A Federal Market for Pollution?


A Senate bill proposes to reduce industry pollution by establishing emission permits. However, the bill is so flawed it should just be scrapped.


By Barbara Holzer


The heated debate about global warming has finally given rise to something tangible – a Senate bill that proposes a system to curb the damaging environmental effects of greenhouse gases.


Unfortunately, the Senate’s legislation is so flawed that it would be better to scrap this bill and wait until a new Congress and administration are sworn in next year to comprehensively address climate change.


Introduced in October by Sens. Joe Lieberman (I-Conn.) and John Warner (R-Va.), America’s Climate Security Act (S. 2191) outlines a plan for massive changes to how industrial polluters manage and reduce their greenhouse gas emissions.


Congress is focused on industry because of the amount of carbon dioxide it generates; in 2006, it emitted an estimated 3.4 billion metric tons of carbon dioxide, or 57 percent of America’s total, according to the U.S. Department of Energy’s Energy Information Administration.


The bill’s authors claim that the bill, which is expected to be debated by the full Senate in late May, will control the costs of reducing pollution by allowing electric power, transportation, manufacturing, natural gas and other companies – 86 percent of the U.S. economy – to trade, save and borrow what are in effect pollution rights. It also proposes giving many of those rights away to corporate polluters for free.


“The Lieberman-Warner climate change bill doesn’t do enough to stop climate change, but it does plenty to give billions of dollars away to coal, oil and nuclear energy corporations,” said Tyson Slocum, director of Public Citizen’s Energy Program. “It simply doesn’t address the fundamental changes needed to prevent dangerous global warming.”


Slocum is currently working with a broad coalition of consumer and environmental allies to develop a strategic response to the bill.


A cap-and-trade system


Under the legislation, the government would try to harness greenhouse gases through a scheme called “cap-and-trade,” in which a ceiling is established – a cap – for how much pollution a particular facility can generate in a year.


Permits are then issued to the company equal to the amount of greenhouse gases it has been authorized to emit.


Because quantities of pollution spewed by industry will invariably fluctuate, the government would allow the permits to be bought and sold among polluters, effectively creating a “market” for pollution. The underlying premise is that the government would not care which company’s facility creates which greenhouse gases – as long as industry as a whole is meeting the total federally mandated cap for greenhouse gas emissions.


With carbon dioxide comprising the bulk of greenhouse gases, pollution is measured in units of carbon dioxide equivalents, so the permits are commonly called “carbon credits.” The cap-and-trade system makes these credits extremely valuable to the industries covered by the bill.


Internationally, the bill allows for the purchase of up to 15 percent of carbon credits from foreign markets. Public Citizen is skeptical about the value of this allowance because of concerns about how adequate many international offsets are at truly improving climate change, as the integrity of international carbon markets would be difficult to evaluate.

In a simple case of supply and demand, trade in carbon credits would become ever more lucrative as caps are lowered each year, a tactic designed to encourage industry to develop new, more efficient technologies and increase its use of non-polluting renewable resources, such as wind, solar and geothermal power.


Public Citizen contends that cap-and-trade could be a viable system, but only if 100 percent of the carbon credits are sold at auction (rather than the current setup in the bill, which simply gives most of the valuable credits away to polluters), with proceeds returning to government coffers to be used for such things as financial help for taxpayers struggling with ever-increasing energy bills.


The five other primary greenhouse gases the bill aims to reduce with the cap-and-trade scheme are methane, nitrous oxide, sulfur hexafluoride, perfluorocarbons and hydrofluorocarbons.


The goal of the proposed federal program – which would run from 2012 to 2050 – is to reduce U.S. greenhouse gases by approximately 63 percent. Analyses by the Environmental Protection Agency and Duke University estimate that carbon credits could be worth more than $5 trillion over the life of the program.


Questionable practices


S. 2191 contains many provisions to dislike. The bill would allow a polluter engaged in environmental projects outside its principal business to benefit from the positive results of those projects when calculating compliance with its pollution cap. These are known as offsets.


For example, a company also involved in agricultural practices that reduce carbon dioxide – such as conversion of cropland to rangeland or grassland – could factor the good impact of those efforts into the plus side of the equation to stay within the mandated pollution limit.


It may sound like a reasonable plan, but unforeseen conditions, such as wildfires or flooding, could alter – even eliminate – grassland benefits. Yet lawmakers have failed to clarify how such vulnerabilities would be taken into account.


In addition, the fossil fuel industry stands to receive substantial subsidies for a risky process called carbon capture and sequestration. This describes a method whereby the polluter tries to collect the carbon dioxide that emanates from a smokestack and inject it deep into the ground.


Although Lieberman-Warner proposes to give away the majority of carbon credits at no cost, it wants to auction off the permits connected with sequestration and then reward industry with 7 percent of the sale proceeds. Over the life of the program, that 7 percent would equal a staggering $424 billion. Further, there is no proven evaluation of the extent to which injecting carbon into the ground could pollute groundwater or crops on the ground.


Another problem with sequestration is the process itself. The underground carbon could interact with deep saline rock formations to create an explosive and highly concentrated release of carbon dioxide – literally and figuratively backfiring.


Further, illogical regulations are proposed to govern the fuel used for transportation, but not the emissions from the cars, trucks, planes or ships using the fuel.


Public Citizen supports a smarter approach to the transportation industries that includes the development of a low-carbon fuel standard, new efficiency standards for vehicles and creative incentives to reduce the amount of driving.


“Climate change is a pressing issue that requires stringent oversight and the participation of all sectors of the economy,” said Public Citizen President Joan Claybrook. “We certainly should not be rewarding the fossil fuel companies that helped create global warming in the first place.”


Limited support for bill


Slocum believes this legislation won’t pass the full Congress this year, even though it currently has the support of at least half of the Senate, but could be the basis for a more solid bill in 2009.


At an Energy Information Administration conference in early April, even House Energy and Commerce Chairman John Dingell (D-Mich.) said he did not expect that S. 2191 will go far this year, calling himself a realist.


President Bush, who once appeared to favor the cap-and-trade approach, now seems to be listening to his advisers on K Street. In an April 16 Rose Garden speech, the president spoke about his faith in voluntary standards to reduce global warming – an even friendlier position to industry than contained in the climate bill.


Congress watchers think the Senate may pass the Lieberman-Warner bill, warts and all, as a salute to this valiant, if not misguided, attempt to address global warming.


However, S. 2191 likely will die in the House of Representatives.


Barbara Holzer is a broadcast press officer in Public Citizen’s communications office.



Demand an improved approach to global warming legislation. Take action here.