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Climate & Energy Program

Policy Brief
April 2010

Summary: The emerging “tri-parti- U.S. Climate Leadership: Outlook for 2010
san” bill on climate and energy
faces a tough legislative calendar by Chelsea Henderson Maxwell1
but it remains the most viable
option on the table for the United
States to meet its Copenhagen Many industry stakeholders and In November 2009, Senators John Kerry
commitments and achieve low environmental advocates in the United (D-MA) and Lindsey Graham (R-SC)
carbon economic growth. States and Europe went into 2008 with published an op-ed in the New York Times
the assumption that, regardless of who detailing the elements of a potential
A Senate trio of a Democrat (John was elected to the White House, the new climate and energy bill with bipartisan
Kerry), a Republican (Lindsay president would make enactment of a support, adding crucial momentum to
U.S. Climate Program in the 111th the U.S. climate and energy debate. Kerry
Graham), and an Independent (Joe
Congress not only likely, but even and Graham, joined by U.S. Senator Joe
Lieberman) is crafting a bill aimed
inevitable. Yet in early 2010, passage of Lieberman (I-CT), are working to find a
to appeal to a bipartisan minimum
a climate change bill has not emerged as legislative path that leads to 60 votes. But
of 60 senators, an increasingly one of President Barack Obama’s top this momentum is waning as stakeholders
difficult task as the November mid- priorities. While the U.S. House of and lawmakers wait for the new draft bill
term elections near. But, as of today, Representatives passed a climate and to be unveiled. While the senators may
none of the alternatives—EPA regu- energy bill in May 2009, it remains un- have found a formula with broad appeal,
lation, an “energy only” bill without clear whether the U.S. Senate can find the the “tri-partisan” team’s timing is of the
a cap on emissions, or postponing right formula to pass similar legislation. essence as Congress is not known for
action to a future Congress, among The only federal effort to cut U.S. emis- passing comprehensive bills in a bipar-
others—would deliver the U.S. com- sions that is moving forward, although tisan fashion during an election year.
mitment to reduce its emissions not without obstacles, is regulation by An issue as politically charged as climate
17 percent below 2005 levels by the Environmental Protection Agency change becomes increasingly difficult to
(EPA)—an approach widely regarded as consider as the November mid-term elec-
2020. Meanwhile, the United States
less effective, more burdensome and more tions near.
remains dependent on imported oil,
expensive than proposals being consid-
while China and other nations gain
ered by the U.S. Congress. There is much at stake and little time to
a competitive edge in clean energy waste. As the world’s largest historic emit-
technologies. Stakeholders on both There is still some hope that the U.S. ter, the United States is woefully behind
sides of the Atlantic still need to Senate could pass a climate and energy in reducing its greenhouse gas emissions.
convince wavering senators that the bill this year, given the strong push in the Our current energy policies and practices
trio’s bill has the best chance to cap climate and energy debate by business, do more than harm the environment:
U.S. emissions while strengthening national security, and labor leaders as well U.S. addiction to foreign oil (we import
the U.S. economy and increasing as environmentalists. But each day brings nearly 70 percent, mainly from countries
energy independence. fresh rumors to substantiate, alternative that do not have our best interests at
policy options to distract attention, and, heart) put our national security at risk.
most importantly, updated vote counts to Defense and intelligence community
consider. leaders have identified climate change
1744 R Street NW and energy dependence as emerging
Washington, DC 20009
T 1 202 683 2650 1
Chelsea Henderson Maxwell is a partner at The Clark Group. The views expressed here are those of the author and do not
F 1 202 265 1662 necessarily represent the views of the German Marshall Fund of the United States (GMF). This is the first of a policy brief series that
GMF will publish throughout the year on Climate Change Policy: New Ideas for a New Decade.
Climate & Energy Program

Policy Brief
threats to U.S. armed forces at home and abroad. Furthermore, moderate Republicans fearful of energy price hikes during a
our delay in implementing a cap on carbon also leaves us eco- recession.
nomically vulnerable, as other nations race to win a competitive
edge in clean energy technologies. In the end, the United States Details of the draft bill are expected by late April, but there are
could find itself trading an expensive reliance on foreign oil for real concerns that this could be too close to the mid-term elec-
a dependence on clean energy technology manufactured abroad. tions in November. Talk of “Plan B” among Washington insiders
The reality is simple—each day that passes without a U.S. cap is rampant, even before the fate of Plan A is sealed. But big ques-
on carbon, China invests around $270 million in the clean tions remain: Are there other viable legislative proposals on the
energy economy—not for environmental reasons but because it table or is the Kerry-Graham-Lieberman “Plan A” the only real
recognizes that it will contribute to sustained national economic option for 2010? And if there are workable alternatives to Plan A
growth and new jobs. is there even time to consider them this year?

U.S. policymakers long ago ceded a leadership role on global Cap and dividend
climate change when they side-stepped mandatory emissions
caps in favor of voluntary actions by industry—an approach that One alternative to the Kerry-Graham-Lieberman approach is the
has failed to deliver substantial cuts in U.S. emissions. The ques- “Cap and Dividend” proposal by Senators Maria Cantwell (D-
tion now is not so much whether the United States should lead, WA) and Susan Collins (R-ME). Cantwell and Collins market
but rather whether it can, at a minimum, meet its Copenhagen their bill—the “Carbon Limits and Energy for America’s Re-
commitment to reduce emissions 17 percent below 2005 levels newal” (CLEAR) Act—as a simpler alternative to cap and trade
by 2020. The answer hinges on enacting a comprehensive climate that would rebate proceeds directly to American residents rather
change and energy bill, and as of today the only viable proposal than establishing a new market for carbon. But the proposed
that comes close to achieving this target is the one under devel- bill is not without critics. Its near-term emissions targets are
opment by Kerry, Graham, and Lieberman. seen by many as too weak and questions remain about how the
revenues from selling emissions allowances to companies would
Running out of time and options? be distributed to Americans. In addition, the bill does not set
aside any of these revenues to help developing countries cope
Further delay only makes it harder and more expensive for the with the consequences of climate change. In other words, the bill
United States to meet the interim targets that the world’s leading would neither achieve the U.S. commitment to cut emissions by
scientists say are required to prevent catastrophic climate change. 17 percent nor support its pledge to help raise $100 billion in
The EPA’s new and broadly supported “car rule,” which will climate financing for developing countries by 2020. While the
increase Corporate Average Fuel Economy (CAFE) standards CLEAR Act is imperfect, Kerry, Graham, and Lieberman could
for cars and light trucks, is an important step toward lowering tip the scales in their favor by incorporating its most appealing
greenhouse gas emissions. But unfortunately, the EPA regulatory elements—dividends to the public and strong market regula-
process alone cannot deliver the promised 17 percent cut in U.S. tion—into their bill.
emissions by 2020. And even if it could, the EPA-only approach
is so unpopular politically that it has sparked numerous efforts “Energy only”
on Capitol Hill to limit the extent to which EPA can use its au-
thority under the Clean Air Act to combat climate change. There is a small coalition of senators mainly from the Energy
and Natural Resource Committee who want to shelve compre-
To win support, Kerry, Graham, and Lieberman have shifted hensive climate legislation this year. In its place, they urge the
from the comprehensive economy-wide approach of the House Senate to focus on what they view as in the realm of the pos-
bill to a sector-by-sector approach to cutting emissions. Under sible—an energy-only bill drafted by Senators Jeff Bingaman
the trio’s plan, only the power sector would face an emissions (D-NM) and Barbara Murkowski (R-AK) and passed by the
cap at first; manufacturing would be phased in at a later date. committee last year. But the version of the bill endorsed by the
A fee on fuel refining and processing would slow transport Committee may not be environmentally strong enough to appeal
emissions. By including incentives for nuclear power and more to progressive Democrats. For example, the Bingaman Renew-
domestic drilling, as well as robust measures to limit costs, the able Electricity Standard only requires that 15 percent of U.S.
Senate trio hopes to appeal to conservative Democrats and electricity come from renewable energy sources by 2021, and

Climate & Energy Program

Policy Brief
25 percent of that target can be met through energy efficiency. bills, conservative Democrats from traditionally red states are
This standard is weaker than most renewable energy standards reluctant to vote for climate and energy legislation before their
already adopted by a number of U.S. states. In addition, the reelection.
energy-only approach may “give away” too many of the nuclear
and drilling incentives that Kerry-Graham-Lieberman plan to Some Washington pragmatists think that if 2010 is not the year
use to bring fence-sitting members on board with a comprehen- for passing U.S. climate change policy, the next best opportunity
sive climate bill. Finally, lacking mandatory emissions reduction for enacting a bill is 2013, since 2011 and 2012 will be consumed
targets, the energy-only approach would not bring U.S. emis- by the presidential election. Even the 2013 timeline assumes a
sions in line with its Copenhagen Accord commitments. pro-environment president in White House.

Power sector only Given what is at stake, it is no wonder that environmental

advocates are on edge. There is no easy or adequate Plan B that
Some senators support a cap on the power sector only (an is likely to emerge in time in 2010 and the prospect of delaying
element of Kerry-Graham-Lieberman approach) and want to U.S. climate action for several more years is real. There is great
exclude manufacturing and transportation emission limits. pressure but also great promise for success as Kerry, Graham,
But this approach is not popular among power companies as and Lieberman work to build support for their bill. But progress
it would place a heavier burden on electricity generators than is only possible if environmental advocates and industry stake-
alternative approaches. Furthermore, lawmakers would not holders work closely with the Senate trio to win over uncommit-
begin negotiating a power sector–only bill unless it was clear that ted senators.
the Kerry-Graham-Lieberman approach had failed. By then, the
window to build support for this approach and strike a compro- Senators get elected to solve difficult national problems and,
mise before the end of the 111th Congress could be closed. sometimes, to make tough decisions and cast uncomfortable
votes. With an uncertain economic future, an unacceptable
If Plan A fails in 2010 dependence on foreign oil, unpredictable energy prices, and an
obligation to curb U.S. carbon emissions, it is intolerable for U.S.
If the Senate fails to pass the Kerry-Graham-Lieberman bill in lawmakers to ignore complex issues like climate change be-
2010, the chances of the U.S. Congress enacting a climate and cause it is an election year. If anything, now is when our nation
energy bill in the near future are slim. If Democrats, particu- needs its leaders more than ever to come to the table and make
larly a number of the conservative or freshman House members progress toward a better climate and energy future, a future
who voted “yes” on the Waxman-Markey bill, lose seats in the that under a climate program that places a cap on carbon—and
2010 elections, that chamber may be unwilling to “go first” on thus a market signal to spur investments in renewable energies
climate and energy legislation in the next Congress. The politi- and clean energy technologies—could include a resurgence of
cal calculus in the Senate does not look much rosier next year; manufacturing jobs, sustained economic growth, and renewed
proponents of climate and energy legislation cannot afford to U.S. leadership in the clean energy economy.
lose a single vote.
Maintaining momentum in 2010
In 2011, the United States enters the presidential election cycle.
Partisan cooperation has been abysmal during the last two years, Despite the obstacles, climate stakeholders remain hopeful that a
and prospects for improvement are dim as Congress is notori- bill will emerge from the Kerry-Graham-Lieberman process this
ously uncooperative in the run-up to a presidential election. spring. President Obama and European policymakers and stake-
President Obama is “damned if he does, damned if he doesn’t” holders can help to maintain momentum in the 2010 debate and
drive climate and energy legislation. Even if he makes it his top increase the chances that the Senate trio’s bill will pass.
priority, Republicans may work to block climate legislation to
punish Democrats for what they perceive as unfair tactics used In the last month, President Obama has proposed creating
to pass health care reform. In addition, Republicans are wary incentives to develop more nuclear power and open some U.S.
of helping the president secure another victory in an election waters to more offshore drilling. These announcements were
year. But the challenges President Obama faces are not from the meant to demonstrate to moderate Democrats and Republicans
opposition party alone. Fearful of job losses and higher energy that he is serious about boosting domestic energy production

Climate & Energy Program

Policy Brief
to improve U.S. energy security. Some environmental groups
are willing to accept such concessions in exchange for a cap on Chelsea Henderson Maxwell, Partner, The Clark Group
greenhouse gas emissions and were surprised that Obama
Chelsea Henderson Maxwell is a partner at The Clark Group. Working
offered these incentives without a carbon cap. If the Obama
out of the Washington, DC office, Ms. Maxwell provides strategic
administration wants to tackle climate change this year, the
advice and lobbying services for a number of clients regarding global
president needs to use the nuclear and offshore drilling incen-
climate change, energy, transportation, and water resources policy.
tives as the carrots to garner support for enactment of a cap on
Prior to her current position, Ms. Maxwell served as senior policy
greenhouse gas emissions.
advisor for U.S. Senator John Warner (R-VA), where she co-authored
the Lieberman-Warner Climate Security Act and helped finalize the
Another critical step is to demonstrate to the American public
conference report to the Water Resources Development Act of 2007.
that climate policies can and will make the United States a stron-
Prior to joining Senator Warner’s office, Ms. Maxwell had ten years
ger nation. Opponents of climate legislation have unfortunately
experience working on environment and energy issues, both on and
done their job well. They’ve convinced the American public
off the Hill. She holds a master’s degree in education and a bachelor’s
that cap and trade—which offers emitters flexibility and uses
degree in international relations from Boston University.
market forces to reduce emissions at the lowest possible cost—is
something they should fear. Opponents have also misled the U.S.
About Policy Brief Series
public into believing that the European Emissions Trading Sys-
tem has been a failure, when in fact by 2012 it will have helped GMF’s Climate & Energy Program has published a new series of policy
reduce emissions by 7.4 percent for the 15 EU members that briefs on Climate Change Policy: New Ideas for a New Decade. These
signed up to the Kyoto Protocol at a lower cost than originally briefs are intended to offer fresh thinking and policy recommenda-
anticipated. Europe can help dispel the myth that a mandatory tions to help clarify the post-Copenhagen policy landscape and offer
greenhouse gas reduction program is an economy killer by dem- ideas to policymakers in the United States, Europe, and around the
onstrating to U.S. policymakers that it has implemented strong globe on how to tackle climate change.
climate and energy policies while gaining a competitive lead in
clean energy technologies and improving its energy security. About GMF
Europe can also make the case that climate policy is critical to
minimize international security risks related to climate impacts, The German Marshall Fund of the United States (GMF) is a
such as natural disasters, conflicts over scarcer resources, and nonpartisan American public policy and grantmaking institution
impacts on migration and regional instability. dedicated to promoting greater cooperation and understanding
between North America and Europe. GMF does this by supporting
A U.S. climate and energy bill will pass when the American pub- individuals and institutions working on transatlantic issues, by
lic demands that the president and Congress enact a program to convening leaders to discuss the most pressing transatlantic themes,
cut emissions because it will strengthen the U.S. economy and and by examining ways in which transatlantic cooperation can
increase U.S. energy independence. The challenge is for propo- address a variety of global policy challenges. In addition, GMF sup-
nents of climate action on both sides of the Atlantic to make this ports a number of initiatives to strengthen democracies. Founded
happen sooner rather than later. in 1972 through a gift from Germany on the 25th anniversary of the
Marshall Plan as a permanent memorial to Marshall Plan assistance,
GMF maintains a strong presence on both sides of the Atlantic. In ad-
dition to its headquarters in Washington, DC, GMF has seven offices
in Europe: Berlin, Bratislava, Paris, Brussels, Belgrade, Ankara, and