House Democrats won’t be able to avoid wading into the tricky politics of carbon pricing plans such as cap and trade, despite shying away from explicitly pricing carbon emissions in their new climate change strategy.
That’s because several elements of the Energy and Commerce Committee Democratic climate framework, released Jan. 8, rely on market-based policies that would place an indirect or a shadow price on greenhouse gas emissions. That exposes it to critiques from both the Right, who are hesitant to penalize emitters economically, and the Left, who question whether the market can drive emissions down quickly enough.
Some Republican lawmakers, for example, have already compared the framework’s power sector clean electricity standard, which would allow power suppliers to buy and trade clean energy credits, to failed cap-and-trade legislation from 2009.
And the Left has slammed the plan’s support of market-based policies that would allow for continued use of fossil fuels, particularly oil and natural gas, in the near-term.
“At the end of the day, it’s a failure of political imagination, fear of political repercussions, and an appeal to nonexistent centrists,” said Lukas Ross, a senior policy analyst with Friends of the Earth.
The pushback from both sides could put House Energy and Commerce Democrats in a difficult spot as they try to tee up partywide consensus on climate change legislation heading into 2021, to position themselves for a different White House and political landscape.
House Energy and Commerce Chairman Frank Pallone of New Jersey was insistent the plan doesn’t explicitly price carbon emissions.
“We think we can get there and achieve this goal” without it, he told reporters at a Jan. 8 news conference.
The legislative framework released by Democrats, though, centers on market-based mechanisms, either newly proposed or retooled to address climate change.
For example, their memo outlines a “carbon fee” as a federal backstop to a proposal for states to submit individual climate plans to reach a nationwide net-zero emissions goal by 2050. Any state that fails to submit an adequate plan would face a carbon fee imposed on emitters in the state, according to the memo.
The outline also describes a clean electricity standard for the power sector under which power suppliers would earn “clean energy credits” for zero- or low-carbon electricity. Power suppliers would be able to buy, sell, and trade credits, a description that has led Republican lawmakers such as Greg Walden of Oregon to note how similar it is to cap and trade.
House Democrats were able to pass an economywide cap-and-trade program back in 2009, but it failed in the Senate as energy state Democrats joined with Republicans to sink the plan. House Republicans who voted for the climate plan then were hammered in the 2010 midterm elections for their support of the bill, which their opponents painted as a job-killer.
In some ways, the politics haven’t evolved much since then. Republicans, despite talking more openly about climate change recently, have repeatedly rejected any attempts to price carbon. In the last few years, the majority of Republicans have voted to approve a resolution denouncing a carbon tax, and few have been willing to put their name on carbon pricing legislation.
And now, liberal Democrats are starting to be equally skeptical of carbon pricing, for different reasons. Democrats backing the Green New Deal have said that policy, which outlines rapid emissions cuts along with reforms to other social programs, won’t center around a carbon price, suggesting the market won’t drive emissions cuts quickly enough on its own.
Energy analysts note, though, that while the proposed clean electricity standard and cap and trade both use the market to find the cheapest available emissions cuts, they aren’t the same.
A cap-and-trade program ratchets down the level of greenhouse gases allowed, while the clean electricity standard emphasizes the production of low-carbon energy, said Kevin Rennert, a fellow with the think tank Resources for the Future. Fundamentally, that means the clean electricity standard doesn’t present a barrier to the United States continuing to add energy onto its system and allows for more flexibility in the transition, he said.
The U.S. could comply with a clean electricity standard, for example, by adding more clean energy early on in the program, even if the nation didn’t retire existing fossil fuel generation right away, Rennert said.
There are questions, though, about how quickly House Democrats’ proposed clean electricity standard would slash emissions. The standard sets a goal of 100% clean electricity by 2050, but energy analysts said economic trends such as low-cost natural gas and renewables mean emissions are already falling quickly in the power sector.
The electric sector program also sets a carbon intensity baseline roughly at the level of a new coal plant, according to analysis by the Rhodium Group, an independent research firm. That means natural gas-fired plants would be eligible for partial credit under the program.
Noah Kaufman, a research scholar with Columbia University’s Center on Global Energy Policy, said he could see an argument that the power sector could move faster, especially when the clean electricity standard is paired with other policies the committee is proposing, such as the state-federal partnership. He suggested many of the states could also target power sector emissions cuts as part of those individual climate plans.
Rhodium Group analysis of the House Democrats’ plan also suggests the power sector is well on its way to meeting a 100% clean goal. Their quick-take analysis found the electricity sector could already generate clean electricity credits to cover 57%-65% of total electricity sales when that standard would begin in 2022.
What the committee releases later this month in full legislative text, however, will be an important indicator of the policy’s stringency, said Ben King, an analyst with Rhodium.
For example, the committee is taking comment on setting a lower carbon intensity baseline, which would cut out higher-emitting natural gas power from being eligible for partial credit, King said. The committee could also make the program stricter by setting a faster ramp-up, with stronger interim targets before 2050, he added.
House Energy and Commerce Democrats aren’t likely to appease their left flank, though, so long as they keep the 2050 target and the standard’s technology-neutral approach.
“A technology-neutral approach is effectively a lifeline to polluters,” Ross of Friends of the Earth said. “Fundamentally, what we need is a moratorium on new fossil fuel infrastructure and a phase-down of fossil fuel production, coupled with necessary investments for a swift and just transition to a 100% renewable energy economy.”
