Shocked at the stunning turn of events that led to the collapse of a tri-partisan effort to produce an energy and climate proposal in the US Senate, many carbon market experts now expect passage of climate legislation in 2011 – despite pledges by John Kerry (D-Mass) to push forward with the bill this year.
Kerry, Lindsey Graham (R-SC) and Joe Lieberman (I-Conn) had said on Friday that they expected to unveil their proposal for a Senate bill that would have included a cap-and-trade programme for the power sector on Monday.
But Graham upended the entire process over the weekend by announcing he was withdrawing his support because President Barack Obama and senior Democrats in Congress decided to prioritise immigration reform, which Graham said destroyed his confidence there would be a serious commitment and focus on the energy and climate bill.
“Democratic leaders see [immigration reform] as an area where they can gain political advantage for the fall,” Frank Maisano, senior principal with law firm Bracewell & Giuliani, told attendees of the Environmental Markets Association conference in New Orleans on Monday, referring to November’s Congressional elections.
The collapse of the bill should not have been surprising given the numerous obstacles in its path, including competing priorities of financial regulatory reform and a Supreme Court vacancy, he said.
Additionally, utilities were not unanimous in supporting it while some stakeholders had started to question the approach on regulating the transportation sector in the last few days, Maisano said. Notably, Democrats from manufacturing states also wanted a 10-year delay in phasing in manufacturers for compliance, he added.
“This bill really was on life support even though people thought it was going forward,” he said.
Graham has been in discussions with Kerry and Lieberman in the last few days about rejoining the effort, but even if they could get him back on board, his withdrawal is a setback they won’t be able to come back from, said Mark Wilson, counsel for the International Emissions Trading Association.
Senator Kerry has vowed not to quit pushing for adoption of the bill because he believes this year is the best, and perhaps last, chance to pass it. He insisted he can build on the work already done with Graham and that a coalition of stakeholders from environmental groups and industry has not backed away from the legislation. Meanwhile, Senate Majority Leader Harry Reid (D-Nevada) reportedly said yesterday that he will prioritise the climate bill as it is already drafted, unlike one for immigration.
But most market leaders are sceptical. Instead, they expect federal legislators to proceed with a reinvigorated effort to adopt a trading programme for greenhouse gas (GHG) emissions in 2011.
“Cap and trade is probably pushed off until 2011 unless there is some kind of divine intervention,” said Richard Sandor, chairman of the Chicago Climate Exchange.
“We think US legislation will happen in 2011 or the EPA [Environmental Protection Agency] will step in,” said Tom Lewis, CEO of the Green Exchange. The EPA has already set the ball rolling for it to regulate GHG emissions.
A big legislative push is likely next year for cap and trade, possibly for the power sector only, with a start date in 2014, Wilson said. Even though the Democrats are widely expected to lose seats in both legislative bodies, they will retain control of both houses of Congress so they will still set the agenda and raise a climate bill early in the legislative session, he predicted.
But Andrew Ertel, president and CEO of brokerage Evolution Markets, disagreed, saying there is a “good shot” of passing climate legislation this year.
“I think this is a temporary delay,” Ertel said. “This is politics and this is how Washington works these days. This is not the demise of cap and trade.”
By. Carbon Finance