nuclear power would increase consumer prices in a world with caps on carbon dioxide emissions.

    In essence, efforts to cap greenhouse gas emissions are an attempt to comply with the Kyoto Protocol, an international agreement to cap emissions in the industrialized world. Economists have identified the significant costs of this treaty, with estimates ranging from $128 billion to $300 billion a year. As a reference point, President Bush’s recent tax cut was only a total of $350 billion with only a $109 billion reduction in 2003, meaning that higher energy costs would virtually offset any boost to economic growth provided by a tax cut. Scientists continue to debate the uncertainties surrounding global climate change and it appears Congress wisely refrained from addressing the issue in the energy bill currently in conference. Until the debate is resolved, the Senate should continue to show restraint, rejecting any legislation that attempts to cap emissions of greenhouse gases.