Guestblog: American Environmental Policy Sucks

I don’t talk enough about my friend Marathon. The man is a beast. A socially conscious, built-like-an-ox beast. He’s also one of my nicest and most liberal friends. I think his passionate arguments can make even the most tree-hating of conservatives stop and think. As I trust him on environmental matters, today’s post is a guestblog on the American Clean Energy and Security Act that recently passed the House.

I’ll say that I completely agree that our energy consumption absolutely needs to be curtailed and that energy efficiency should be a top priority for not only the federal government, but individuals. Even with these imperatives, Marathon points out how the American political system produces huge hurdles for the kind of progress we currently need.

Perhaps we should dismantle the American political process entirely?

Here’s Marathon:

On Friday the House of Representatives passed the American Clean Energy and Security Act (ACES) by a narrow 219-212 vote, the first major piece of legislation in American history to decrease greenhouse gas emissions, i.e. carbon dioxide. I won’t bullshit you, there have been less than a handful of environmental acts that haven’t sucked since Congress started giving a shit about the environment for completely political reasons in the late 1960s. Most acts are simply rhetoric that give the government the authority to improve environmental quality, but never a strong enough political reason to act.

Take for example The Clean Air Act Extension of 1970, (84 Stat. 1676, Public Law 91-604) a United States federal law that requires the Environmental Protection Agency (EPA) to develop and enforce regulations to protect the general public from exposure to airborne contaminants that are known to be hazardous to human health. The EPA allows the states to create their own State Implementation Plan (SIP) to best improve air quality given the most common pollutants in that state. This example of new federalism sounds all well and good but it ultimately leaves the states responsible for air quality while leaving them unaccountable to anyone.  Air quality doesn’t improve and States waste money pretending do something making committees that ultimately will never get the funding to change anything . Its a bill that makes the ignorant liberals  smile, and ignorant conservatives livid.

I guess what I’m trying to say here is American environmental policy blows. The Clean Air Act of 1991 set up a sulfur dioxide cap and trade system that decreased SO x concentrations drastically while having very limited increases on utility payments in America. It’s a good bill, it decimated  the amount of acid rain created by American factories and did so cost effectively. It however does nothing to curtail nitrates, another component of acid rain but it is forgotten because of the bill’s effectiveness on sulfates. So we have another incomplete bill it solves part of the problem while ignoring another. You could argue that American Environmental Policy is a political ploy. It excites the tree huggers like myself when a politician promises to clean up our industries fight environmental degradation but too often they pass a bill of extemporaneous shit that fails to meet any of its alleged goals.

Not so good...

Much better

ACES is creating the first carbon cap and trade system for public utility companies including coal fired power plants, natural gas, car companies, and oil companies. A good analysis of the bill is by John Larsen of the World Resources Institute.

What’s in the bill?

We have a good understanding of the bill’s four major elements (the official version will be reported out of committee in early June.) These include:

A clean energy requirement, designed both to set new standards for current types of power generation and to accelerate development and deployment of clean energy technologies such as renewables, energy efficiency and carbon capture and storage.

An efficiency requirement that provides funding for energy efficiency programs, and the setting of stronger building codes and product efficiency standards.

A cap and trade program that sets mandatory caps on 87 percent of U.S. greenhouse gas emissions including the electric power and oil and gas sectors, and heavy industry.

What’s title III of the bill?

Title III of the bill provides details on the distribution of allowances allocated to aid affected industries and consumers through the transition to a clean energy, low carbon economy. Rather than being auctioned to the highest bidder, the lion’s share of allowances are allocated to entities in specific sectors, mostly with strict strings attached. For example, the largest chunk – 35% – is awarded to electric power distributors, with the requirement that the benefit of these allowances must be passed on to consumers to cushion against potential increases in energy bills. Similarly, allowances are also designated for consumers of natural gas, heating oil and propane. States would also receive some allowances to be used for specific purposes such as the deployment of clean energy technologies.

The bill also earmarks a small percentage of allowances to the automobile industry to help re-tool factories to manufacture new, clean vehicles such as plug in hybrids. At least 15% of the allowances would be auctioned, with the proceeds channeled into programs to assist low income energy consumers. Up to 17 percent will be given away for free to petroleum refineries and trade exposed industries to assist them as they adjust to a carbon constrained economy.

To summarize the bill, it’s a cap and trade system much like the one for sulfur dioxides to give consumers an economic incentive to lower their energy use and energy producers an incentive reduce their carbon output. Many provisions are in place to ensure that utility costs do not sky rocket in the opening years of newly proposed system and subsidies from the tonnage permits will offset the increased costs of energy to lower income families. Predictions by the Congressional Budget Office have shown that lower income families will not see an increase in their energy bills.

So this bill sounds great; we will take our first step in lowering our carbon emissions while making a small investment from American consumers. However, there are some problems. The cap and trade system won’t go into effect until 2012l so when Obama is up for reelection he won’t have to fight the opposition that blames him for increased energy prices all 4 years as president. Obama plays the political game as well as any president ever has, but as PTP would say: Not Ba’rock. Although it will help the ease into the carbon trading system 60% of the permits will be given out for free the first 3 years of the program. So basically our cap and trade system won’t really be in full effect until 2015. In some we have a cap and trade system which doesn’t start for 6 years and a few subsidies for renewable energy research. Its a pretty bill that lacks a lot of promises.

However this is the House version of the bill. The House is about as liberal as the Kennedy family, and it barely passed. 44 Democrats, predominately from coal mining and manufacturing states, voted against the bill. The Senate Democrats, particularly the moderate Dems from Indiana, West Virginia, Ohio, and Iowa will work to water down the bills provisions and weaken its targets and cap standards. Not to mention opposition who labels this as the job killing bill of America which will make our energy more expensive and as Frank Lucas, Republican representative of Oklahoma put it “The Waxman-Markey bill promises to destroy our standard of living.” Essentially we will come out with a pretty bill that may  never actually do anything of value. If the cap and trade system is lost in the Senate version of the bill, then America has failed once again on environmental policy.

How much more will I pay?
I would like to leave you with one little scenario for those that are still concerned about the increases in energy costs due to the cap and trade system. Once again we will go to our friend John Larsen Senior Associate in the Climate and Energy Program at the World Resources Institute. His current work focuses on U.S. federal, regional, and state climate policy, as well as the interactions of policies between different levels of government. He has also conducted research and analysis for WRI’s two climate business groups: Climate Northeast and Climate Midwest.

Prior to WRI, John worked on environmental issues with groups including The Nature Conservancy, the Campaign for America’s Wilderness, the Global Development and Environment Institute, Clean Water Action, and in the Massachusetts State Legislature. He holds a BS in Environmental Science from the University of Massachusetts, Amherst, and a Masters in Urban and Environmental Policy and Planning from Tufts University.

A response to the ACES article written by John Larson.

By Anonymous on June 15, 2009

Your power bill, depending on your coops resource portfolio mix of coal, natural gas, hydro, nuclear, or alternative energy, could go up from 25% to 50%. Our coop energy bill is about $.04 per kwh. The cap and trade program is expected to raise that cost by $.02 per kwh, or 50%.

John’s rebuttal.

About electric rates.

Thanks anonymous for responding to the questions about REA’s and electric prices.

You are correct about the initial affect of the carbon price and how it would influence electric power rates. The carbon price on its own would increase power rates to varying degrees based on the price of allowances and the relative mix of electric generation that provides you your power. 50% seems on the high side based on most of the analyses I’ve seen at least through 2020 (not sure where you got that number).

However, the impact on rates is only part of the story. The Waxman-Markey bill has an extra set of components that will dampen the affect the carbon price has on your BILL as oppose to your RATES. First, there are multiple programs designed to increase the efficient use of electricity in people’s homes this includes Co-op customers. Even if rates go up if you use less electricity you might see your bill go down. Second, a substantial amount of the emission allowances (pollution permits) are given to electric Local Distribution Companies (LDCs, this includes Co-ops) solely for the benefit of ratepayers. These allowances will likely be sold by the LDCs with the proceeds used to lower the fixed cost portions (not rates) of your electric bill (e.g. distribution and customer charges).

A quick example. Let’s say I currently use 1000 kWh per month of electricity (that’s a lot but the math is easier) at a rate of $0.04/kWh (full disclosure this rate seems really low, my Maryland LDC charges $0.115/kWh). So that’s $40/ month. Then lets say the LDC charges $10/month to each customer for service. So my total monthly bill is $50.

Now let’s a imagine a world with Waxman-Markey in play and its the year 2020. State efficiency programs funded through allowances sales plus new appliance standards have reduced my electric usage by 20% so now I use 800 kWh a month. The carbon price (to use your numbers) increase my rates by 50% so now I’m paying $0.06/kWh. Meanwhile my LDC has cut my costumer fee to $2.50 thanks to additional allowances from the cap and trade program. Under this scenario my total monthly bill is now $50.50.

Now this is a hypothetical scenario but it is illustrative of how the bill really will affect electric bills in total. While my rates went up 50% my bill went up 1%, not a bad deal considering the costs of doing nothing about climate change could be far greater.

Thanks, John.

Now in this scenario if the subsidy isn’t 75% meaning the consumer fee is dropped 7 dollars and 50 cents then the cost is $58.00 meaning a 16 percent increase in price. However there will be a subsidy to consumers of some kind meaning according to the bill’s current provisions somewhere in the range of a 5-10 % increase in energy expenditures per household.

Most PTP posts end in something witty to make you feel a little better about your day but I’m not great at that so I will leave you at this. The cap and trade system is a tax. It is. The Republicans are right. But if we are going to prevent climate change from devastating our planet we have got to be committed to make our adjustments now or be prepared for a changing global landscape that human life has never before seen.

– Marathon is a political science and environmental policy & planning double major at Virginia Tech. He works a job to provide microloans, will be working with Oxfam International next semetser, and gets up at 6 in the morning to run. He is awesome.