To Democrats Abroad
5 July 2009
Tom Fina
Executive Director Emeritus

WARNING! If you are squeamish about seeing sausage made - from the squealing pig to the sizzling sausage - stop here. Political adults only should continue to see how Congress and the President are producing the cap and trade bill.

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On June 26 the House passed the 1300 page HR 2454, the American Clean Energy and Security Act of 2009, by 219 to 212 votes with all but 8 Republicans opposed. Forty-four Democrats also opposed. This was the first time that either house of congress approved a bill to cut heat-trapping ("greenhouse") gases that scientists believe are causing climate change.

It was the second great test of the Democratic majority after the enactment of the fiscal stimulus bill last February which received not a single Republican vote in the House. Passage of the Waxman-Markey energy policy bill was a very important success for the President and Majority Leader Nancy Pelosi. She was chiefly responsible for the last minute arm twisting, cajoling, bribing and threatening that produced the 7 vote majority. It suggests that even on powerfully divisive issues, like that on healthcare reform, the Democrats can muster a majority.

The House vote was on the eve of the July 4 congressional recess. Now, the action moves to the Senate. Barbara Boxer, chair of the Environment and Public Works Committee, expects to take the House bill and, with some strengthening, clear it from committee before the August recess. It would be acted upon by the Senate in the fall and ready for the president’s signature by December. That is the time frame for the negotiation of the extension of the Kyoto treaty in which the President wants to play a constructive role.

While the House legislation is commonly called the "cap and trade" bill (the Republican description is "tax and trade"), it lays out national energy policy in four major provisions. First, it promotes the expansion of renewable electrical energy, the sequestration of carbon dioxide from coal, the increased use of low carbon transportation fuels and an improvement of the electrical grid. Second, it seeks to increase energy efficiency by strengthening building codes, setting higher appliance efficiency standards, making more uniform fuel economy standards (miles per gallon), pressing energy utility companies, industry and public institutions to increase their energy efficiency. Third, it creates a system of cap and trade for pollutants to reduce global warming. And, finally, there are provisions to subsidize both industry and consumers during a transition period to cushion the impact of the new policies. (This summary of 1300 pages will satisfy some. Others can read the text at: hdl.loc.gov/loc.

uscongress/legislation.111hr2454).

The big story is the creation of a system of cap and trade for greenhouse gases.

The basic features of such a systems are: 1) to set a national ceiling ("cap") on the number of tons of carbon dioxide (or equivalent gases) permitted to be produced each year; 2) to identify each point at which fossil fuels (which create carbon dioxide when burned) emit greenhouse gases; 3) to issue a permit for each business creating the carbon dioxide for the number of tons it is allowed to emit in a year or over several years. The total tons permitted all businesses cannot exceed the national ceiling for that year. The permits can either be sold by the government by auction or granted free. Permit holders may buy and sell ("trade") their allowances among themselves; 4) to reduce the national ceiling each year on a predictable schedule that businesses can plan to meet.

The House bill aims to reduce greenhouse gases (carbon dioxide and others) to 7% below 2005 levels by 2020 and by 83% by 2050.

The precedents for this cap and trade system were set by the first president Bush in 1989 to reduce the then grave problem of acid rain. Today there is near 100% compliance with that legislation which has been a great success and has cost only about a quarter of the original EPA estimate.

Nevertheless, the application of the same system to greenhouse gases is energetically opposed by the Republican minority. Its mantra is that jobs will be lost, industry will migrate abroad to less burdensome regulation, consumers will pay higher prices. The eight who broke ranks in the House have become the "cap and traitors".

But, the real problem for Pelosi was the Democratic majority. Members worried that their constituents, coal industries, agriculture, manufacturing, oil, electric utilities would be hurt and that they would be victims of the Republicans in the 2010 congressional elections. Democrats were split between East and West coast urban members and conservative Democrats from industrial, rural and coal producing and burning areas. Brown Dog Democrats forced concessions for the coal producing regions while the agricultural bloc cut deals for its constituents. Even a coalition of Jewish, Catholic and Protestant church organizations wangled language to qualify for energy saving retro-fitting subsidies. Something for everybody.

The common currency for buying the votes needed was cutting the cap and trade target levels of reduction (from 20% to 7% by 2020), the granting of free early year emissions permits industry by industry, congressional district by congressional district. That watering down of the immediate impact of the bill plus the votes of committed environmentalists brought the favorable vote to about 200. Then Obama met with individual members, Secretary of State Hillary Clinton and Al Gore appealed to the uncommitted while Pelosi and her whips worked on the fence-sitters and the fearful. One common fear was that after making a politically risky vote, the Senate or the White House would abandon the bill if the opposition was too strong. That had happened in 1993 when Clinton’s proposed energy tax was defeated in the Senate and House Democrats who had supported him were picked off in the next election. Part of Obama’s and Pelosi’s task was to convince the fearful that they would not be left to hang out to be eaten by the Republicans.

While there are many environmentalists who are angry that Obama did not push for a simple tax on carbon and others who are disappointed at the numerous concessions of free permits and other loopholes, Gore and the major environmental organizations and powerful industry corporations have endorsed it. They recognize that this is game changing legislation. It would bring about profound changes throughout our economy not only reducing global warming pollution but also decreasing our dependence on imported oil, stimulating the creation of new jobs in a vast new industry of clean energy and permitting the President to increase international efforts to reduce greenhouse emissions.

Faced with the faltering of the stimulus pump priming and foreclosure relief plus the high stakes of the health care reform legislation, the question is whether Obama can move them all at once or whether more stimulus money and cap and trade must be deferred. That is a decision of such magnitude that only a supremely gifted and lucky political leader can get right. All of us so dependent on the right call can only hope that is the President. 30

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Thomas W. Fina

Executive Director Emeritus
Democrats Abroad

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