BACKGROUND ON WARNER-LIEBERMAN

ESTIMATED FINANCIAL COSTS OF WARNER-LIEBERMAN CAP AND TRADE BILL

ESTIMATED JOB LOSS BY STATE DUE TO WARNER-LIEBERMAN

BACKGROUND ON DIFFERENCE BETWEEN SULFUR DIOXIDE CAP AND TRADE AND A CARBON CAP AND TRADE

DOMENICI ENERGY BILL AS A FIRST STEP

TIMELINE OF DOE FAILURE ON FUTURE GEN CLEAN COAL PROJECT

BACKGROUND ON WARNER-LIEBERMAN CAP AND TRADE BILL

In June 2008, the United States Senate will debate S. 2191, better known as the Warner-Lieberman, or “America’s Climate Security Act.” Authored by Senators John Warner (R-VA) and Joe Lieberman (I-CT), the bill would implement a cap-and-trade policy to reduce U.S. greenhouse gas (GHG) emissions to 4% below the 1990 level by 2020, and to 63% below the 2005 level by 2050, according to its authors. The bill would cap the total amount of GHGs emitted in America, direct the government to auction GHG permits to American businesses, and set a declining cap on GHGs between 2012 and 2050.

The bill would also establish a number of new organizations and programs:

• The Climate Change Credit Corporation: Auctions emission allowances.
• The Carbon Market Efficiency Board: Observes and reports on the GHG emission market; provides cost relief if the emission market is deemed too harmful to the U.S. economy.
• The Climate Change Worker Training Program: Assists workers displaced by the bill and helps transition them into new “green” jobs.
• Energy Assistance Fund: Provides “reasonably-priced” electricity to off-grid rural energy consumers (at the discretion of the Secretary of Energy) whose price of electricity exceeded 150% of the national average.
• The Climate Change and National Security Fund: Includes the Secretary of State, Director of National Intelligence, and the Secretary of Defense; would submit annual reports on global GHG levels and any resulting compromises to America’s national security.

ESTIMATED FINANCIAL COSTS OF WARNER-LIEBERMAN CAP AND TRADE BILL

(Studies of the Congressional Budget Office (CBO), the Environmental Protection Agency (EPA), the National Association of Manufacturers (NAM) and Economists All Attest to the Negative Economic Impact of Warner-Lieberman Cap and Trade Bill)

CBO: Cap-and-Trade System Would Cause ‘Higher Prices for Consumers’ and ‘Windfall Profits’ For Large Firms. “Policymakers' decisions about how to allocate the allowances could have significant effects on the overall economic cost of capping CO2 emissions, as well as on the distribution of gains and losses among U.S. households. Giving allowances away to companies that supply fossil fuels or that use large quantities of fossil fuels in their production processes could create ‘windfall’ profits for those firms. The reason is that the cap-and-trade program would still result in higher prices for consumers and households but would not impose additional costs on those firms. Even if the companies received allowances for free, they would still raise prices to their customers because the cost of using an emission allowance for production—rather than selling it to another firm—would be embodied in the prices that they would charge for their goods and services. The resulting price increases would disproportionately affect people at the lower end of the income scale.”

(Peter R. Orszag, “Approaches to Reducing Carbon Dioxide Emissions,” Testimony – Congressional Budget Office, November 1, 2007 )

CBO Predicts High Costs For Warner-Lieberman. In April 2008, the Congressional Budget Office revealed the following facts about the Warner-Lieberman Cap and Trade Bill:

• Bill Would Cost Americans Over $1 Trillion In Next Decade. From 2009-2018, Warner-Lieberman would cost Americans roughly $1.2 trillion, and discretionary spending would increase by about $3.7 billion.
• Includes Expensive Private Sector Mandates. “The most costly mandates [of the Warner-Lieberman bill] would require certain types of private-sector entities to participate in the cap-and-trade programs for GHG emissions created by the bill. CBO estimates that the cost of those mandates would amount to more than $90 billion each year during the 2012-2016 period, and thus substantially exceed the annual threshold established in UMRA [Unfunded Mandates Reform Act] for private-sector mandates ($136 million in 2008, adjusted annually for inflation).”
• With Boxer Amendment Now Included, Warner-Lieberman Would Increase Discretionary Spending By Over $80 Billion During Next Decade. During committee markup in December 2007, Senator Barbara Boxer (D-CA) added an amendment to the Warner-Lieberman Bill to make the bill deficit neutral, and the CBO assessed the amended version separately. “CBO estimates that enacting S. 2191, as amended…would increase discretionary spending by about $84 billion over the 2009-2018 period.”

(Congressional Budget Office, “Cost Estimate – S. 2191: America’s Climate Security Act of 2007,” CBO, April 10, 2008: 1, 2 )

EPA Economic Analysis Concludes Warner-Lieberman Would Be Costly. The EPA released a list of key facts of the Warner-Lieberman Bill:

• Warner-Lieberman Would Cost Americans At Least $238 Billion By 2030 and Over $1 Trillion By 2050. If passed, Warner-Lieberman would cause GDP to be between 0.9% ($238 billion) and 3.8% ($983 billion) lower in 2030 than if the bill was not in place. In 2050, GDP would be between 2.4% ($1,012 billion) and 6.9% ($2,856 billion) lower than projected without passing Warner-Lieberman.
• Electricity Prices To Rise Dramatically. “Electricity prices are projected to increase 44% in 2030 and 26% in 2050.”
• Asymmetrical Costs. “The largest GDP and consumption impacts are in the Plains region.”

(“EPA Analysis of the Lieberman-Warner Climate Security Act of 2008,” United States Environmental Protection Agency, March 14, 2008 )

National Association of Manufacturers Rejects the Warner Lieberman Cap and Trade Bill. The National Association of Manufacturers (NAM) and American Council for Capital Formation (ACCF) released a study in March 2008 on the economic impact of Warner-Lieberman cap and trade bill:

• GDP would be reduced by $151-$210 billion by 2020; in 2030, GDP would be reduced by $631-$669 billion (in 2007 dollars).
• There would be 1.2-1.8 million jobs lost in 2020 and 3-4 million jobs lost in 2030.
• Manufacturing would slow and shipment values would fall 3.2 % to 4% in 2020; by 2030 the value of shipments would fall by 8.3 % to 8.5%.
• Household income would be reduced by $739-$2,927 in 2020 and $4,022-$6,752 (in 2007 dollars) in 2030.
• Electricity prices would increase by 28%-33% by 2020 and 101%-129% by 2030
• Gasoline prices would increase 20%-69% by 2020 and 77%-145% by 2030.

(American Council for Capital Formation and National Association of Manufacturers, “Analysis of the Lieberman-Warner Climate Security Act (S. 2191) Using The National Energy Modeling System,” March 12, 2008 )

Economist Anne Smith: Large GDP Losses Under Warner-Lieberman. Economist Anne Smith of CRA International, a financial consulting firm, testified before Congress on the potentially destructive economic impacts of Warner-Lieberman, and discovered the following:

• Unfair Distribution of Costs. “Our scenarios imply that S.2191 would decrease US average economic welfare by 1.1% to 1.7%. This impact varies by region, and…we find that New York, New England states, and California would experience welfare impacts substantially less than the US average, while regions heavily reliant on fossil fuel energy sources would face impacts somewhat greater than the US average.”
• Punitive Effect On GDP. Rather than allowing healthy economic expansion, Warner-Lieberman would restrain GDP growth. “GDP would be lower in 2015 by about $160 billion to $250 billion. Eventually, the annual loss in GDP would increase to the range of $800 billion to $1 trillion (stated in real, 2007 dollars).”
• Job Loss Much Greater Than Green Job Creation. “Naturally, with reductions in GDP come reductions in real wages and job losses. We have estimated 1.2 million to 2.3 million net job losses by 2015 over our set of scenarios. By 2020, our scenarios project between 1.5 million and 3.4 million net job losses. There is a substantial implied increase in jobs associated with “green” businesses (e.g., to produce renewable generation technologies), but even accounting for these there is a projected net loss in jobs due to the generalized macroeconomic impacts of the Bill.”

(Anne Smith, “Prepared Statement of Anne E. Smith, Ph.D., at the Legislative Hearing on America’s Climate Security Act of 2007, S. 2191,” United States Senate Environment and Public Works Committee, November 8, 2007 )

Cost to the Average Family Estimated at Nearly $17,000.

(WashingtonWatch, “S. 2191, The America's Climate Security Act of 2007,” 2008 )

Conservative and Evangelical Leaders Sign Letter Opposing Warner-Lieberman. In a letter sent to all 100 U.S. senators, over 70 scientists, evangelicals, and conservative leaders made the following statement: “We the undersigned write to urge you to reject legislation that imposes regulations on American energy usage through a so-called ‘cap-and-trade’ provision in a vain attempt to change global average temperatures.” The letter further asserts that “the current offering of cap-and-trade measures would produce imperceptible climate change while doing grave harm to our economy, the poor, and U.S. competitiveness.”

“Conservative Leaders Write Congress Letter Against Lieberman-Warner Bill,” American Environmental Coalition, March 17, 2008)

TABLE OF ESTIMATED JOB LOSSES BY STATE DUE TO THE WARNER-LIEBERMAN CAP AND TRADE BILL
(IN THOUSANDS OF JOBS)
Source: American Council for Capital Formation and National Association of Manufacturers

THE DIFFERENCE BETWEEN THE CAP AND TRADE APPROACH USED IN THE 1990s FOR SULFUR DIOXIDE EMISSIONS AND THE PROPOSED CAP AND TRADE APPROACH TO REGULATE CARBON EMISSIONS TODAY

(Source: Newt Gingrich, “BookTV – ‘In Focus’,” C-SPAN, December 10, 2007)

Well I actually helped pass the Clean Air Act you were describing in 1990. I was the Republican whip at the time, and it did establish a cap and trade program for sulfuric acid, largely to clear up acid rain in the Northeast. But remember, that’s a very specific product of a very small number of electrical plants and can be monitored pretty easily.

[By contrast,] [c]arbon is ubiquitous to the whole economy, it is an enormously more complicated topic, and in Europe the efforts at cap and trade I think have been pretty much a failure and have led to all sorts of distortions. I was delighted that Senator Kerry was moving towards a market oriented approach and I said so at the time at that debate, our discussion would be a more accurate term.

The difference is I would like to lower the price of hydrogen, of ethanol, of wind, of solar, because I think you’re going to get faster acceleration of new innovation if you lower the price of the good products of the future rather than raise the price of the obsolete products of the past. When we decided we wanted transcontinental railroads, we didn’t start by raising the tax on stage coaches. We started by setting up incentives, both land and money, to encourage companies to build railroads. When we decided that it was time to fundamentally move toward automobiles, we didn’t start taxing horse and buggy to get people to move, we required Henry Ford to invent mass production and to dramatically lower the cost of buying a car, so people could afford it. When we wanted the air mail system in the 1920s we subsidized airlines to carry the air mail, we did not try to tax trains for carrying mail.

So I think the idea of punishing people into the future is in the long run much more expensive and doesn’t get the change you want. Increasing the pain level is not the key. Increasing the reward level for innovation and science and technology and having prizes, I’d like to see us have a billion dollar tax-free prize for the first hydrogen engine that can be mass produced at a reasonable price because that kind of breakthrough changes all of the environmental equation and all of the energy equation and would liberate us from dependence on dictators in Venezuela and the Middle East.

DOMENICI ENERGY BILL AS A FIRST STEP

Noteworthy Aspects of Senator Domenici’s American Energy Production Act of 2008

• Allows petitions for leasing activities in the Atlantic and Pacific regions of the Outer Continental Shelf in order to tap into the 14 billion barrels of known recoverable oil in this area. Excludes the Gulf of Mexico. Allows the Governors of coastal states to submit a petition for a lifting of the moratorium within their state boundaries Suspends filling the Strategic Petroleum Reserve for 180 days.
• Creates a revenue sharing agreement for participating states in which 37.5 percent of revenues will go to new producing states, 12.5 percent to the Land and Water Conservation Fund, and 50 percent to the Federal Treasury.”
• Repeals a provision in last year’s Omnibus which reduced mineral leasing revenue payments to States by 2 percent, and restores the 50/50 Federal-State revenue sharing structure.
• Mandates that 6 billion gallons of coal-derived fuels be produced by 2022, starting at 750 million gallons in 2015 and ramping up by that same amount annually.

(SOURCE: “Summary of the American Energy Production Act S. 2958,” U.S. Senate Committee on Energy and Natural Resources)

_________________________________
PRESS RELEASE
U.S. SENATE COMMITTEE ON ENERGY AND NATURAL RESOURCES
May 1st, 2008

Summary of the American Energy Production Act S. 2958

The American Energy Production Act, introduced today by Senator Domenici and Senate Republicans, will address America’s soaring gas prices by focusing on common sense measures that will increase production of oil and gas in America.

If enacted, the American Energy Production Act will produce up to 24 billion barrels of oil—enough oil to keep America running for 5 years with no foreign imports. And that doesn’t include billions more barrels of potential fuel from oil shale and coal to liquids in the bill. By expanding production offshore and in Alaska, and removing obstacles to domestic production in the West, this bill will help us reduce our dependence on foreign oil.

TITLE I – Traditional Resources

Subtitle A: Outer Continental Shelf
Allows petitions for leasing activities in the Atlantic and Pacific regions of the Outer Continental Shelf in order to tap into the 14 billion barrels of known recoverable oil in this area. Excludes the Gulf of Mexico. Allows the Governors of coastal states to submit a petition for a lifting of the moratorium within their state boundaries.

Creates a revenue sharing agreement for participating states in which 37.5 percent of revenues will go to new producing states, 12.5 percent to the Land and Water Conservation Fund, and 50 percent to the Federal Treasury.

Subtitle B: Leasing Program for Land Within Coastal Plain
Establishes a competitive oil and gas leasing program for the Arctic National Wildlife Refuge Coastal Plain under the Mineral Leasing Act, providing access to over 10 billion barrels of recoverable oil. Had President Clinton not vetoed ANWR in 1995 (when oil was $19 a barrel), over 1 million barrels of oil per day would be domestically produced today. Tapping into the oil and gas in ANWR will produce hundreds of thousands of jobs and save the U.S. economy nearly $40 billion annually which is now spent to buy oil overseas.

Provides for a 50/50 share of ANWR revenues between the Federal Government and the State of Alaska. Directs that $35 million of the State share be deposited annually into a “Coastal Plain Local Government Impact Aid Assistance Fund” for Alaska communities.

Subtitle C: Permitting
Repeals the $4,000 fee for new applications for permits to drill that was established in last year’s Omnibus Appropriations Bill.

Since no new refineries have been built in the United States in over 30 years, grants the EPA authority to accept consolidated applications for permits required to construct and operate refineries, and authorizes financial assistance to states and Indian tribes for the hiring of personnel to process permits. Establishes a 360 day deadline for the approval or disapproval of consolidated permit applications for new refineries and a 120 day deadline for applications to expand existing refineries.

Subtitle D: Strategic Petroleum Reserve
Suspends filling the Strategic Petroleum Reserve for 180 days.

Subtitle E: Restoration of State Revenue
Repeals a provision in last year’s Omnibus which reduced mineral leasing revenue payments to States by 2 percent, and restores the 50/50 Federal-State revenue sharing structure.

TITLE II – ALTERNATIVE FUELS

Subtitle A: Renewable Fuel and Advanced Energy Technology
Amends the Energy Independence and Security Act of 2007 to strike the definition of renewable biomass and replace it with the Senate-passed definition.

Establishes a program of direct loans and grants to accelerate the production of advanced batteries in the United States.

Establishes a research program to determine infrastructure needs for the transport of renewable fuel blends, and directs the Secretary of Energy to consider the compatibility of existing infrastructure with intermediate blends of renewable and petroleum based fuels.

Studies the environmental and efficiency attributes of diesel-fueled vehicles.

Subtitle B: Clean Coal-Derived Fuels for Energy Security
Mandates that 6 billion gallons of coal-derived fuels be produced by 2022, starting at 750 million gallons in 2015 and ramping up by that same amount annually. This will result in a 3.75 percent reduction in the amount of oil America is projected to import in 2022. Requires that CTL fuels produced result in lifecycle greenhouse gas emissions not greater than those associated with gasoline and provides waiver authority based on economic or environmental harm.

Subtitle C: Oil Shale
Over two trillion barrels of oil shale current exist in Colorado, Wyoming and Utah, which can eventually be used to reduce our dependence on foreign oil. Repeals the one year moratorium on funds to complete final regulations for the commercial leasing of oil shale established in last year’s Omnibus.

Subtitle D: Department of Defense Facilitation of Secure Domestic Fuel Development
Increases the current allowable contract duration of five years to 25 years for procurement of synthetic fuels by the Department of Defense.

Repeals Section 526 of the Energy Independence and Security Act of 2007, which prohibits federal agencies from procuring alternative fuels with lifecycle greenhouse gas emissions greater than those associated with conventional fuels that they replace. This provision could threaten the ability of our military to reduce its reliance on foreign sources of oil.

AMERICAN ENERGY PRODUCTION ACT OF 2008
Text of Legislation (As Introduced in Senate)S. 2958
Click here for a PDF version of the bill

TIMELINE OF THE DEPARTMENT OF ENERGY’S FAILURE ON THE FUTURE GEN CLEAN COAL PROJECT

• In Dec. 2003, the Department of Energy (DOE) announced a plan that in five years FUTURE GEN would be built and operating to demonstrate clean coal.
• In Dec. 2007, DOE finally announced a site where FUTURE GEN would be built.
• In Jan 2008, DOE announced FUTURE GEN restructuring that canceled the planned 2008 construction.
• In May 2008, DOE announced that the commercial operations to demonstrate clean technologies under its restructuring plans would only begin by January 2016.
• China’s plan for a clean coal plant (GreenGen) was announced in Dec. 2005, and according to the GreenGen website, is to be built in 2009, seven years before FUTURE GEN’s restructured approach is now scheduled to come online.

Thus, the federal bureaucracy promised action over five years and, as soon as the action was imminent, cancelled it for further inaction.

Meanwhile the Chinese are simply building their plant with more engineers and less red tape.

Guess who is going to be licensing new technology and who is going to be falling further and further behind?

This is a case study in why we need real change.