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American Clean Energy & Security Act: Sending the Wrong Signals

| Monday May 25th, 2009 | 1 Comment

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The latest, most vigorous federal government effort to date to foster clean energy, energy security and address climate change is being emasculated as key members of Congress do their unrestrained utmost to ensure that America’s reliance on “King Coal” and “Big Oil” are not in any way threatened by a national emissions cap-and-trade system or cleaner renewable alternatives.
On the contrary, having recently passed review by the House Energy and Commerce Committee, Reps. Waxman and Markey’s “American Clean Energy and Security Act” is already shot through with enough in the way of subsidies, giveaways and allowances to coal and oil interests to make the bill as much a “Subsidize Coal and Oil” bill as it is a “Clean Energy & Climate Change” bill.
Despite the best efforts of the bill’s sponsors, if the practical economic outcome of the clean energy and security legislation is to produce price signals across the power sector and broader economy that will result in significant reductions in CO2 and greenhouse gas emissions, it looks like it’s going to be woefully, if not fatally, flawed.


Mixed Messages
Growing numbers of prominent CEOs across economic sectors–such as members of the Carbon Disclosure Project–have been publicly calling for clear, consistent policies and price signals so that they will be better able to get on with the business of adapting to and mitigating the effects of climate change by making their businesses less energy intensive, less wasteful, less polluting and less reliant on fossil fuels.
What kind of a price signal will the marked up Waxman-Markey bill send, however? Consider this: the bill includes giving away 80-85% of the emissions allowances utilities will need for 20 years, and would subsidize their efforts to develop carbon capture and storage technologies at the public expense rather than subsidizing cleaner, renewable alternatives–or removing fossil subsidies altogether.
Moreover, it allows them to offset 20% or more of the emissions cap by purchasing carbon credits, including projects in developing countries around the world, for which no really adequate institutional or market framework exists.
Price Signals Anyone?
It’s becoming clear that despite the best efforts of Reps. Waxman, Markey; their supporters; and other proponents of stricter, more rigorous and substantive measures, the baseline that will result from the Act is that the US government is intent on seeing that the nation continues to rely on coal and oil for the foreseeable future regardless of the mounting risks and costs.
As Grist contributor and longtime environmental journalist Gar Lipow points out, rather than seeking to cap and send price signals at the source–based on the extraction and importing of fossil fuels–the Act seeks to cap emissions sector by downstream industry sector–a much more cumbersome, time consuming and inefficient approach.
The US has a lot of coal, not to mention oil shale and other potential alternative fossil fuels. Coupling this with the critical role fossil fuels play in the US economy, the military and forecasts of growing energy demand, it’s easy to see that it’s coal, oil and natural gas will continue to be the predominant energy resources for decades to come.
But should the US continue to subsidize and promote their use? This is the key issue, and there are any number of really good reasons not to do so, the mounting costs and risks of climate change and environmental degradation prominent among them.
Added to this are broad public opinion–not that that counts for all that much outside election years–and international efforts to craft a global climate change accord. Then there’s the multi-billion dollar cost of foreign military aid, terrorism/counter-terrorism efforts and outright wars–associated with ensuring that the flow of oil and other fossil fuels continues unabated.
Should the public be protecting and subsidizing what are the largest, most profitable multinational businesses in world history at such great expense?
More Subsidies for Fossil Fuels
There have been calls, and even attempts, to eliminate some or all oil, gas and coal industry subsidies from the legislative books. They’ve all failed as Big Oil and King Coal have continued to pour billions into influencing elected government officials and the broad public. They’re sparing no expense, and using just about every means available to thwart this latest and most serious effort to pass legislation that would reorient US energy policy and address climate change in a vigorous, sustained way.
Wall Street execs will be cheering right along with them. The same financial industry leaders and fast, hot money crowd that has thrived in this era of easy monetary policy and negligent regulation at the expense of the broad public will have a potentially vast new market to game.
Despite all this, will the legislation actually reduce CO2 and greenhouse gas emissions to the extent and degree promised? Who knows? Who cares? What seems most important to key Congressional leaders and party faithful at the moment is protecting their own narrow interests by seeing to it that the energy industry status quo is maintained and that a new, multi-billion dollar market is created for Wall Street denizens and industry participants to manipulate and cash in on.
David Roberts, another Grist journalist, draws attention to a soon to be released study on the degree to which the House Energy and Environment Subcommittee is packed with members who represent coal industry interests.
The Political Economy of Energy
Entitled “Carbon Geography: The Political Economy of Congressional Support for Legislation Intended to Mitigate Greenhouse Gas Production,” and authored by UCLA economics professor Matthew Kahn and the Battle Group’s Michael Cragg, it’s a recommended read.
Having already won significant concessions, the oil and coal lobbies still aren’t content. And while some House and Senate members are doing a stalwart job trying to maintain the Act’s integrity, it’s clear that reliably large and regular political contributions, lobbying and the PR power of the oil and coal industries is having a telling effect on the legislative process.
To be sure, the overarching, long-term goals of the Act are still there, which lends it at least some credibility. Meeting even the watered down goals of reducing overall CO2 emissions by 17% by 2020 and 83% by 2050 will entail a massive effort on the part of industry and businesses spanning the entire economy–from utilities through transportation, manufacturing, distribution and on to the retail and waste management sectors.
Unfortunately the Act aims to do this by offering huge subsidizes and allowances associated with “clean” coal and fossil fuel efforts rather than promoting other cleaner, renewable alternatives.
As with all legislation in a complex, modern industrialized society, the devil lies in the details. And politicians have become very adept and skilled at crafting a marquis theme for legislation that they can sell to the public and internationally while stuffing it full of pork and elements contradictory to its stated purpose.


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  • http://www.globalwarmingisreal.com/blog Tom

    NIce post Andrew. While in Germany we visited the German emissions trading authority. Germany has had an independent emissions trading program in place since 2003.
    One official that spoke to us, Dr. Enno Harders, made clear to that his biggest concern regarding “other countries” negotiating their first round of emissions legislation (and I believe he was, in this case, speaking directly to the four Americans in the group) was the enormous pressure “from the lobbyists.”
    He also admitted mistakes in their first round of trading (that ended in 2008 – they are now into their second round with tougher caps on emissions) and suggested others can learn from their mistakes.
    I wrote a post about his remarks and the enormous effect of the “fossil lobby” on Red, Green, and Blue:
    http://redgreenandblue.org/2009/05/19/a-bit-of-advice-on-waxman-markey-beware-the-lobbyists/