Environmentalists, Transpo Reformers Brace for Scaled-Back Energy Bill

"We know we don’t have the votes."

With those seven words last Thursday, Senate Majority Leader Harry Reid dashed hopes for a comprehensive climate bill. Prospects also dimmed for a transportation component in the final energy legislation that emerges from the Senate. Reid is expected to announce that plan later today.

405.jpgHarry Reid indicated last week that he won’t address the nation’s oil-dependent transportation system in legislation expected to be unveiled today. Photo: atwatervillage/Flickr

Up until Reid’s announcement, advocates for transportation reform had reason to believe the Senate bill might include some form of action to improve fuel
efficiency, increase transit options, and encourage more sustainable land use patterns — ideas drawn from the Oil Independence Bill introduced by Oregon Senator Jeff Merkley. The oil independence legislation contained elements of Delaware Senator Tom Carper’s "CLEAN-TEA" bill, introduced in March 2009, which would have funded the planning and implementation of green transportation projects with revenues from a carbon emissions cap-and-trade system.

Instead, Reid indicated that his bill will likely contain language dealing only with the Gulf oil spill and some energy efficiency provisions.

"The package that Reid announced [Thursday] doesn’t address climate
change at all,” said Colin Peppard, deputy director of federal
transportation policy at the Natural Resources Defense Council. "What we were
hearing from staff on the Senate side is that basically up until pretty
close to Reid’s announcement, there was still consideration for pieces
of the Merkley bill."

Reid’s announcement “took the entire environmental community off-guard,” said Stephanie Potts, a policy analyst with Smart Growth America.

While the Deepwater Horizon catastrophe became an emblem of the need to wean the nation off oil, it did not stiffen many spines in Congress. In fact, said Potts, the Gulf spill may have worked against a broader
climate bill by narrowing the avenues for compromise and horsetrading.
Without expanded offshore drilling as a bargaining chit, there were few
lures to win the votes of some recalcitrant Senators, especially those from coastal states.

In the end, the globs of brown in the Gulf of Mexico didn’t overcome the absence of will to raise revenues. "The biggest obstacle is lack of funding," said one source close to the legislation, who said some transportation component may still surface in the final bill. "[Reid’s bill] has not been released. There are opportunities to effect influence on that legislation, that bill, via amendments."

The source said that as a standalone measure, however, the Merkley bill is a “very difficult prospect.”

Some advocates also described the climate bill as a casualty of the Obama administration’s decision to focus first on health care legislation and then the recently-passed financial reform bill. “I think it’s been a timing issue in large part," said Matt Mayrl, policy director for the California-based Apollo Alliance, which works toward “a green energy revolution.” “In terms
of oxygen the Senate has to operate, the time is not there.”

There are still opportunities to reform U.S. transportation policy this year. Potts pointed to a lame duck period in late fall and early winter as the next best opportunity to push through another version of Carper or Merkley’s bills. She also said it is important to continue to explain the benefits of transportation reform.

“We’re trying to work with Congress to educate them on how smart growth works around communities,” Potts said. “It’s not all transit… it really works in communities of all sizes.”

And components of the Merkley bill will re-surface in the fight to encourage alternative energy use and more transit options. “We think that the Merkley bill is great place to start,” Peppard said. "We are working with the House and Senate this year into next year and we are making a big push to build support for those initiatives."

For now, all eyes are on the bill that Reid will introduce later today. Despite the seeming finality of last week’s announcement, there is still a chance some components of the Merkley bill will be included. One source close to the legislation said simply, “All hope is not lost.”

  • Mark Walker

    How strikingly similar Harry Reid’s “don’t have the votes” sounds to Sheldon Silver’s excuse for not letting congestion pricing come to a vote. Without votes, individual senators cannot be held accountable. How convenient.

  • MinNY

    What a shame that in our current system, 55-45 does not constitute a majority.

  • Larry Littlefield

    There is no possibility of this legislation because interested swing voters are selfish, Republicans will vote against any sacrifices to appeal to them, and fossil fuel production state Democratic Senators are constrained by their donors interests.

    As importantly, other alternatives are not being considered because the Democrats are pushing a command and control solution with more federal spending and subsidies (pork), rather than an adjustment to the incentives to encourage businesses, individuals and local governments to make changes on their own.

    The alternative solution is a reversible tax on raw fossil fuels (oil, coal, gas) that goes up as their prices go down, to keep the net prices at a stable, relatively high level.

    The target price for oil would be highest because if its economic an national security implications, say $120 per barrel. The target price of coal would be equivalent because of its environmental problems, but the tax could be remitted back to large users (utilities) what remove the pollutants when it is burned. The target price for gas would be lower, because it is a domestic fuel with lower impacts.

    The prices would be high enough to encourage conservation and alternatives, but not so high as to shock the economy. Gradual increases could be included in the legislation.

    All the money it collected could be sent back to Americans on a per adult basis. This would make the tax and refund a net benefit from the less well off, who use less energy, while retaining an incentive for households in all income groups to seek alternatives or conserve. Since any money collected would be sent back, the “harm to the economy” and “make the government bigger” criticism would be false.

    Most importantly, not only would such a tax encourage lifestyle changes and alternative fuels in the long run, but it would also encourage domestic fossil fuel supplies in the short run. With no difference in price for the buyer (and thus no reason to prefer cheap oil from Saudi Arabia), sellers would compete on the basis of long term contracts and reliability of supply, giving domestic producers an edge. That’s a point that could be sold to oil and gas state Senators.

    With such contracts in place, there would not only be a floor on pricing but also a de facto cap, benefitting the economy by avoiding the energy yo yo. And alternative energy producers would have a target they need to hit, providing the security to make investments.

    This is a policy that could be in place in a year. Cap and Trade, which would require a huge new administration that would take years to set up, could come along later, perhaps as part of an international agreement.

  • “In the end, the globs of brown in the Gulf of Mexico didn’t overcome the absence of will to raise revenues.”

    But is revenue really the main problem? It’s illegal to build buildings without parking for cars. I think that’s a bigger problem, but those are local rules and not federal ones. Still, isn’t there some way for Obama to try to lessen these ridiculous rules?

    Yglesias: Centrally Planned Suburbia
    On average, buildings can only occupy at most 50 percent of the lot. And there have to be two parking spaces per dwelling unit.

  • Doug

    Larry,

    The only issue I see with a level price “reverse tax” (and probably the reason we’ve never heard of it before), is that once you tell the market “no one shall pay less than $120 for oil in this country” (since whatever the market price is, taxes take care of the difference), the asking price of oil goes to $120; purchasers of oil are completely price insensitive up to $120, and will pay that amount. Similarly, other resources now cost more as well. There goes all the tax revenue in your plan. All you’ve done is establish a floor on the resource, without generating any tax revenue or redistribution.

  • Larry Littlefield

    “Once you tell the market “no one shall pay less than $120 for oil in this country” (since whatever the market price is, taxes take care of the difference), the asking price of oil goes to $120.”

    First, this was the simple version — I’d actually put in a 90% of the difference capture.

    But even so, the attitude has to be, sobeit. The consumers are not paying the price of the economic/environmental/national security damage. That has to change if there is an incentive to do otherwise.

    Consider this: we restrict imported sugar, which is produced all over the world often in countries that don’t hate the U.S., to keep the price high enough to encourage domestic production. The result is we end up with high fructose corn syrup, and pay extra for it, while the rest of the world gets real sugar.

    If such a policy can be put in place to encourage security of supply of obesity-related garbage calories, why can’t such a policy be put in place to encourage energy independence and lower carbon emissions?

  • J:Lai

    Regarding the “floor tax”, I think this is a good idea, its main drawback being that it makes too much sense.

    It is true that if the commodity is trading below the floor, domestic prices will never go through the floor, creating windfall profits for producers/importers.
    However, given that the US represents a large share of the aggregate world demand for energy resources, setting a national policy of this sort would effectively prevent the open mkt price of the commodity from trading significantly below the floor.

    If the initial floor is set close to the trailing avg price, the gains from price stability could very well offset the short term losses due to higher cost of energy inputs. A fixed or predictable schedule of future increases would work to preserve stability, while creating a long term incentive for innovation to use less energy or different kinds of energy.

    The only part I don’t believe is that all the revenue generated from this floor tax would passed through and returned to citizens — when have you ever seen a large revenue stream pass through any level government without getting “re allocated” in the process.

  • “the Democrats are pushing a command and control solution with more federal spending and subsidies (pork), rather than an adjustment to the incentives to encourage businesses, individuals and local governments to make changes on their own.”

    Waxman-Markey, the House bill, did have lots of pork to buy votes, but it also had a cap-and-trade system which would have meant a rising price on co2 emissions. That would have been an adjustment in incentives to encourage people to make changes.

  • Brandi

    The senate is the most useless body ever. The supermajority requirement means that it will always be beholden to rural states interests. There was no leadership by Obama on the issue either. Despite both him and McCain using the words climate change on the campaign trail, he is afraid to use them now. I guess we’ll just let our kids and grandkids pay for it. Sad to see no one can rise to one of the greatest challenges of our time.

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