Cap and Trade Rules
King Coal

By Kevin Drum
Mother Jones
March 13, 2009

Barack Obama has promised to push cap-and-trade legislation this year, and one
way of getting it approved in the Senate is to push it through via the budget
reconciliation process, where it would require only 50 votes to pass. Elana
Schor reports that this has run into a roadblock:

In a letter delivered to the Senate Budget Committee yesterday, eight
Democratic senators joined 25 Republicans to defend the GOP's right to set a
60-vote margin for passing emissions limits.

"We oppose using the budget process to expedite passage of climate
legislation," the senators, including eight centrist Democrats, wrote in their missive.

The eight Democratic senators who signed on to the letter are
Robert Byrd (WV), Blanche Lincoln (AR), Ben Nelson (NE), Evan Bayh (IN), Mark
Pryor (AR), Bob Casey (PA), Carl Levin (MI), and Mary Landrieu (LA).

Take a look at those names: six are from the midwest and the south, joined by
Casey and Byrd. In other words, coal country senators. Nearly all the
electricity generated in these regions comes from coal, and a lot of that coal
comes from West Virginia and Pennsylvania, the #2 and #4 coal-producing states
in the country.

This is a dynamic to watch. The battle over cap-and-trade isn't just between
liberals and conservatives, it's also between regions. You'll find coal-fired
electric plants all around the country, but the midwest and the south rely on it
much more heavily than the west and the northeast, which generate a lot of their
electricity via hydro and natural gas. Cap-and-trade will raise the price of
coal-fired electricity more than any other kind, which means the price increases
will hit the south and midwest especially hard.

This letter, then, isn't just a sign that there are some Democratic senators who
feel strongly about not bending Senate rules. It's a sign that Democrats from
the south and midwest are probably going to have to bribed to support
cap-and-trade. The big question is, how? Can they be bought off in fairly
benign, traditional ways, or will their price effectively mean the gutting of
the legislation? Stay tuned.

The obvious way to buy them off is federal subsidization of CO2 sequestration,
along with pointing out the jobs sequestration infrastructure and construction
would give rise to.

Regardless of what you think of sequestration (and, let's be honest here, plenty
of environments oppose it on theological, not scientific, grounds) this seems to
me the most practical path forward. Which means, in turn, trying to ensure that
the resulting legislation is an uncrappy as it can be. I'd say the points to try
to insist on are

(a) prices are unchanged across the nation, and across carbon sources. What is
provided is an EXPLICIT sequestration subsidy, not some screwing around with
grandfathering in sources and so on.

(b) the subsidy is an explicit amount of money, NOT an open-ended check-book or
a fraction of the coal cost or whatever. With an explicit amount of money, there
is much more incentive to do the sequestration in ever more efficient ways.
(c) the subsidy is given explicitly as a transition mechanism, not something to
last till the end of time. Make it a fixed amount of money, and make that
ratchet down on a linear path over the next 30 years or so.

(d) there needs to be ways to ensure that sequestration projects are not
leaking, and that the incentives are not skewed to reward short-term sloppiness
at the cost of long-term problems. The financial people can obviously think up a
bunch of schemes for this --- eg for each project there exists a fund that is
basically a bond against disaster in the project. The fund is invested in
treasuries or whatever, so it generates income, and persons can buy shares in
the fund. As time goes by and it becomes clear that the site is not leaking, the
fund will disgorge the capital.

The problem, however, as we have seen, is that financial theory is not enough
--- if the people providing the information behind the project are lying, all
the financial tricks in the world will not help. Which in turn means that, I
think, we have to push for very aggressive public access to all aspects of
sequestration projects. Geological data, sensor data, accident reports, it ALL
has to be publicly available for every project. There are ways to detect leaks
from satellites, from airplanes, and on the ground --- and the public has to be
full partners in each. If, for whatever reason, Green Peace believes that some
project in Wyoming is leaking at levels above what is mandated, it has to be
allowed to fly its planes over the site, and have its people with sensors walk
all over the site. Without this level of public scrutiny, I would not blame the
public for believing that sequestration is just more plutocratic BS, a way to
have certain persons paid a fortune today, but building up a problem that's
going to surface in a hundred years in a serious way.


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