US Dems To Push Climate Bill As Recovery Tool For Econ Crisis

U.S. Democratic leaders say they plan to push a climate-change bill in the new year as a central tool for economic recovery, but the financial crisis may have arrested the political momentum necessary to pass such legislation.

Despite both presidential contenders having named climate-change legislation as a top priority and Democrats forecast to win larger majorities in the Senate and the House, a bill that would force energy costs up and create trillion- dollar wealth transfers may be a hard sell when the economy's in a recession.

"This crisis puts the nail in the coffin for climate change, at least until all of the problems in the economy are worked out," said Bill Kovacs, vice president of the U.S. Chamber of Commerce's division for environmental and regulatory affairs.

Spurred on by pressure from within their environmental base, however, Democratic leaders say investment in clean energy infrastructure would not only generate domestic growth but also stem the outflow of hundreds of billions in petrodollars that currently exacerbates the nation's trade deficit.

"When we address the threat of unchecked global warming by investing in clean energy technologies and reducing our dependence on foreign oil, we also have a recipe for economic recovery," Sen. Barbara Boxer, D-Calif., head of the environment committee responsible for climate legislation, told Dow Jones Newswires.

"A comprehensive economic recovery plan would incorporate a program of investment in clean energy technology paid for by revenues from a cap on global- warming emissions," said Dan Lashoff, director of the Climate Center at the Natural Resources Defense Council, which has strong ties with Democrats on Capitol Hill.

Earlier this year, the Senate failed to pass a bill that would cap greenhouse- gas emissions in an effort to limit the impact of human-generated emissions on climate change. Under the bill, polluters would have to hold allowances for the right to emit greenhouse gases into the atmosphere. Companies that had trouble staying within limits would have to buy additional allowances, while companies that found ways to reduce emissions could sell excess allowances. The effect would be to penalize polluters and reward companies that find ways to operate with more energy efficiency or fewer emissions.

Senate Majority Leader Harry Reid, D-Nev., House Speaker Nancy Pelosi, D- Calif., and Sen. Boxer all say the legislation is still a top priority.

All told, the bill would cost - and generate for some industries - $6 to $8 trillion over the several-decade lifetime of the program.

Given the current economic crisis in the U.S. and forecasts for flat or negative growth over the next several quarters, the Democratic leaders are casting the legislation as an essential tool for recovery.

"A climate-change bill generates a lot of revenue and that money will stimulate the economy and create new jobs." said House Speaker spokesman Drew Hammill. Jim Manley, a spokesman for Reid, agreed: "We can and must design it to create jobs while reducing emissions."

The Past Looking Forward?

The history of the bill sheds light on the political sensitivity of the matter and also may reveal the prospects for another vote in an ongoing financial crisis. In June, Sen. Reid pulled the bill off the floor after coming up a dozen votes shy of what was needed to pass the legislation. Many pointed to the meteoric rise in oil, natural gas and gasoline prices as the cause of the failed vote. "When faced with the inconvenient truth of the bill's impact on skyrocketing gas prices, very few senators were willing to even debate this bill," Sen. James Inhofe, R-Okla., ranking member of the environment committee, said at the time of the vote.

Now, Inhofe sees the "financial realities" making it much more difficult for an aggressive, economy-wide climate bill. "I believe the current financial difficulties will only reinforce the public's concerns about any climate-change bill that attempts to increase the costs of energy and jeopardizes jobs in the near term," he said.

Richard Cortright, managing director of Standard & Poor's utilities and infrastructure group, said the issue has been diluted in importance compared with the economic crisis, and will likely be delayed for at least a year. Add to that the lobbying fight over the allocations, distribution of wealth and who bears the biggest emission burdens, "It's going to be a slugfest as it is, without the recessionary background on top of everything," he said.

Climate Bill Leverage

Tony Kreindler, a spokesman for the Environmental Defense Fund, said the conventional wisdom that the climate bill is temporarily a bust may prove to be wrong. He said that with a Congress that aims to pass an expensive economic stimulus package and two presidential candidates favoring funneling billions for clean and secure energy supplies to protect the climate and wean the country away from its dependency on imports, "The billion dollar question is where the billions will come from."

The climate-change bill, he said, could be the vehicle that pays for those investments without adding more debt to the government deficit.

Auctioning allowances, as Democratic presidential candidate Sen. Barack Obama, D-Ill., proposes, could generate $150 billion a year for clean-energy industries, although it would tax emitting industries such as coal-fired generation, which produces much of the nation's power, as well as the petroleum sectors, which provide for the bulk of the economy's transportation needs. Those costs, of course, would ultimately be borne by the consumer, meaning higher energy bills.

"One could certainly see the new president and the Congress taking an integrated approach that leverages a cap on global-warming pollution to invest in economic growth," said Kreindler.

There are several other factors putting pressure on Congress to act: a new rule drafted by the Environmental Protection Agency that would regulate greenhouse gases under the Clean Air Act and an international ministerial meeting in Copenhagen, Denmark, in December next year.

Many lawmakers fear that regulation under the Clean Air Act may be too onerous and wouldn't be as economically efficient - or congressionally controlled - as a cap-and-trade program developed on Capital Hill.

Also, one of the biggest challenges to creating a domestic emissions program would be trying to encourage other polluting nations to enact similar caps so as to prevent competitive disadvantages. If the U.S. were to have a climate-change law to bring to the table at the Copenhagen talks, it could have the leverage to encourage countries such as China and India to set stricter emission levels.

And while Rep. John Dingell, D-Mich., chairman of the House Energy and Commerce Committee, signaled a climate-change debate is likely in the new year - publishing a discussion draft of a more lenient cap-and-trade bill than the Boxer proposal - few Washington insiders believe environmental groups and the ardent supporters of a strong cap such as Boxer, Pelosi and Rep. Ed Markey, D- Mass. would be willing to compromise.

-By Ian Talley, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com