Category Archives: Economy

First Look at the Kerry Lieberman Energy Bill: Pros and Cons

The long awaited Kerry-Lieberman climate and energy bill was finally unveiled today without a Republican co-sponsor after Lindsey Graham withdrew his support. Still, the American Power Act reflects most of the promises that had been made by the trio over the past months; both good and bad.

A strong push by electric, coal, and gas lobbies to protect their industries is heavily reflected in the bill which promotes nuclear power, “clean” coal, and offshore drilling. Also, carbon caps will be established on a rolling sector-by-sector basis which will not affect certain industries for (like manufacturing) for over 5 years, while others (like agriculture) are completely exempt. This leaves open the possibility for these sectors to produce “offsets” – or free carbon credits – which can be sold to regulated sectors in lieu of making real emissions cuts.

Here is a general overview of the high and low points contained in a draft text released by Kerry’s office today:

Pros

Cons

Carbon Cap:

The bill calls for an economy-wide emissions reduction to 95.25 percent of 2005 levels by 2013, 83 percent by 2020, 58 percent by 2030, and 17 percent by 2050.

Domestic Offsets:

Establishes a nationwide system under which sources not subject to the greenhouse gas emission reduction program may receive credits for making reductions in emissions that can be sold to and used by those subject to reduction requirements.

Coastal Drilling Opt-out:

States have the right to opt-out of drilling up to 75 miles from their shores, and veto projects of nearby states.

Offshore Drilling:

Despite a smattering of new regulations, offshore drilling stays in the nation’s long-term energy plan.

Clean Energy Funding:

Establishes a Clean Energy Technology Fund, though source for funding is not explicitly outlined.

Nuclear Power:

Incentives include a new investment tax credit to promote the construction of new generating facilities, $54 billion in loan guarantees and a manufacturing tax credit to spur the domestic production of nuclear parts.

Clean Transportation:

Supports electric vehicle infrastructure; provides funding to municipal transportation emissions reduction programs.

“Clean” Coal:

Annual $2 billion for research and development of carbon capture and sequestration methods and devices.

Clean Energy Career Development:

Grants and career training in the fields of clean energy, renewable energy, energy efficiency, climate change mitigation, and climate change adaptation.

International Offsets:

Establishes an independent advisory committee to monitor and approve international offset projects which allow US industries to continue polluting.

Customer Refund:

Two thirds of revenues from carbon trading will rebated to consumers, though not directly.

State Pre-emption:

States will not be permitted to operate their own cap-and-trade programs.

The next few weeks will undoubtedly see push-back from both the right and the left on a number of the bill’s more controversial elements. The chance of any legislation passing the Senate before the summer campaign season begins remains murky, but a strong push by the administration and civil society could mean a victory for the comprehensive, albeit less than perfect, bill.

View the full bill text here.

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Graph of the Day: Income Inequity

Business Insider has some pretty telling charts on income inequity in the United States.  It is definitely worth spending a few minutes of your time. The chart above shows the wealth distribution in the United States.  70% of the wealth is held by the top 10% of the population while half of the population only accounts for 2.5%.

See what the White House and Joe Biden’s Middle Class Task Force wants to do about it here.

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The Search for Workable Climate Legislation: Cap-and-Dividend

Robert N. Stavins, a climate economics expert at Harvard, expressed yesterday his hope for an effective climate bill that can please both sides of the aisle. His solution rests on a system of “upstream” cap-and-trade, in which all carbon allowances are sold to carbon emitters and a large portion is then returned to American households through tax rebates. According to Stavins:

[This] modified version of cap-and-trade that could be much more attractive in this era of rampant expressions of populism, coming both from the right (“no new taxes”) and the left (“bash the corporations”). Such a system – which would have direct and visible positive financial consequences (i.e., rebate checks larger than energy price increases) for 80% of American households – might not only not be difficult for politicians to support, but it might actually be difficult for politicians to oppose!

This concept most closely resembles the “Carbon Limits and Energy for America’s Renewal (CLEAR) Act,” sponsored by Senators Maria Cantwell (D-Washington) and Susan Collins (R-Maine). The bill, introduced in December, would create a “cap and dividend” system to defray higher energy costs to the consumer.

But some changes need to be made for this proposal to be effective, according to Stavins. For one, the current bill allows only producers and importers of fossil fuels to buy the carbon allowances, which necessarily restricts the market. “Furthermore, the Senators’ proposal says that holders of carbon allowances are actually prohibited from creating, selling, purchasing, or trading carbon derivatives, thereby tremendously reducing the efficiency of the market and needlessly driving up costs.”

Nevertheless, the concept of “upstream cap-and-trade” has a lot of promise, according to a PEW Center on GLobal Climate Change study:

An economy-wide upstream cap-and-trade program would be environmentally effective, could attain least-cost compliance if it incorporates flexibility measures, and would be administratively feasible.

There are substantial theoretical benefits from such an approach. The near-term environmental outcome is clear, assuming that the government will maintain the emission limits in the face of possibly significant price uncertainty and volatility. Current analysis indicates that it would minimize economic costs to the economy, be manageable administratively, avoid overcompensating existing emitters, and perhaps capture some offsetting benefits from reduction of distortionary taxes.

By Mary Tharin

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Graph of the Day: Economic Recovery

From the Office of the Speaker, this graph reflect the new Department of Labor January jobs report and shows how the economy is recovering using the monthly numbers of jobs lost.

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Map of the Day: Congressional Districts

Neil Freeman at fakeisthenewreal.org has this interesting map of what the United States would look like if states were divided equally by population.  He has all populations equal populations of 5,617,000.   He lists his advantages below:

Ends overrepresentation of small states and underrepresention of large states in presidental voting and in the US Senate.
Preserves the historical structure of the electoral college and the United States unique federal system, balancing power between levels of government.
States could be redistricted after each census – just like house seats are distributed now.

Sounds logical enough. Unfortunately, as we have seen this last week, the U.S. is slightly resistant to change.

In case you were as worried as I was about Alaska and Hawaii, Freeman accounted for them as part of Olympia and Coronado respectively.

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Bad Day for Massachusetts, Bad Day for America

Martha Coakley lost the special election to replace Ted Kennedy in Massachusetts today.  This leaves not only the future of health care reform up in the air, but the future of other progressive ideas and movements.  It’s time to dig in the heels, roll up the sleeves, and work even harder and learn from Kennedy to accomplish reform.

The twitter trending topics say it all:

*#masen is twitter code for Massachusetts (MA) Senate (Sen)=MASen

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Copenhagen Week One: A Long Way to Go

Copenhagen Watch: Part One

After a week of tumultuous protests, controversy, and political sparring, the UN Climate talks in Copenhagen have produced a an official negotiating text from which world leaders will continue to negotiate next week. The “long-term action plan text” commits developed countries to emissions cuts of 25-45% by 2020. This broad range is more than most rich countries have proposed thus far, and will require leaders like Obama to come to the table with more serious emissions reduction commitments.

However, many points remain unresolved and are likely to spark heated debate next week, including:

  • How to incorporate forest protection initiatives into the deal. The currently proposed UN Reducing Emissions from Deforestation and Degradation program (REDD) faces opposition because of the program’s inherent weaknesses.
  • Climate financing for developing countries. The text requires developing countries to cut emissions between 15-30% by 2020, but offers not clear mechanism for providing technology or climate mitigation assistance. The EU has already committed €7bn a year for the next three years, but the U.S. has yet to propose a figure.
  • The role of China and India. As some of the world’s top polluters, where to these nations fall in the developing/developed country scheme? Do they need financial assistance on the same level as poorer nations?

DC Progressive will continue to report on next week’s talks, during which these issues will hopefully be resolved.

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