The Wonk Room

In ‘Dear John’ Letter, Carl Levin Tries To Limit Promise Of Green Economy

In a letter to Sen. John Kerry (D-MA), Sen. Carl Levin (D-MI) outlined his policy priorities for the comprehensive climate legislation Sen. Kerry is authoring with Sen. Lindsey Graham (R-SC) and Sen. Joe Lieberman (I-CT). Levin’s letter says it highlights “some of the points I made at the March 2 meeting on climate legislation”:

– Eliminate California waiver for automotive emissions

– Pre-empt EPA from Clean Air Act regulation of stationary sources

– Establish a “realistic and firm” price collar on the carbon market

– Establish a “delay of at least 10 years in regulation of industrial sources”

– Allocate “sufficient” allowances for industrial sources

– Establish trade provisions “to assure a level playing field”

– Use a “100% emissions-based distribution formula” for permits to electricity generation

As a package, Levin’s requests would limit investment in a clean energy economy, threatening the development of millions of new jobs. There are better ways to protect the hard-hit citizens of Michigan than by keeping them tethered to the post-whale-oil economy.

Although Levin’s language is unclear, the “delay of at least 10 years in regulation of industrial sources” appears to refer to individual site performance standards, not a decade-long delay in including industrial polluters under a market-based cap.

Giving allowances away to polluters for free based on their historic emissions, or “grandfathering,” says Environment America, “rewards owners of highly polluting facilities and discourages innovation.” President Obama has favored a 100% auction of pollution permits to help American families and spur clean energy innovation, a feature of the Cantwell-Collins climate bill. Europe’s grandfathered cap-and-trade system generated $100 billion in windfall profits before they moved to an auctioned-credit system.

Several progressive and environmental organizations have made the preservation of existing Clean Air Act authority a top priority.

Sen. Levin’s understandable effort to protect existing, high-pollution electricity production in his region would leave Michigan woefully behind the clean-energy economy in other states, unable to catch up in the innovation race.

Full text of the letter:

March 5, 2010

The Honorable John Kerry
Chairman
Committee on Foreign Relations
United States Senate
Washington, D.C. 20510

Dear John:

I am writing to reiterate some of the points I made at the March 2 meeting on climate legislation:

• A binding national standard for greenhouse gas emissions from mobile sources is needed, with clear pre-emption of states adopting a different standard. The rules for greenhouse gas emissions from stationary sources should be set by Congress, superseding EPA’s existing statutory authority under the Clean Air Act.

• A realistic and firm “price collar” is needed to ensure that businesses and consumers do not face excessive costs and to provide more certainty for businesses to invest in the new clean energy economy.
• A delay of at least 10 years in regulation of industrial sources is needed, with a further delay provided for if important trade provisions to assure a level playing field are not included and fully implemented. Sufficient allowances for industrial sources are needed to cover both direct and indirect emissions. This is critical for ensuring that cost disparities relative to greenhouse gas controls do not erode our international competitiveness.
• Any approach for reducing greenhouse gas emissions needs to take into account the differences in the source of electricity generation across the country, in order to avoid regional disparities. An allocation formula based 50 percent on emissions and 50 percent on sales would result in some states bearing an unfair and disproportionate share of the costs. As can be seen in the attached table, a 50-50 allocation would result in a wide disparity in the extent to which emission allowance needs are met, with a difference across states of 47%. A 100% emissions-based distribution formula is a more equitable approach (but there still is a difference across states of 22%). An adequate total number of allowances to the electricity sector is also needed to ensure a realistic and smooth transition to lower carbon-intensive electricity production.

Thanks.

Sincerely,

Carl Levin

Download the letter.