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Energy Reform Debate Is a High-Stakes Game

As the debate over comprehensive energy and global climate change legislation moves through Congress this year, gauging who the winners and losers are in this high-stakes game may be a function of perception rather than reality.

Depending on who you ask, the odds are even that the same states, regions, industries and people that stand to gain from legislation under development in the Senate and House are just as likely to lose under a proposed cap-and-trade system.

Regional differences have blurred party lines in a debate that pits areas heavily reliant on coal-fired plants to generate power with areas of the country that have a greater potential to produce electricity from renewable sources such as wind and solar.

Yet all 50 states have a stake in the debate and all stand to win to one degree or another in the nation’s transition to a clean energy economy.

Texas, the epitome of a big oil-producing economy, generated more electricity from wind than any other state in 2007. Tennessee is defined in some ways by the cheap electrical power generated by the Tennessee Valley Authority. But the Volunteer State has a burgeoning job market in recycling, waste treatment and water management, according to a recent report by the Pew Charitable Trusts.

It’s easy to see that environmentalists win out in the energy game because industry groups agreed to accept a mandatory cut in greenhouse gases in a bill that also requires expanded wind and solar power production.

But concessions from those manufacturers, utilities and refiners also won them free pollution “allowances— that allow them to continue to emit tons of carbon during the early years of a cap-and-trade program as the economy bulks up its clean energy sector.

Moderate House Democrats from the Southeast and Midwest, led by Rep. Rick Boucher (Va.), scored a victory in their negotiations with House Energy and Commerce Chairman Henry Waxman (D-Calif.) to provide their coal-reliant states with a heavy dose of free allowances — major utilities get free credits for 90 percent of their emissions — in an effort to lighten their potential economic burden.

Boucher also helped lower the target to cut emissions to 17 percent below 2005 levels by 2020, instead of the previously suggested 20 percent cut.

In the current House bill, lawmakers will give away 85 percent of the allowances and auction the remaining 15 percent, shifting that revenue to programs that help low- and middle-income families pay their utility bills.

While House Democrats tout the benefits of their bill, Energy and Commerce ranking member Joe Barton (R-Texas) has said the measure is too expensive and argues that implementing a cap-and-trade program is a major gamble that will break the federal bank and lead to exorbitant energy prices — which in turn will prevent families from being able to pay their power bills.

If the legislation doesn’t cause a spike in other energy prices such as gasoline, diesel and natural gas, the measure as structured could be a victory for ratepayers, setting up a system for them to recoup some of the expected rise in residential energy bills.

When the proposed cap-and-trade program begins in 2012, electric utilities would receive 35 percent of the allowances with 30 percent going to local distribution companies for the specific purpose of offsetting costs to customers.

In a recent analysis, the Natural Resources Defense Council determined that consumer energy bills would actually decline under the House bill.

But the American Petroleum Institute has argued that the inequity of how allowances have been distributed could easily create a rise in other energy prices — along with massive job losses.

An average family could pay $1,500 a year more for energy than it does now and 74 percent more for gasoline, according to a study quoted by the API.

“While the bill has laudable environmental and economic goals, its inequitable system of allocations remains intact and if enacted would have a disproportionate adverse impact on consumers, businesses and producers of gasoline, diesel fuel, jet fuel, crude oil and natural gas,— API President Jack Gerard said in a statement.

Regardless of how the allowances are allocated, Rep. John Shimkus (R-Ill.), a member of Energy and Commerce, has said a cap-and-trade plan would kill the coal industry and cause significant harm to his state and other states that rely on coal-fired plants to generate electricity.

While Democrats have said those free allowances are designed to cushion consumers from a rise in energy prices, some environmental groups that oppose the House and Senate bill see this provision as a win for the coal and oil industries, said Nick Berning, a spokesman for Friends of the Earth.

“They don’t have to change their polluting behavior much,— he said.

Still many Democrats argue that their bill (H.R. 2454) is a winning hand for all sectors of the economy and environment.

“The only losers are people who won’t have grandchildren,— Rep. Jay Inslee (D-Wash.) said.

Wind, solar and nuclear can all be winners because the bill provides loans from a “green bank— that will allow development of the respective technologies, Inslee said.

Pew’s recent report backs the Democrats’ theory that any bill aiming to cut greenhouse gas emissions will create jobs in the clean energy sector.

The emerging clean energy economy, which is producing jobs in all 50 states, grew 9.1 percent from 1998 to 2007, accounting for 770,000 jobs and growing almost three times faster than the overall job creation rate.

The Center for American Progress Action Fund, which supports the House bill, wrote recently that a renewable energy standard of 20 percent in the House bill could create jobs in struggling business sectors such as manufacturing and construction.

A 25 percent RES could create 850,000 new manufacturing jobs, according to a study by the Blue Green Alliance — but neither bill goes that far, Berning said.

Berning fretted that the Senate bill, which opens the Gulf of Mexico to more oil drilling, could reduce clean energy use, possibly stalling the effort. The Senate’s 15 percent RES also could undercut stronger measures already in place by the states, he said.

“This is a tremendous opportunity to create millions of green jobs,— he said. “We’re missing out because it’s just too little to make the transition to a clean energy economy.—

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