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Kerry-Boxer: Is This the Big One?

The Big Bill... Or is it?

It has been a while since I last blogged... so long and so many things have happened that deserve mention, that I don't know where to start. But let's not bury the lead, the main story these days is the recently released Kerry-Boxer bill, also known as the "Clean Energy, Jobs, and American Power Act" (whose horrible acronym, CEJAPA, was the subject of much twittering last week. Kudos to Cantor CO2e, by the way, for snagging the CEJAPA URL... Hope it is worth it). I would say that it is the bill that we've all been waiting for, except that I'm not entirely sure it is.

Yes, it is a good thing that we finally have a Senate climate bill to complement the Waxman-Markey bill (whose better acronym is ACES) that made it through the House of Representatives. And yes, the focus of the chatter in the media and on the internet has been the fact that this new bill sets somewhat tighter short-term emissions reduction targets than its House-born counterpart (a 20% reduction from 2005 levels by 2020 as opposed to 17% in ACES). There are numerous other differences between this bill and the once passed by the House, but before we get into those (in a future post), it is more important, I think, to ask ourselves one essential and overarching question: Can this bill go the distance? Can it pass in the Senate?

Not much use rearranging the bill's metaphoric deck chairs --as pretty and tempting as they may be-- if this is one big legislative Titanic. Right? (Wrong, there is much to discuss in this bill, but I will save that for the next post.)

OK, so here's my take: I have serious doubts that the bill will go the distance. In a number of ways, the bill takes the discussion slightly to the left of the Waxman-Markey bill and, while this may be the way that many environmentalists would like to see the bill go (present company not necessarily excluded), the political realities in the Senate make it difficult for such a bill to pass. Already many moderate democrats (on whom the fate of a bill such as this rests), not to mention Republicans, have lined up and prepared themselves to fight the bill. Not a good sign.

Make no mistake, climate change legislation in 2009 will be contentious at the best of times and, appearances to the contrary, these aren't the best of times.

Conventional wisdom holds that passing a climate bill in the US is directly related to what happens to health care, and that the issue to watch in the climate bill is what happens to coal states.

I don't fully agree. In my view, the most important issue to watch in the climate bill is what happens to agriculture. I've said it before and I'll say it again, the role of the agricultural community will be central to both the passage and fulfillment of any climate legislation is the US. Full stop. It will be as important --if not more important-- than what happens to coal states. If you go back to the passage of the Waxman-Markey bill in the House, you see that, in the end, passage came when agriculture, in the form of Congressman Colin Peterson, began to make amendments and extract concessions from the bill. Even so, the bill passed with nary a vote to spare, it was one vote shy of not passing.

As it was in the House, so it is likely to be again in the Senate. Expect agriculture to once again have a big say in the ultimate fate of this or any other climate legislation. Here again, conventional wisdom holds that if agriculture finally got behind the bill (albeit reluctantly) in the House, it can do so again in the Senate. Not so fast. There are signs out there that some major farming interests are moving the other way, that they are gearing up to battle against the Senate bill with renewed vim and vigor. Their argument is, as it always has been, that this bill will increase energy costs, and therefore increase the costs of the inputs that farmers need. And, since farmers have trouble passing on increasing costs to consumers, they will get squeezed and even driven out of business. Whether you believe this argument or not is irrelevant, the point is that there is enough fear of this scenario out there to make farming states wary of the bill... and without the moderate Democrats from those states, this bill does not pass.

One argument to counter this fear is, of course, that by selling offsets, farmers will be able to minimize their pain. The problem is that virtually every farmer in the US has seen what damage increased input costs can cause... and they have the scars to prove it. Their friends have lost their farms, their local businesses have closed down. By contrast, virtually NO farmers in the US have seen remarkable benefits from the sale of carbon offsets. Sure, there have been some (courtesy largely of the Chicago Climate Exchange), but they are few and far between (not to mention that prices of a ton of carbon on the CCX have fallen to below the $1 mark).

Now, like all generalizations, this one can be patently unfair. There are many US farmers and a few far-sighted farmers organizations that have come out in favor of a climate bill, so this is by no means a monolithic political force. Like all political forces, it has distinct factions. Still, there is a critical balance that will play out in the days to come... and it is the age-old balance between greed and fear, the same one that drives bankers on Wall Street, retailers on Main Street and everyone else in between. On the greed side, some farmers see that there may be a way for them to make money, possibly even considerable amounts of money, on offsets, biofuels, etc. On the fear side, some worry that they will be put out of business by the increasing costs of fuel, fertilizer, herbicide, etc. Where this balance ends up will determine where, when, and even how the climate bill passes. (An interesting recent report on this issue was put out by the Environmental Working Group.)

In this regard, there has been a recent (and notable) change in the chairmanship of the Senate Agriculture committee. As a result of the reshuffle caused by the death of the venerable Ted Kennedy, a moderate Democrat from the farming state of Arkansas, Blanche Lincoln, has taken up the chairmanship of the Senate's Ag committee. At first blush, this is not a very good development for the bill, largely because she has been publicly doubtful of the utility of such a bill and has even been vocal that she doesn't think such a bill should pass this year. Even worse, she is heading into a tough and highly contested election so will be EXTREMELY careful about how she plays her climate change cards. Not great. (See some recent comments by Senator Lincoln on this matter.)

And yet, it took a sometimes climate-hostile Congressman Peterson to get a bill passed in the House, so Senator Lincoln could yet turn out to be the Senate's version of Mr. Peterson. Time will tell. Hope (and greed) spring eternal.

I know, I know, you are thinking to yourself that I'm avoiding answering the question I posed at the beginning of this post. And while it may seem that way, I'm actually just taking the scenic route to an answer. Here's you go...

First, I don't think Kerry-Boxer (or any other climate bill) is likely to pass before Copenhagen. There just isn't time to bring the interests together, especially since this month there is Halloween, next month is Thanksgiving, then there is Chanukah, Christmas shopping... you get the point. This means the US will arrive in Denmark brandishing three things: the Waxman-Markey bill, the announcement that the EPA will now regulate Greenhouse gases (not coincidentally, announced the same day as the Kerry-Boxer bill was made publicly available, but that could be a blog entry in itself), and the draft Kerry-Boxer bill, in that order. We'll see how well that flies...

Secondly, by trending towards the left (at least in the skewed perception of the Fox News-distorted reality of US politics), this bill is likely to engender some immediate opposition and either get marked up and amended beyond recognition, or simply supplanted by another similar, but more palatable, bill before it even has a chance of passing. Again, we are talking about next year, I think.

To me, this is all a disappointment on several counts. If you had asked me in May, or even in July what I thought were the chances of a bill passing the Senate this year, I would have put them at 50-50 or better. I now think they are considerably worse than 50-50. There is still a chance (remember what I said about hope), but it isn't huge. It is also a disappointment, because I actually think that there is much in the Senate bill that is worth keeping. It is, overall, not a bad bill. In fact, the only major omission worthy of note (beyond the fact that it is silent on allocations, as would be expected), is how it doesn't really deal with agriculture. Still, had this bill not fallen into shark infested political waters... in the midst of a feeding frenzy... with blood in the water... who knows? But such was its destiny.

Thirdly, I expect that in the debate over this bill, there will be several bones of contention, the most important of which will relate to agriculture. These include biofuels, agricultural offsets, who regulates these offsets (USDA vs. EPA), domestic vs. international offsets, and what other systems can be used to provide incentives to farmers (beyond those already in the bill). In short, expect to see more political goodies being tossed towards ag interests. If you think this is a bad thing, consider that without it, this bill (and any other US climate bill) is dead in the water.

Finally, if you live beyond the borders of the US, resist the temptation to think this is all about Republicans vs. Democrats. That is a gross misunderstanding of what is happening here. In fact, it will most certainly NOT be about the Republicans. For the next few months, they won't matter. It will be ALL about the Democrats, about how to make dozens of shades of blue come together around one contentious issue.

I hope the Democrats can pull it off. Climate change is too big a global issue to get sucked into the civil war raging among and within one American political party. But it doesn't seem like they will be able to do it before December.

Ultimately, however, I do think a climate bill will see the light of day, and I think it will do so sometime maybe mid next year, but I worry that CEJAPA is not yet THE bill. It could be transformed into THE bill, but it could also --pun intended-- just end up tilling the soil on which will be sowed a somewhat different bill. So by all means, let's talk about the deck chairs, about what is good and not so good in this bill. But as we do that, let us figure out how to politically tinker with the bill to turn it into something that has two essential characteristics: 1) it helps us reduce emissions and address climate change, and 2) can see the light of day and pass given the politics of today (and by politics, I mean agricultural interest politics).

Because, unlike our planet's climate, the political climate doesn't ever seem to change fast enough.

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