The Howey Report

by Brian Howey

INDIANAPOLIS – Cap-and-trade is coming, Hoosiers, and you need to pay close attention, try to avoid all the hyperbole in the blogosphere and help your Members of Congress make good decisions.

Here’s an Indiana primer on the topic.

Brian Howey

“What is cap-and-trade?” President Obama wants to limit greenhouse gas emissions (GHG) at 14 percent below 2005 levels by 2020, and 80 percent below 1990 levels by 2050. A cap-and-trade system would allow clean energy users to sell their credits to polluting users while the caps gradually increase. Congress is now considering the Waxman-Markey American Clean Energy and Security Act.

“Why do we need cap-and-trade?” According to the Congressional Research Service (CRS), the earth’s climate is warming, with observable effects on human and ecological systems. Since 1900, the average global temperature has risen some 1.0 to 1.3 degrees (F), with most warming since the 1970s. The current global temperature is approaching, possibly exceeding, the maximum experienced by human civilizations. Most models project GHG-driven change to have important impacts on regional economies, human safety and health, ecosystems, with the potential for surprising and abrupt shifts.

“Will cap-and-trade solve this problem soon?” No. The CRS notes that the question of appropriate timing of actions is exacerbated by the long time lags between emissions and climate change impacts, raising potential inter-generational trade-offs. Another CRS report notes that “The climate would continue changing for hundreds of years after GHG concentrations were stabilized, according to most models.” And for cap-and-trade to work, China and India will also have to act. So if Congress passes cap-and-trade, it would be like a gift to our grandchildren, who will have to deal with our massive debts.

“How would this impact Indiana?” Indiana gets 96 percent of its energy from the cheapest and dirtiest fuel – coal (compared to California’s one percent). We are also – by a long shot – the No. 1 state using high intensity manufacturing at steel mills and foundries.

Republicans ranging from U.S. Rep. Mike Pence to Gov. Mitch Daniels call Waxman-Markey an imperialist plot by coastal liberals to tax the Great Midwest. Daniels insists that electricity prices will double under cap-and-trade. They cite a Heritage Foundation analysis that revealed eight of Indiana’s nine Congressional Districts are in the top 20 of those taking the brunt of the original Waxman-Markey. But the bill has changed significantly, easing some of the costs on Indiana and it still has to go through nine House committees, a floor vote and then on to the U.S. Senate.

U.S. Rep. Baron Hill, a Democrat, said after he voted for Waxman-Markey in the House Energy & Commerce Committee last month, “We cannot continue to push the issue of addressing climate change onto future generations.”

“Will Waxman-Markey double our electric bills?” “The problem with Pence and Daniels statements is that Indiana’s electric bills are going to go up “significantly” anyway according to Jim Newland Jr. of NiSource. A Purdue University study several years ago noted that Indiana would run out of capacity soon. Think about how much electricity you use now compared to five or 10 years ago. Seven NiSource customers use 45 percent of its electricity. If Waxman-Markey were to pass, at what point will U.S. Steel say, “To hell with this. We’ll go make steel in Thailand?’” And, yet, there were similar costs to industry during acid rain legislation and many found ways to manufacture even more efficiently.

“What happens if Congress doesn’t pass cap-and-trade?” The Environmental Protection Agency (EPA) is waiting in the wings and will deal with it administratively.

“Who should I trust when it comes to cap-and-trade?” Gov. Daniels is right to express concerns over what will happen to Indiana energy rates under Waxman-Markey. He fears that an advantage we have with business is low electricity rates. Indiana’s Republican congressmen have opposed just about everything President Obama has initiated, so it’s hard to tell when they’re playing politics, or have a legitimate beef. They do note that Waxman-Markey doesn’t include emission free nuclear power. Even liberal critics say that the bill does not invest enough in alternative energy development. Keep an eye on how Sens. Dick Lugar and Evan Bayh approach Waxman-Markey. Both are very progressive on climate issues, and yet they will guard the economic vitality of the state.

“What’s Lugar saying about Waxman-Markey?” Lugar’s tree farm has purchased credits on the Chicago Climate Exchange, so he clearly understands that cap-and-trade is not an “if” but “when” reality. In an April 22 letter to Dr. Jane Lubchenco of the National Oceanic and Atmospheric Administration, Lugar urged the Obama administration to “dramatically increase education efforts on climate change for the American public and for policymakers. Passing and implementing far-reaching legislation requires that elected officials explain clearly to the American people why it matters in their daily lives. Americans need detailed information on state-by-state, district-by-district and county-by-county levels on what the impacts of climate change would be on them and what opportunities exist in a new energy economy.”

“So, what’s the bottom line?” Pay attention. Watch carefully how Sens. Lugar and Bayh evolve on this issue, as it will be the Senate that will likely forge the most equitable compromise. If Congress doesn’t, the EPA will.

The columnist publishes at www.howeypolitics.com.