Greenhouse gases on the agenda

Obama administration plans to set limits and charge fees

critics fear that his measures could strangle the struggling economy

January 25, 2009|By Jim Tankersley | Jim Tankersley,Tribune Washington Bureau

WASHINGTON - The Obama administration plans to push ahead with plans to aggressively limit greenhouse gas emissions and fight global warming despite fears that the move could further slow the recessionary economy.

Instead of backing away, the administration plans to portray the limits as a boost for America's "clean energy economy," according to congressional leaders and energy experts who have talked with top Obama advisers. The move would spur competitiveness and promote investment in renewable alternatives to imported oil, the government will argue.

At issue is the "cap and trade" initiative, under which the government would set limits on carbon emissions by power plants, factories and other installations but allow those who emit more to buy or trade permits with companies and facilities that emitted less than the prescribed limit.

The idea is that raising the cost of pumping more carbon into the atmosphere would encourage companies and other emitters to cut back, thus reducing a principal cause of global warming.

"If we don't put a price on carbon," said Sen. Barbara Boxer, a California Democrat and chairwoman of the Senate Environment and Public Works committee, "we'll never get these clean energy sources online."

But cap-and-trade would amount to a tax, raising energy costs. And several independent studies have suggested that emissions limits could be a drag on economic growth, a concern raised frequently by opponents of climate change legislation.

"The whole economic issue will be front and center in the debate on this, on both sides," said Eileen Claussen, president of the Pew Center on Global Climate Change, who has discussed Obama's global warming plans with senior administration officials.

Polls show voters increasingly losing interest in the global warming issue.

By pressing ahead anyway, Obama would be sticking with a program he said during the campaign would be a high priority of his presidency.

"There's a general consensus that things are going to be done with climate" in Washington this year, said Daniel Yergin, the author of the Pulitzer-winning The Prize: The Epic Quest for Oil, Money and Power, who recently updated his book with an epilogue on Obama and energy. He added: "We're going to go through a very intense national seminar on cap and trade and carbon tax."

Details of the administration's approach are far from set, though Obama has repeatedly said he favors "cap and trade," allowing companies to buy and sell emissions permits. The administration will argue that greenhouse gas restrictions should be part of a two-pronged effort to stimulate renewable energy supplies and ensure demand for the megawatts they'd produce.

The first part is to invest heavily in wind power, solar power and biofuels, through the massive stimulus bill working its way through Congress. The second is to help that power compete with cheaper fossil fuels by pumping up their costs to reflect the potential economic damage from a warmed earth.

Critics, including many Republicans on Capitol Hill, say those moves will only increase energy prices and hurt already struggling families.

"I just have concerns on the impact on the economy with all of the issues of global climate change," said Sen. John A. Barrasso, a Wyoming Republican who sits on the Senate's energy and environment committees, "and what restrictions there's going to be, what expenses there's going to be for American taxpayers."

Economists generally agree that limiting emissions is likely to curb economic growth, at least in the short term.

Peter Orszag, the former head of the Congressional Budget Office who now heads the White House Office of Management and Budget, told Congress last year that emissions limits would reduce long-term economic risks but "also impose costs on the economy ... in the form of higher prices for energy and energy-intensive goods."

Orszag also testified that the size of those costs could depend on whether the government sells emissions permits and if so, how it spends the proceeds. Environmentalists have recently pushed that idea one step further, arguing that if Congress passed emissions caps today, it could borrow against the future revenues from permit sales and spend the money on alternative energy research and technology.

That would stimulate the economy and "allow polluters to transition from a high-polluting environment to a low-polluting environment," said Andy Stevenson, a former hedge fund manager who is now a finance adviser for the Natural Resources Defense Council in New York.

Other experts are more skeptical. Subsidizing alternative energy could stimulate the economy, said Robert Shapiro, an economic adviser to President Bill Clinton who now chairs the U.S. Climate Task Force. But a cap-and-trade system, he said, "would raise energy prices, at a time when you're trying to increase consumption. ... It goes against everything [Obama] campaigned on."

Shapiro and many economists would prefer for the government to tax carbon emissions and refund the proceeds straight to taxpayers. The Democratic leaders working with Obama on climate legislation prefer cap-and-trade. So do a coalition of business leaders, including Shell Oil and the Big Three automakers, who joined with some environmental groups to release an emissions-limit proposal this month.

Boxer said Friday that she's learned from the defeat of a cap-and-trade bill in the Senate last year. She's set to unveil basic principles of a simpler, more focused plan next week, in hopes of passing a bill by year's end.

Her counterpart on the House Energy and Commerce Committee, Rep. Henry A. Waxman, a California Democrat, talks even more optimistically: He has promised a bill by Memorial Day.

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