This post was written by Todd O. Maiden, Lawrence A. Demase, Jennifer Smokelin, Louis A. Naugle, and John Lynn Smith.
On June 6, 2008, U.S. Senate Majority Leader Harry Reid withdrew from consideration a bill that would have established a national “cap-and-trade” system, requiring industry to pay to emit carbon dioxide and the five other most abundant greenhouse gases (“GHGs”). The Senate voted 48-36 in favor of the legislation, but Democratic proponents fell 12 votes short of the 60 votes needed to overcome a Republican filibuster. Six senators absent from the debate, including presidential candidates John McCain and Barack Obama, sent letters indicating they would have voted for the bill, had they been present.
The bill, dubbed the Lieberman-Warner Climate Security Act of 2008, and championed by California Sen. Barbara Boxer, Chair of the Senate Environment and Public Works Committee, aimed to reduce total U.S. GHG emissions by about 66 percent of current levels by 2050. In the coming decades, the Act – proposing the first cap-and-trade system to cover the electricity, industry, and transportation sectors – would have generated more than $5 trillion in government revenue, to be distributed to affected industries, consumers, and local governments.
Sen. Boxer remained optimistic about the chances of passing federal climate change legislation in the near future. “It’s clear a majority of Congress wants to act,” she said, referring to the 54 senators who had demonstrated support. She predicted that a new Congress and a new president would be more amenable to legislation mandating reductions in GHGs.
Other senators had harsher words for the bill’s opponents. Sen. Robert Menendez (D-N.J.), a member of the Energy and Natural Resources Committee and Chairman of the Senate Foreign Relations subcommittee in charge of international environmental agreements, released a statement in which he charged that “The Republican ‘No’ Machine has reared its head again . . . prevent[ing] our nation from reducing the emissions that have caused the climate crisis and from investing in green technologies that can create jobs and spur the economy.” Noting the bill was “not perfect,” he added that “every major movement starts with a first step, and that’s what this bill represented.”
Utilizing the same general approach as is being developed under California’s Global Warming Solutions Act of 2006, the bill would have created a national market in emission allowances and provided companies with financial incentives to reduce emissions. The legislation would have allowed total U.S. GHG emissions to peak in 2012, and required subsequent reductions of about 2 percent per year until 2050. Approximately 2,100 companies – mostly coal-fired power plants, oil refineries, natural gas processors, and factories – would have been required to purchase permits, or “allowances,” to emit GHGs. Companies exceeding the target reductions would have been able sell or trade their allowances. While many of the initial allowances would have been distributed at no charge, most would have been auctioned off. The revenue from these auctions would have paid for cleaner technologies and rebates to poorer consumers to offset expected increases in energy prices. The bill would have also established a Carbon Market Efficiency Board, which would have monitored progress and assisted companies in dealing with fluctuations in carbon prices. In short, the bill was intended to incentivize GHG emission reductions while enabling the emitting parties to determine how they wish to accomplish those reductions.
Opponents, including the current Administration, viewed the bill as a tax on industry that would have increased energy prices, eliminated jobs, and made American businesses less competitive. President Bush said the bill was “the wrong way to proceed,” and had threatened a veto if it were to pass in its current form. He added that the bill “would impose roughly $6 trillion of new costs on the American economy.” An Energy Information Administration study estimated that reducing greenhouse gases 45 to 55 percent by 2030 would slow economic growth by 0.2 percent to 0.6 percent of U.S. gross domestic product. Because the electric power industry would account for more than 80 percent of the reductions, the study predicts that electricity prices could rise by 11 percent to 64 percent by 2030, and gasoline prices could rise by 22 to 49 cents over the same period.