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Handicapping Senate Passage of the Kerry-Boxer Climate Bill

Peter GrayWith the decline of the Redskins, a new favorite pastime among Washingtonians is handicapping Senate passage of climate change legislation.

Will the Senate pass the “Clean Energy Jobs and American Power Act,” S.1733, a cap-and-trade bill cosponsored by Sen. John Kerry (D Mass.) and Sen. Barbara Boxer (D-Calif.) (also known as the “Kerry-Boxer” bill)? If so, when and why? Democratic insiders keep insisting that there is little or no chance of passage in the Senate anytime in the near future. But a pathway to passage does exist — it’s all about coal.

Those who follow climate change typically break down the 100 Senators into five camps: yes, probably yes, fence-sitters, probably no, and no. Environment & Energy Daily’s head count is typical: 31 yes votes, comprised of 29 Dems and two Independents, Lieberman (Ct.) and Sanders (Vt.); 12 probably yes, comprised of 10 Dems and 2 GOP Senators from Maine (Collins and Snow); 25 “fence-sitters,” comprised of 17 Dems and 8 GOP; 12 probably no, comprised of 10 GOP and 2 Dems (Landrieu (La.) and Nelson (Neb.)); and 22 no votes (all GOP).

Achieving a simple majority of 51 Senators in favor of Kerry-Boxer should not be a problem. With 43 Senators prepared to vote yes or probably yes, it would only take 8 of the fence-sitters to reach 51 on an up-or-down vote. The more difficult hurdle is achieving a supermajority of 60 votes, which is required to end debate on the bill. The most likely route to 60 is to convince 17 of the 25 fence-sitters to join the yes and probably yes votes.

Analysts have focused on efforts by John Kerry and Lindsey Graham (R-S.C.) to broker a bipartisan climate deal by offering incentives for nuclear power, allowing off-shore oil drilling and protecting energy-intensive sectors by imposing tariffs on imports produced in countries lacking cap-and-trade. These efforts will garner some votes, such as nuclear power advocates John McCain (R-N.M.) and Johnny Isakson (R Ga.). Insiders, however, believe the Kerry-Graham initiative will not move enough votes to reach the magic 60 threshold.

To reach 60, you must appease the 17 Democrats that are part of the 25 fence-sitters. Notably, 12 of these 17 Democratic fence-sitters represent states in the Midwest and the Rust belt whose economies depend heavily either on mining coal or burning coal. They are part of the so-called “Gang of Fifteen,” organized by Sen. Evan Bayh (D-Ind.) in 2008, and they share a common interest in the climate change debate: protecting their constituents from a ruinous rise in the cost of coal-based power.

Indiana, Senator Bayh’s state, is typical of this group, generating 94 percent of its power from coal. Missouri, represented by Senator Claire McCaskill, generates 84 percent of its power from coal. West Virginia — represented by Jay Rockefeller and Robert Byrd — generates nearly 98 percent of its power from coal and also accounts for 13.5 percent of the country’s coal production.

Convince these Coal State Senators that coal will remain a cost-effective source of power under Kerry-Boxer, and Kerry-Boxer likely passes.

Providing the coal industry with funding to develop clean coal technology (carbon capture and storage) is not going to be enough to sway Coal State Senators. Experts claim that carbon capture and storage technology is ten years away from commercialization. Throughout that ten-year period power generated from coal would become significantly more costly under cap-and-trade because coal-fired power plants will have to purchase “emission allowances” to cover each ton of carbon dioxide released when coal is burned.

An “emission allowance” is akin to a permit to emit one ton of carbon dioxide or an equivalent amount of other greenhouse gases. Under Kerry-Boxer, EPA would issue allowances and sell them in an auction or “allocate” them, i.e. give them away as directed by statute. To attract the Coal State Senators, proponents of Kerry-Boxer likely must allocate to coal users free allowances to offset the anticipated rise in costs over the short term.

No doubt this would alienate advocates of renewable energy: more coal incentives translates to more coal power and correspondingly less renewable power. However, renewable energy advocates will likely accept this as a compromise. They will be comforted by the bill’s “renewable energy standard,” which mandates that an increasing percentage of power provided by utilities come from renewable sources (e.g., wind, solar, geothermal, and biomass). The more energy that must come from renewable power, the less that comes from fossil fuels.

There likely is not enough time in 2009 to reach this deal in the Senate, but it might be achievable in the first quarter of 2010. If the debate drags past April 2010, however, all bets are off because attention will shift to the mid-term elections.

Peter Gray is a partner in the Washington, D.C. office of McKenna Long & Aldridge LLP. Gray chairs the firm’s Environment, Energy & Product Regulation Department and co-chairs the climate change practice. Gray can be reached by email at pgray@mckennalong.com.

Peter Gray
Peter Gray is a partner in the Washington, D.C. office of McKenna Long & Aldridge LLP. Gray chairs the firm’s Environment, Energy & Product Regulation Department and co-chairs the climate change practice. Gray can be reached by email at pgray@mckennalong.com.
 
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