Blogentry
Washington View
Part of:
CO2 capture and storage
,
Climate change
‘Smart Grid’ is the new catch phrase in Washington. Nobody is quite sure what it is or how to explain it, but everyone agrees it is essential to the anatomy of Obama’s energy plan.
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* Prospects for cap-and-trade legislation.
* Do the Democrats have the votes?
* EPA proposes a new greenhouse gas registry.
* Smart grid is the sexy subject of the month.
* Capitol Hill gets serious about CCS.
Prospects for cap-and-trade legislation
At the end of February, President Obama submitted a budget to Congress that urged it to pass a plan for a mandatory cap-and-trade programme. My blog of February 24th summarized the main budget highlights. Obama has said that he wants a $15 billion-year-investment “to develop technologies like wind power and solar power, advanced bio-fuels, clean coal and more efficient cars and trucks built right here in America.” US Government estimates (from last year’s Senate climate debate) suggested the permits from a cap-and-trade programme could raise around $50 billion in the initial years of its operation and up to $300 billion a year by 2020.
House and Senate Democratic leaders have already promised floor votes this year on cap-and-trade legislation, but there are sure to be vigorous debates before then about where to spend the money raised from selling the emissions allowances. Some Democrats and fiscal conservatives support sending the money back to taxpayers to compensate for higher energy bills, or to help pay down the federal deficit. Some groups want to use the money to help vulnerable communities and wildlife adapt to climate change. There has even been talk of using the new source of cash to pay for Obama’s proposed health care reforms. Wherever the money goes, the Republicans are sure to oppose it.
Advocates for a carbon tax continue to make their case on Capitol Hill, but Administration officials insist that the Obama administration supports cap-and-trade. EPA Administrator Lisa Jackson said that on cap-and-trade, “the President has been clear he believes that’s the way to go.” However, the administration is not going to forge ahead with its own proposal but will wait for Congress to develop legislation. The House Energy and Commerce Committee Chairman Henry Waxman (Democrat, California), said that Congress would “obviously follow his (Obama’s) leadership” in what will be a consultative process. Waxman’s committee is holding hearings on the issue and he has promised that his committee will produce a draft bill by the end of May. House Speaker Nancy Pelosi (Democrat, California) has committed to a vote by the full House by the end of the year. The Senate will also consider legislation although the path forward is not so clear at this point. It is possible that Congress will merge cap-and-trade legislation with an energy bill and even the budget bill, which only adds to the complexity of the process.
Do the Democrats have the votes to pass a cap-and-trade bill?
This is the key question in any congressional debate. To be sure of passage through in the Senate, legislation needs to get 60 of the 100 votes. With 60 votes, the majority can prevent any further debate on legislation. If supporters fall short of 60 votes, opponents (i.e. The Republicans!) can use various procedures to prevent passage of the legislation. The Democrats currently control 58 seats so to force through legislation, some Republicans will need to vote with the Democrats. You need a very clear crystal ball to predict how votes will turn out.
But for votes on the federal budget – a process known as “reconciliation” - the Senate needs only a simple majority of 51 votes. The Leader of the Senate, Senator Harry Reid (Democrat – Nevada) is considering how to proceed. There is always great pressure on congress to pass a budget – so it is a popular congressional tactic to add on some specific issue (like cap-and-trade). Reid has not yet decided on the approach to adopt. Republicans would oppose such a move. Senator Judd Gregg, (R - New Hampshire) bashed the idea of using reconciliation to move cap-and-trade legislation. “That would not be appropriate” he said. “It would undermine the process where public policy(...)should be subject to significant airing.” Judd likened cap-and-trade to “a national sales tax on energy.” Former Presidential candidate Senator John McCain (Republican, Arizona) said that he would not be happy if the President linked climate change to the budget proposal. He said “I think it’s really the wrong approach. What it does is it alienates many of us who are for cap-and-trade but who now see it as being used simply as a way to raise taxes on people.”
So CCS is far from a done deal here. This discussion will continue throughout the year
EPA proposes a greenhouse gas registry
On March 10th, the Environmental Protection Agency (EPA) announced plans to develop a nationwide system for reporting greenhouse gas emissions, a programme that could form the basis of a national cap-and-trade programme. The plan would cover about 13,000 facilities that account for about 90 percent of US greenhouse gas emissions. Lisa Jackson, EPA Administrator said “Through this new reporting, we will have comprehensive and accurate data about the production of greenhouse gases.” If adopted, the new rule could produce greenhouse gas statistics by the end of 2010.
Smart Grids
The smart grid wins my award for sexy topic of the month. President Obama mentioned it, the Washington Post ran a front page story on it, and it’s mentioned on nearly every energy and environment website. Greenwire said that the smart grid was an essential part of President Obama’s energy agenda. The digital capabilities of smart grid will be even more critical if a cap-and-trade bill passes. So far, smart grid applications have been tested in pilot projects across the US but none has been rolled out on a commercial scale. A commercial project may begin in Boulder, Colorado, by the end of this year.
In February, I attended a meeting in New York hosted by the investment firm Piper Jaffray. The theme of the meeting was the development of clean energy technologies.
There were numerous sessions during the meeting and it was only possible to cover some. But the standing room only, rock star session was on smart grids! There were attempts to define a smart grid. But whatever it means, President Obama frequently mentions it. To many at the meeting, smart grid was code for greater reliability, higher efficiency, environmental leadership and business partnership (rather than monopoly). There were several speakers who agreed that in terms of development, the US was only “in the 2nd innings” (there are 9 innings in a US baseball game!) so there is a long way to go. The killer application of smart grids will be demand response – in other words, it is the way to extract the most efficiency and value from the grid. But there are obstacles to overcome. New “intelligent” infrastructure is needed. Who is going to pay for the investment? Utilities or customers? And the utility companies present called for the development of technical standards.
Capitol Hill gets serious about CCS
Finally, Congress is busy thinking about CCS. Both Senate and House energy committees are holding hearings on the prospects for CCS. The Natural Resources Defence Council and the Pew Center on Climate Change held a well attended seminar on the issue on March 6th. The main purpose of the event was to educate Capitol Hill. The main challenges to CCS in the US remain – no commercial scale demonstration; no marketplace (need a price on carbon) and no regulatory framework.
Separately, at a hearing of the House Energy and Environment Subcommittee, David Hawkins, NRDC’s director of climate programmes, said developing strong CCS provisions as part of a cap-and-trade law would have additional benefits for the US domestically and internationally. CCS deployment could help end US dependence on foreign oil by supporting an enhanced oil recovery programme to maximize output from oil reserves and pioneering CCS programmes could also encourage coal-dependent economies like China to commit to adopting similar technologies. Hawkins will speak at Bellona Europa’s CCS seminar next week. Expect lots more CCS activity here in the US in coming months.
Jonathan Temple is the director of Bellona USA
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