Emissions Trading and Other Climate Change Legislation - Overview and Update

Ladeene A. Freimuth

Overview of Climate Change Legislation in the 106th and 107th Congresses
In the 106th and 107th Congresses, several members in the House and Senate introduced climate change-related legislation, including bills designed to reduce greenhouse gas and other power plant emissions through market-based emissions credit trading schemes, and bills to reduce greenhouse gas emissions through tax incentives and carbon sequestration methods. The bills receiving the most attention at this time are the ones that would cap emissions from four pollutants (including carbon dioxide) and allow emissions trading.

Emissions Trading Legislation
In 2001, Senators Jeffords (chairman of the Senate Environment and Public Works (EPW) Committee), Lieberman and others, and Representatives Waxman, Boehlert, and other members introduced counterpart bills that would establish caps to reduce emissions from four pollutants (nitrogen oxides, sulfur dioxide, mercury, and carbon dioxide) and would direct the Environmental Protection Agency to establish a framework to allow for flexible mechanisms to achieve these reductions, such as credit - or allowance - trading. Emissions trading provisions offer a market-based alternative to a command and control approach. Typically, emissions trading schemes are considered more cost effective than other regulatory alternatives. Senator Jeffords' bill is S.556, and Representative Waxman's bill is H.R.1256.

The current administration has said that it does not support a four-pollutant approach, but rather a three-pollutant approach (nitrogen oxides, sulfur dioxide, and mercury). Four-pollutant emissions trading legislation also faces opposition from most Republicans as well as some Democrats in the House and Senate, because of concerns regarding the potential costs involved with implementing technologies to reduce all four pollutants.

Industry representatives and environmental interest groups have expressed a range of opinions about emissions trading legislative proposals. Environmental groups want a four-pollutant bill with strong caps and most of these groups want to maintain the New Source Review program under the Clean Air Act. Some utilities (primarily located in the northeastern United States) want the certainty that a four-pollutant bill would provide. Other utilities have expressed their concerns regarding the perceived technological difficulties and costs of complying with a four-pollutant bill. Several utilities have expressed concern about the lack of technology available to comply with proposed mercury reductions.

Recent Events
On October 4-5, 2001, the Senate EPW Committee held an off-the-record "Stakeholders' Workshop," which brought together many of the major key players to express their views and to work toward developing a compromise on emissions trading legislation. On November 1, 2001, the Senate EPW Committee held a hearing on Senator Jeffords' four-pollutant bill. At that time, Senator Voinovich, a Committee member who had heretofore been fairly supportive of a four-pollutant trading scheme, began to express concerns regarding the Jeffords legislation and indicated that he might have problems supporting the bill. On November 15, the EPW held a second hearing on the Jeffords bill. The witnesses again expressed the same concerns they have had to date and reiterated the need to recognize regional differences rather than adopt a uniform, one-size-fits-all program.

Senate Energy Legislation
Senator Daschle has plans to introduce a Democratic energy bill imminently. The bill will be comprehensive and will include energy-related sections from relevant committees of jurisdiction, including a section on climate change primarily drafted by the EPW Committee. The climate change section will not include emissions trading legislation, however, because of the degree of controversy that surrounds this legislation. Instead, it will likely include combinations of several of the other pieces of legislation that have been introduced in 2001 to stabilize concentrations of greenhouse gases in the atmosphere, such as promoting research and development, and developing clean energy technology transfer programs, as discussed in greater detail below. Emissions trading could be offered as an amendment to the energy legislation when it is taken up on the floor. The likelihood of such action remains unclear, but is probably slim.

Future Prospects for Emissions Trading Legislation
Regardless of whether his legislation is addressed as part of the Senate energy debate, Senator Jeffords has been planning for quite some time to pass a bill out of the Committee to bring to the Senate floor for debate. This could occur in 2002, but Senator Voinovich now could pose as an obstacle and could keep some of the moderate Republican Committee members from supporting the legislation. Some Republican votes might be needed to pass the bill out of Committee. If the bill were to pass out of Committee, it could see floor action in 2002.

On the Senate floor, an emissions trading bill is likely to face some obstacles among Midwestern Democrats, as well as most Republicans. Even if a trading bill were to pass out of the Senate, it would face even greater difficulty in the Republican-led House of Representatives. In fact, there has not been any Committee action on emissions trading legislation in the House in 2001.

Moreover, because President Bush has clearly expressed his opposition to including carbon dioxide in emissions trading legislation, a four-pollutant bill could face the threat of a Presidential veto. Then, enough votes for a veto override would be required. So, the legislation clearly has a tough road ahead for the remainder of the 107th Congress. The outlook could improve in Congress if the Democrats win the majority in the House. Yet, the Executive Branch hurdles would remain.

Since four-pollutant emissions trading legislation was first introduced in the 106th Congress, it could be another five to seven years before there is sufficient Congressional support to pass four-pollutant emissions trading legislation out of both Houses. Legislation that pertains to an issue with which Congress has not had much experience, and on which there has consequently not been a long or substantial legislative history, could take many years to move forward. One reason for this timeframe is that it generally takes a long time for Members and staff to understand this type of legislation that is technical and somewhat scientific in nature. With rapid staff turnover, moving such legislation forward becomes even more difficult.

Other Climate Change Legislation
Other climate change legislation that was introduced in 2001 includes a bill by Senators Byrd and Stevens - S.1008, the Climate Change Strategy and Technology Innovation Act of 2001 - that aims to develop a national climate change strategy to stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system, while minimizing adverse economic and social impacts. The bill also would advance a research and development clean energy technology program. The bill has been passed out of the Senate Government Affairs Committee.

Senators Craig and Hagel introduced S.1293, the Climate Change Tax Amendments of 2001, to provide tax incentives for the voluntary reduction, avoidance and sequestration of greenhouse gas emissions and advance global climate science and technology development and deployment. Senator Murkowski and others introduced S.1294, the "Climate Change Risk Management Act of 2001," which would establish a national climate change strategy and a greenhouse gas emissions registry, and authorize funding for climate technology research, development and deployment, as well as for international clean energy technology deployment.

In August 2001, the Senate Foreign Relations Committee approved the State Department Authorization bill, S. 1401, which included a "Sense of Congress Relating to Global Warming," that the United States should demonstrate international leadership and responsibility in mitigating the threats posed by global warming by taking responsible action to ensure significant and meaningful reductions in emissions of greenhouse gases from all sectors; creating flexible international and domestic mechanisms; and participating in international negotiations, in a manner that is consistent with the environmental objectives of the United Nations Framework Convention on Climate Change and that protects the economic interests of the United States. The bill has not passed out of the Senate yet.

Several carbon sequestration bills have been introduced during this Congress including:

• S.1255, the Carbon Sequestration and Reporting Act, introduced by Senator Wyden, would establish a Carbon Advisory Council to help develop guidelines for reporting sequestration activities and would encourage the use of carbon storage and sequestration, including through financial assistance mechanisms;
• S. 820, the Forest Resources for the Environment and the Economy Act, also sponsored by Senator Wyden, would assess opportunities to increase carbon storage in national forests, and facilitate voluntary and accurate reporting of forest projects that reduce atmospheric carbon dioxide concentrations;
• S. 765, the Carbon Sequestration Investment Tax Credit Act;
• S. 769, the International Carbon Conservation Act, introduced by Senator Brownback, would enhance international conservation and carbon sequestration and promote international voluntary cooperative efforts to sequester carbon; and
• S. 785, the Carbon Conservation Incentive Act, also sponsored by Senator Brownback, would encourage owners and operators of land to increase sequestration through agricultural practices.

Ladeene A. Freimuth is a legislative assistant for Senator Byron L. Dorgan for environment and energy issues.