Kerry-Graham-Leiberman and the implications for Australia
It’s been a long time since the US passed their Climate Change Bill through Congress but, so far, no progress has been made getting a similar bill through the Senate. There are some parallels with the passage of the CPRS here.
On Monday a new US Climate Change Bill is due to be presented to the Senate, proposed jointly by Democrat John Kerry, Republican Lindsey Graham and independent Joe Leiberman.
This is going to be the last real chance to get a bill passed before the US mid-term elections and the trio have been working hard to get bipartisan and industry support for the Bill. The outcome of the debate on this Bill is important for Australia for two reasons.
Firstly, the prospects for improving on the Copenhagen Accord will be bleak without meaningful US action. While the US has made a reduction commitment under the accord, as has Australia, we still need to see what policy the US will use to achieve the target.
Secondly, both major parties in Australia are keen to be seen to be in-line with US policy. With a Federal election looming, the outcome of debate on this bill in the US could influence policy here — or at least election posturing.
There have been claims in the media here that ‘cap and trade’ is dead and this means the US will move to a direct action model, in line with Coalition policy. On the other hand, we’ve recently had President Obama’s comments on the 7:30 Report that “you have to put a price on carbon of some sort”, in line with Labor policy.
We should know more details on the Bill this week and have a good idea of its prospects soon enough, but no one is suggesting it will pass easily, and most are suggesting it will fail. If the Bill does fail, does that mean the US won’t meet its reduction target? Does it mean ‘cap and trade’ is dead? And what does it mean for Australia?
I recently attended a presentation by from Frank Litz, a Senior Fellow from the World Resources Institute (WRI). He said that research still to be published by WRI has found that the US could still meet their reduction target without a national ‘cap and trade’ system. There are two reasons why. Firstly, there is already a regional emissions trading scheme in the US and there are two more in development. The Regional Greenhouse Gas Initiative is underway and covers the electricity sector in 10 mid-Atlantic states. The Western Climate Initiative will cover 11 Pacific states across the US and Canada and the Midwest Greenhouse Gas Reduction Accord will cover 7 more US states. It is clear that even without a national ‘cap and trade’ system, emissions trading will be a major driver of abatement in North America.
Also, the President has significant power to regulate emissions through existing legislation, such as the Clean Air Act. The Environmental Protection Authority has recently issued a finding that greenhouse gas emissions endanger public health and welfare with the support of the White House and following a ruling from the Supreme Court. This means they can begin to put in place performance standards on major emission sources such as vehicles, factories, and power plants. Other agencies such as the Department of Energy and the Department of Transport also have powers that could be used by the President to regulate emissions.
It’s important to distinguish this kind of ‘direct action’ from that proposed by the Liberal Party. The Liberal Party’s policy is to make direct investments in offsets and some renewable energy production and to provide grants to companies to reduce emissions. The policy placese no limit on emissions and makes no attempt to regulate emission sources.
Some people have gone further and suggested that the US EPA might have the power to implement a national emissions trading scheme under existing laws. But even without using existing laws there are some reasons to think the US will have a national scheme soon and if not during this congress, then probably in the next one. And if the US puts a price on carbon, Australia is pretty sure to follow suit.
One of the reasons there is doubt that the Kerry-Graham-Leiberman Bill will get enough support this time around is the looming mid-term elections, rather than insurmountable opposition to such a scheme. The Bill will need Republican support to pass and there is a view that after Obama’s success with Health reform, the Republicans don’t want to give the Democrats another high-profile win. Also, President Obama has indicated that the Financial Reform Bill is a higher priority and he also has a highly political Supreme Court nomination to deal with before the mid-terms. So climate change might not get the attention it deserves.
Direct regulation by the EPA is very unpopular with industry and is seen as a more expensive way to achieve emissions reductions. So we can expect to see renewed pressure from industry for a national trading scheme if and when they become subject to more stringent regulation of emissions. Again, there are echoes of the situation in Australia, where industry is calling for more certainty.
What does this all mean for Australia and our upcoming Federal election?
Right now neither of the major parties has a strong or popular position on climate change, but both parties will hope to get some political mileage from the outcome of debate on this bill. If the US bill does get up then it will provide strong support for Labor’s policy and may see Rudd want to make even more of climate change as an election issue. Despite his failure to pass the CPRS Bill and the disappointment of Copenhagen, he is back talking about emissions trading now and definitely sees it as an area where he has stronger credentials than the Coalition.
Tony Abbott seems quite happy to make up new policies on the run, so what he will do is anyone’s guess. If the Bill fails it should be good news for him because the media will interpret this as a trend away from emissions trading towards direct action. However, President Obama will still want to show international leadership on climate change and demonstrate to partners that the US is taking action to meet its commitment under the Copenhagen Accord ahead of COP16 in Mexico. He will probably draw to attention to the trading schemes that are already underway in the US and use his executive powers to start regulating emissions with new performance standards.
This kind of action is quite different to what the Coalition is proposing, which lets polluters off the hook entirely. And the US will probably get a national emissions trading scheme, sooner or later.
Tags: cprs, election, emissions trading, ETS
