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Overview: Congress Works Toward Energy Compromise

With international global warming talks scheduled to get under way in Denmark later this year, stakeholders from across the globe will be paying close attention when a House subcommittee takes up a landmark energy and climate change bill later this month.

European nations and others have been clamoring for years for decisive U.S. action on warming, and the House measure — dubbed the American Clean Energy and Security Act by sponsors Henry Waxman (D-Calif.), chairman of the Energy and Commerce Committee, and Rep. Ed Markey (D-Mass.) — represents the first cap-and-trade bill seen as actually having a shot at being signed into law.

Also closely following the House debate are a dozen or so mainly Midwestern Senate Democrats, whose concerns over the economic effects of climate legislation in their home states have replaced former President George W. Bush and Republicans as the chief hurdle to seeing cap-and-trade enacted.

“We’re going to have to work with them,— Senate Majority Leader Harry Reid (D-Nev.) said earlier this month after meeting with Michigan Sens. Carl Levin and Debbie Stabenow, Sen. Sherrod Brown (Ohio), Sen. Evan Bayh (Ind.) and other Democratic moderates on climate change. “We’re going to have to make sure what we do doesn’t devastate the economy.—

The moderates began flexing their legislative muscles last summer, when after voting for a failed cloture motion on a cap-and-trade bill, 10 Democrats spelled out their conditions for future support in a letter to Reid and Senate Environment and Public Works Chairman Barbara Boxer (D-Calif.).

While some of the signatories — such as Brown — lean to the left on many issues, a heavy labor, manufacturing and/or coal presence in their states has led them to adopt a more moderate and cautious approach on energy and climate policy. Other signers included Democratic Sens. Jay Rockefeller (W.Va.), Claire McCaskill (Mo.) and Blanche Lincoln (Ark.).

The letter was essentially a laundry list of must-include provisions intended to mitigate the economic effects of cap-and-trade, which over the short term at least is expected to lead to higher energy costs. It’s a theme that has been amplified by months of bad economic news, and the question of whether to cap carbon dioxide in the middle of a recession or wait is one that has dogged Reid and Speaker Nancy Pelosi (D-Calif.), who has dozens of conservative Blue Dog Democrats to deal with.

Senate Energy and Natural Resources Chairman Jeff Bingaman (D-N.M.), who has been at the table with other moderates on energy and climate issues, said he shares their economic concerns but believes the time to act is now.

“I’m sure some would like to see this put off until the economy is on the mend, but I think the reality is if we were to enact a cap-and-trade system, it would take a few years to get it started,— he said in a recent interview.

Bingaman said the House debate will be instructional for winning the 60 votes from Democrats — and a handful of centrist Republicans — necessary to advance the bill in the Senate. “There’s just a lot of difficult issues, lots of movable parts,— he said.

The Waxman-Markey draft released in late March aims to reduce greenhouse gas emissions to 83 percent below 2005 levels by 2050. It would do so by capping annual emissions and distributing allocations — essentially pollution permits — that can be sold or traded.

The draft contains several provisions to bridge the liberal-moderate gap in the House Democratic Caucus. For example, it includes a bill authored by Rep. Rick Boucher (D-Va.), who comes from a coal-producing region, that would promote the development of carbon capture and sequestration technology that is seen as a lifeline for carbon-spewing coal plants.

It also includes language drafted by Reps. Jay Inslee (D-Wash.) and Mike Doyle (D-Pa.) that aids energy-intensive industries, such as iron and steel manufacturers, which could face stiff international competition from countries lacking carbon controls.

However, the bill is silent on what is perhaps the most contentious detail of cap-and-trade: how to distribute the carbon allocations, which are projected to be worth billions of dollars. Environmentalists and the Obama administration favor a 100 percent auction, with the proceeds either being invested in clean-energy programs or returned as tax breaks; industry wants the allocations to be distributed to polluters for free, at least initially, to help the transition to a carbon-constrained economy.

In a nod to moderates, the Obama administration recently signaled flexibility on the auction vs. allowance issue, which could ease passage of the bill through the Energy and Commerce Committee before Waxman’s Memorial Day deadline. White House officials are also meeting with staff for some of the moderates in anticipation of a possible Senate debate later this year.

Other key battles in the House debate to watch include the use of “offsets— — projects intended to substitute for emissions reductions elsewhere, such as planting trees — as well as a first-time federal renewable energy mandate opposed by Southern lawmakers.

All told, the House bill could see passage ahead of the international negotiations scheduled for December. But the road through the Senate is less clear. Reid has said he would like to schedule the debate for later this year but will await the outcome of the House bill before deciding how to proceed.

Many observers see the Senate debate slipping into 2010 but view enactment as almost inevitable at this point, given that President Barack Obama has made tackling global warming a priority.

Reid also sounded optimistic after meeting with moderates in his caucus. “Not a single Senator there that didn’t want to have a global warming bill,— he said.

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