Carbon Trading Bill Dropped From US Senate

The failure of the US Senate to enact comprehensive energy and climate legislation prior to the August recess likely dooms its prospects for 2010, despite vows by its most ardent supporters to press forward.

Instead of a sweeping bill, Senate Majority Leader Harry Reid (D-Nevada) is bringing narrow legislation to the Senate floor that will focus on the Gulf of Mexico oil spill, promotion of natural gas vehicles, home energy renovations and financing for the Land and Water Conservation Fund.

But it's not clear that Reid has the votes to proceed with even this limited bill because he may have lost some liberal Democrats who want to leverage support for popular provisions such as an increase to the oil spill liability cap to pass a more comprehensive bill, said Elias Hinckley, a partner in the energy group at law firm Venable in Washington, DC.

"I'm not even sure they will get this passed," he said. "That creates an interesting dynamic if nothing happens."

Reid dropped efforts to include a carbon trading system and other elements of energy proposals when it became clear that supporters could not round up the 60 senators needed to overcome procedural attempts to block a vote before Congress leaves for the summer recess on 6 August.

Congress enacted massive legislation reforming the health care and financial regulatory systems this year, which narrowed the timeframe for working on an energy and climate bill, said Tom Lewis, CEO of the Green Exchange, an environmental commodity derivatives exchange. "None of us felt there was a high probability of carbon trading this year," he said.

John Kerry (D-Mass) vowed to keep working to find the 60 votes, including Republican supporters, a difficult prospect due to the upcoming elections, but necessary as some Democrats from coal-heavy states balked at the legislation.

"That is consistent with 40 years of environmental legislation, which has always been bipartisan," said Jonathan Lash, president of the World Resources Institute, who called the Senate's failure to proceed with a comprehensive bill "a disgrace".

Prominent supporters such as Kerry publicly insist that legislation featuring a carbon trading programme could still pass, either in the September session before legislators leave for their campaigns or in a lame-duck session after the mid-term elections.

"This is not dead," Kerry insisted. "We'll continue to try over the next weeks. But if it's after the election, it well may be that some members are freer and liberated and feeling that they can take a risk ... or the whole political landscape may have changed in some way."

But both paths are fraught with political obstacles. The prospects for action before the 2 November elections are slim as legislators are reluctant to vote for controversial proposals right before voters go to the polls. "I don't think anything happens in September because of the pending elections," Hinckley said.

Advocates hope for movement on the legislation in the lame-duck session, the time period after the mid-term elections before the new Congress is sworn into office in January. The theory is that legislators who have been ousted from office may be more willing to vote for controversial legislation.

There is precedent for passing environmental legislation during lame-duck sessions, including the 1970 amendment to the Clean Air Act that reduced pollutants from new vehicles and a conference committee that finalised the Superfund legislation in 1980.

But the outcome of the November elections is the key factor. Democrats are widely expected to lose seats in both legislative bodies, and control of the Senate and the House of Representatives may be up for grabs as disenchanted voters protest issues such as the still-sluggish economy.

"I think there will be a very big push in the lame-duck session," Hinckley said. But placing odds on such action is "tough because everything depends on what happens in the election".

In the meantime, some federal legislators are ramping up efforts to keep the US Environmental Protection Agency (EPA) from regulating greenhouse gases. In the House of Representatives, Steven LaTourette (R-Ohio) offered an amendment to a budget item to block the agency's funding for implementing its endangerment finding, the basis for regulatory action on GHG emissions. While the motion failed to win enough votes, it did achieve bipartisan support in the appropriations subcommittee and could appear again when the full committee considers the EPA's funding appropriation.

Senator Reid has reportedly committed to allowing a vote on a proposal by Senator Jay Rockefeller (D-West Virginia) to suspend EPA's regulatory authority for two years, allowing Congress more time to enact legislation. But officials in President Barack Obama's administration have indicated he would veto the proposal.

By. Carbon Finance