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Climate Security Act of 2008 - Motion to Proceed

Floor Speech

Location: Washington, DC

CLIMATE SECURITY ACT OF 2008--MOTION TO PROCEED -- (Senate - June 02, 2008)


Mr. SPECTER. Mr. President, I thank my colleagues for squeezing me in for 5 minutes. I sought this time to talk very briefly about the Bingaman-Specter bill which is aimed at solving the problem of global warming but is somewhat more moderate than the Warner-Lieberman bill.

I will take a few seconds on a personal note. I have had quite a few people take a look at me today and ask me how I am. On C-SPAN 2, some people may notice I am a little pale, a little thin, and a little bald. I feel better than I look. I have gone through this chemotherapy for Hodgkin's once, and I am optimistic about doing it again. But I agree with Senator Boxer that this is an historic day, and I wanted to be here at the outset of this debate.

I have long been concerned about the problem of global warming, and I congratulate Senator McCain and Senator Lieberman for what they did several years ago and what Senator Warner and Senator Lieberman are doing now. I think it is vital that we move ahead on this issue, and I intend to vote yes on the motion to proceed. It is my hope that in this debate we can reconcile many of the interests. Warner-Lieberman and Bingaman-Specter have a lot of similarities, but there are significant differences. I believe it is going to be difficult to get 60 votes to impose cloture so that this bill can move ahead. Senator Bingaman and I started a long time ago, 18 months ago, in January of 2007, with a draft bill. We were ready for introduction July 11, 2007, and assembled a large group of labor, business, industry, and environmentalists to support the bill which we have. I would like to see us attain the goals of Lieberman-Warner. I would like it very much. But for reasons which are detailed in my extensive written statement, I do not believe that is possible.

On February 14 of this year, at the request of management and labor, I testified before the Finance Committee on the issue of what importers were going to have to do. Illustratively, China wants 30 years. Well, in 30 years there won't be a steel industry. We have to reconcile a great many conflicting interests. My State is a major coal State. One of the top experts on Capitol Hill on this subject, Tom Dower, worked months working through complex issues with labor and management and conservationists. The details of a very extensive analysis are set forth in my floor statement, but that is the essence of my approach today.

I ask unanimous consent that the full text of my statement be printed in the Record.


Mr. SPECTER. Mr. President, I seek recognition to discuss the Lieberman-Warner climate change bill, S. 2191/S. 3036, ``America's Climate Security Act of 2007.'' It is my intention to support cloture to end debate on the motion to proceed to this legislation, however I have concerns about the legislation some of which I will outline here.

Global climate change is potentially the greatest threat to mankind and our planet that our civilization has ever faced. The amount and quality of scientific data continue to improve our understanding of global climate change. This information points toward potentially severe ramifications for Earth's climate, ecosystems, and life as we know it. The most recent assessment in February 2007 by the Intergovernmental Panel on Climate Change (IPCC) concluded that ``most of the observed increase in globally averaged temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations.'' This 90% likelihood of human impact on the global climate adds to the compelling case that action to fight climate change is warranted.

Some skeptics of the human contribution to this global problem remain, however their voices grow more distant as more information comes to light and the realities that we face in terms of regulatory uncertainty around this issue have given rise to calls for action from the business community. Given past uncertainties, I have previously been unable to support legislative proposals which have threatened U.S. economic interests without meaningful environmental benefit. The Senate voted 95-0 in 1997 to overwhelmingly support the Byrd-Hagel resolution (S. Res. 98) rejecting the Kyoto protocol for its unequal treatment of developed and developing nations, as well as the potential serious harm to the U.S. economy. Subsequently, the Senate has twice voted on climate change legislation offered by Senators McCain and Lieberman--failing by votes of 43-55 in 2003 and 38-60 in 2005. As I stated on the Senate floor at the time, the McCain-Lieberman bill did not contain adequate protections for the U.S. economy, nor did it adequately address the global nature of the problem.

Given my commitment to finding a way for the U.S. to combat global warming, Senator Bingaman and I offered a Sense of the Senate amendment to the 2005 Energy Policy Act. An effort to set aside our amendment failed 54-43 and it was subsequently passed by voice vote. The resolution called for adoption of an economy-wide program that will slow, stop and reverse greenhouse gas emissions without harming the economy and that will encourage action by developing nations. Meeting these dual tests is a great challenge that I believe must be met not just to pass a bill into law, but to ensure the effort's long-term viability and support from the American people.

Following the 2005 debate, Senators Domenici and Bingaman as Chairman and Ranking Member, respectively, of the Senate Committee on Energy and Natural Resources issued white papers and held Committee sessions to debate the merits of various approaches to this issue.

In January 2007, Chairman Bingaman and I proposed a ``discussion draft'' of comprehensive legislation to address climate change. Between January and July, our staff held a series of public workshops for stakeholders and Senate, House, and Administration staff. Hundreds of people attended these sessions and hundreds more were involved in other meetings to provide comments, suggestions, and concerns. We heard from electricity generators, mining companies, transportation fuel refiners, natural gas producers, energy-intensive manufacturers, consumer groups, environmental organizations, conservationists, sportsmen, labor unions, faith-based organizations, and many others.

The culmination of this process was the introduction of the Bingaman-Specter ``Low Carbon Economy Act of 2007,'' S. 1766, on July 11, 2007. We held a memorable press conference in the Energy Committee hearing room in the Dirksen building flanked by key supporters of our bill from labor groups, energy companies, and conservation organizations. I was very pleased to stand with Richard Trumka (AFL-CIO), Cecil Roberts (Mineworkers), Bill Klinefelter (Steelworkers), John Rowe (Exelon), Jim Miller (PPL), Jim Rogers (Duke Energy), Jeff Sterba (PNM), Mike Morris (AEP), and David Crane (NRG Energy). We also greatly appreciated the support of 21 groups representing millions of hunters, anglers and other conservationists including Ducks Unlimited; Trout Unlimited; National Wild Turkey Federation; and Pheasants Forever. In addition to Senator Bingaman and I, our bipartisan cosponsors included Senators Akaka, Casey, Harkin, Murkowski, and Stevens.

The ``Low Carbon Economy Act'' creates a strong and credible approach to reduce U.S. greenhouse gas (GHG) emissions while protecting the U.S. economy and engaging developing countries. The Act creates a cap-and-trade program for U.S. GHG emissions that is modeled on the successful Acid Rain Program. By setting an annual target and allowing firms to buy, sell, and trade credits to achieve the target, the program is designed to elicit the most cost-effective reductions across the economy. The target is set to avoid harm to the economy and promote a gradual but decisive transition to new, low-carbon technologies.

The strategic targets of the Act are: Starting in 2012 reducing U.S. GHG emissions to 2006 levels by 2020 and 1990 levels by 2030. To limit economic uncertainty and price volatility, the government would allow firms to make a payment at a fixed price in lieu of submitting allowances. This fee, referred to in the bill as the ``Technology Accelerator Payment'' (TAP), starts at $12 per metric ton of CO2-equivalent in the first year of the program and rises steadily each year thereafter at 5 percent above the rate of inflation. If technology improves rapidly and if additional GHG reduction policies are adopted, the TAP option will never be engaged. Conversely, if technology improves less rapidly than expected and program costs exceed predictions, companies could make a payment into the ``Energy Technology Deployment Fund'' at the TAP price, to cover a portion or all of their allowance submission requirement.

Under the Act, carbon dioxide (CO2) emissions from petroleum and natural gas are regulated ``upstream''--that is, at or close to the point of fuel production. For these fuels, regulated entities are required to submit tradable allowances equal to the carbon content of fuels produced or processed at their facilities. Regulated entities that must submit allowances include: Petroleum refineries, natural gas processing facilities, fossil fuel importers, large coal-consuming facilities, and producers/importers of non-CO2 GHGs. GHG emissions from coal are regulated ``downstream'' at the point of fuel consumption.

The proposal sets out a detailed methodology for distributing tradable emission allowances. At the beginning of the program in 2012, a majority (53 percent) of allowances are given out for free to the private sector. This amount is gradually reduced each year after the first five years of the program. In addition, 8 percent of allowances will be set aside annually to create incentives for carbon capture and storage to jump-start these critical technologies; 24 percent of total allowances will be auctioned by the government to generate much-needed revenue for the research, development, and deployment of low- and no-carbon technologies, to provide for climate change adaptation measures, and to provide assistance to low-income households; 5 percent of allowances are reserved to promote agricultural sequestration; and 1 percent of the allowances will reward companies that have undertaken ``early actions'' to reduce emissions before program implementation. Another 9 percent of the allowances are to be distributed directly to States which can use associated revenues at their discretion to address regional impacts, promote technology or energy efficiency, and enhance energy security.

To effectively engage developing countries, the Act would fund joint research and development partnerships and technology transfer programs similar to the Asia Pacific Partnership. The bill also calls for a Five-Year Review Process that provides an opportunity to reassess domestic action in light of efforts by our major trade partners (and relevant scientific and technological developments). If by 2020 other countries are deemed to be making inadequate efforts, the President could recommend to Congress that products imported from such countries must be accompanied by allowances (from a separate reserve of allowances) sufficient to cover their embedded greenhouse-gas content. If there is sufficient international progress in reducing global greenhouse gas emissions, the President could recommend changes in the U.S. program designed to achieve further reductions (e.g., to at least 60 percent below 2006 levels by 2050).

There are many other provisions of this comprehensive legislation that help set the U.S. on the right track in taking meaningful steps to combat global climate change and put our trading partners on notice that we take this issue very seriously. Strong U.S. leadership will go a long way in moving the Nation and the world toward a cleaner and more sustainable future.

Much of the Lieberman-Warner bill tracks closely to the Bingaman-Specter bill. The two bills regulate the same entities (oil and natural gas producers; coal consumers; and non-CO2 greenhouse gas producers) using the same approach--cap-and-trade. They both initially provide a free allocation of roughly three-quarters of available allowances for affected industries and special purposes, while selling the remaining quarter through a government auction, the proceeds of which are used for technology research, development, and deployment, as well as climate change adaptation and other purposes. Both bills transition many of the free allocations to auctions over time--thus providing an increasing price signal to affected industries that they must invest in new technologies.

While these provisions are similar, there are fundamental differences that cause me great concern. First, the emissions reductions ``targets'' or ``caps'' in Lieberman-Warner are very stringent and potentially unattainable without high cost. The bill begins in 2012 and would limit emissions to 2005 levels; it would require 19 percent below 2005 by 2020 (1990 levels); and 30 percent below 2005 levels by 2030.

The second crucial problem of the Lieberman-Warner bill is the lack of adequate cost control mechanisms like a Bingaman-Specter-style ``safety valve'' or price cap, particularly in the context that we are considering taking unilateral action on a global problem for which many of our trading partners are not. Theoretically, the costs of a cap-and-trade program will be manageable if optimistic assumptions about the availability of affordable low-carbon technologies prove correct, very meaningful improvements in energy efficiency and conservation are attained, and ample ``offsets'' or allowances from non-regulated entities like farmers are readily available. However, there is a great deal of uncertainty about all of these crucial elements.

Therefore, there must be some protection for the U.S. economy as a whole and various sectors that would have to shoulder the burden of higher than expected costs. It is for this reason that I believe any cap-and-trade program should include a ``safety valve'' or cap on the price of each ton emissions. Without such a protection, a series of risks remain including cost-sensitive industries moving production overseas as a result of higher energy prices in the U.S. that could not be passed through to consumers in a competitive market. It is worth noting that such production would likely move to countries that are not taking actions to reduce greenhouse gas emissions, so essentially making the problem worse. Other risks include raising energy costs in the transportation and electricity sectors to levels that could not be met by consumers, thus exacerbating the overwhelming situation in which many Americans already find themselves.

I understand Chairman Boxer has included a new cost control mechanism in her substitute bill that is modeled on suggestions from the Nicholas Institute at Duke University and the National Commission on Energy Policy, as well as the U.S. Climate Action Partnership. My staff participated in a number of meetings with the offices of Senators Boxer, Lieberman, Warner, Baucus, and Bingaman over the timeframe of January through April 2008 in an attempt to explore options to control costs. I am disappointed that Chairman Boxer decided to include these new cost containment auction provisions without first vetting their details with me and my staff. Upon review of the details provided in the substitute, it appears that a number of emission allowances (6 billion tons) would be borrowed from 2030-2050 and placed into a reserve fund that could be used to release into the market in the form of another auction. In 2012, the President would choose a price between $22 and $30 from which this additional auction of allowances would occur, and in subsequent years the auction starting price would rise 5 percent over inflation annually. While this is an interesting concept, it is entirely unclear to me what effect, if any, this would have on the cost of the program. It is clearly complicated and does not likely provide affected industries with the same level of certainty that is inherent in a safety valve with an established price. I believe the new cost containment provisions require extensive review and in the meantime, a safety valve should be added--the details of which should be open to discussion, debate, and analysis as well.

Some other concerns I have with the current bill involve the international competitiveness provisions that were first included in the Bingaman-Specter bill and were conceived by American Electric Power (AEP) and the International Brotherhood of Electrical Workers (IBEW). On February 14, 2008, I testified before the Senate Committee on Finance at a hearing on the international implications of climate legislation. I outlined my thoughts that the provisions in the Bingaman-Specter and Lieberman-Warner bill to require imports by the year 2020 to have credits to account for the carbon emitted in their production is consistent with trade law. The Boxer substitute has made some changes to these provisions, including moving forward the start date of import allowance purchases to 2014. While this and other provisions are welcome, I remain concerned that we still have not gotten this part of the legislation quite right. I intend to work with my colleagues and affected industries like steel, glass, iron, aluminum, cement, pulp, paper, chemicals, and industrial ceramics, to shore up these imperative provisions.

I also understand that certain emissions from industrial production were intended to be exempted because there is no alternative method of production. These ``process gas emissions'' provisions should be made very clear so as to remove any uncertainty by these industries. Without these protections, the competitiveness issues again might lead companies to shift production of energy-intensive products like steel to countries without emission standards.

Finally, as I review the Lieberman-Warner bill, I am concerned that it does not provide the essential pathway to the future of coal use and thereby protect consumers from the price impacts of a rapid shift from coal to natural gas for electricity consumption. The U.S. currently produces half of its electricity through the combustion of coal. While there is also a great deal of capacity to burn natural gas, the high price of natural gas leads most regions of the country to only use it at times of peak demand. However, if a price to carbon places natural gas in a competitive advantage relative to coal use, we could see immediate shifting to this resource which is also used as a feedstock or raw material in chemical and fertilizer production. Natural gas prices in recent years have experienced a great deal of volatility. Coal, by comparison, has been relatively stable and less expensive.

If our Nation hopes to meet its rising energy demand into the future and keep prices for consumers affordable, any climate change response will have to factor how to bridge to that point in the future when capture and storage or sequestration of carbon dioxide is commercially deployable and regulated to ensure the environmental integrity of pumping millions of tons of carbon dioxide underground. This technology will not only be a key to meeting domestic energy needs while protecting the environment, but is likely the most effective way we can influence the greenhouse gas emissions of developing countries like China and India that are heavily dependent on coal. Under all modeling scenarios of climate change legislation, carbon capture and storage is shown to be critical. Otherwise, we will have to greatly exceed all expectations for deployment of nuclear energy, renewable energy, efficiency, and conservation, as well as other low carbon technologies, all of which will already be called upon to shoulder a tremendous burden in shifting our economy from one that is carbon-based on low-carbon-based. I intend to work with my colleagues to ensure this clean future for coal use.

In conclusion, the Senate has a unique opportunity to pass our Nation's first comprehensive climate change response. While this is an extremely complicated issue, much work has been done to date and it now comes down to finding the right balance between limiting U.S. greenhouse gas emissions and protecting the U.S. economy. This is often the challenge of environmental policy and we have found the right approaches in the past--including the acid rain cap-and-trade program after which this legislation is modeled. I look forward to working with all of my Senate colleagues as this debate proceeds. I thank the presiding officer and yield the floor.

Mr. SPECTER. It is my hope that we will reconcile all these interests and move ahead, but I think it is very important that we not search for a goal we cannot attain and end up doing nothing. We know the maxim that the perfect is the destroyer of the good.

I thank my colleagues and yield the floor.


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