U.S. Senate Rejects Lieberman-Warner Cap-and-Trade Bill

Published August 1, 2008

Supporters of a sweeping plan to address global warming by limiting use of fossil fuels suffered a stinging defeat June 6 when the U.S. Senate rejected a bill intended to create a cap-and-trade system to reduce greenhouse gas emissions.

Senate Majority Leader Harry Reid (D-NV) pulled the bill from the floor after it fell 12 votes shy of the 60 needed to overcome a Republican-led filibuster. The final tally was 48 to 36, with 16 senators, including presumptive presidential nominees Barack Obama (D) and John McCain (R), declining to cast a vote.

Long Way to Go

With President George W. Bush threatening to veto the bill, there was no chance the American Climate Security Act would be enacted this year. Instead, debate on the bill was seen by people on both sides of the issue as a dress rehearsal for a renewed clash over global warming policy next year.

Supporters of greenhouse gas restrictions found it impossible to overcome concern over soaring energy prices across the United States and the additional costs a cap-and-trade system would impose on consumers and industry.

The chaotic circumstances surrounding the bill’s demise strongly suggest proponents of a far-reaching climate change bill still are a long way from reaching their goal, analysts say.

Introduced by Sens. Joe Lieberman (I-CT) and John Warner (R-VA), the bill would have established what its supporters say is a “market-based” system similar to the one adopted by the European Union a few years ago.

The legislation would have capped the amount of carbon dioxide that electric utilities, manufacturers, and other firms would be allowed to release into the air. If companies emitted more than their cap allowed, they would have to buy “carbon allowances” in a government-created market from companies that had extra ones to sell.

Plentiful Pork

Because such schemes inevitably create winners and losers among U.S. businesses, the bill’s sponsors loaded it up with goodies in the hope of gaining the support of affected industries and communities.

Those provisions included, but were not limited to, $802 billion in “relief” for low-income taxpayers, $190 billion for training for “green-collar jobs” to replace jobs lost in “losing” industries, $288 billion for “wildlife adaptation,” $342 billion for “international aid,” and $171 billion for mass transit.

Sen. Barbara Boxer (D-CA), chairman of the Senate Environment and Public Works Committee, estimated the amount of taxpayer largesse the plan would spread throughout the U.S. economy allegedly to ease the cost of the transition would be a whopping $3.42 trillion over the next four decades.

Economic Disaster

Just as the Senate was preparing to consider the 150-page Lieberman-Warner bill, Boxer prevailed on Reid to replace it with her substitute measure, which ran to a staggering 491 pages. Minority Leader Sen. Mitch McConnell (R-KY) then forced the clerk of the Senate to read out loud all 491 pages, an exercise that took nearly nine hours of the Senate’s time.

Boxer’s substitute bill mandated a 66 percent reduction in U.S. greenhouse gas emissions from 2005 levels by 2050, a goal the U.S. Environmental Protection Agency (EPA) estimated would reduce the nation’s gross domestic product (GDP) by between $1 trillion and $2.8 trillion over the next 42 years.

EPA’s analysis confirmed an observation made by economist Robert Samuelson in the Washington Post on June 2. “If we suppress emissions,” he wrote, “we also suppress today’s energy sources, and because the economy needs energy, we suppress the economy.”

Democrats Defect

Fearing they might be blamed for massive economic disruptions resulting from a cap-and-trade system designed specifically to suppress emissions, a growing number of Democrats began expressing doubts about the Lieberman-Warner-Boxer legislation before the vote was called.

“We can’t unilaterally disarm,” Sen. Sherrod Brown (D-OH) told The Wall Street Journal for a June 6 story.

Brown was one of 10 Democratic senators who expressed opposition to the bill in a letter to Reid and Boxer. They pointed out they were “Democrats from regions of the country that will be most immediately affected by climate legislation.”

They explained they could not support the bill “in its present form” because it would impose “undue hardship on our states, key industrial sectors, and consumers.”

Lack of Global Burden

Brown’s reference to unilateral disarmament underscores a complaint lawmakers from both parties have expressed regarding Kyoto-style plans to reduce greenhouse gas emissions. Developing countries, including such major emitters as China, the world’s leading emitter of greenhouse gases, and India, are exempt from any mandates to cut their emissions.

China and India, in particular, have been forthright in refusing to hurt their growing economies for the sake of combating global warming. On the day before the cap-and-trade bill collapsed, Namo Narain Meena, India’s minister of state for environment and forests, made his country’s position clear. “India is struggling to bring millions of people out of poverty,” he said. “We cannot accept binding commitments to cut down greenhouse gas emissions.”

Organizational Differences

Environmental activist groups spent millions of dollars on advertising promoting the cap-and-trade bill. And while its defeat in this session of Congress was not unexpected, the defection of a growing number of Democrats points to potential problems in the future. Democratic Senate staffers were unsparing in their criticism of Boxer’s handling of the bill, which, they grumbled, turned a defeat into a rout.

Opponents of the bill, by contrast, praised Sen. James Inhofe (R-OK), the ranking member of the Senate Environment and Public Works Committee, for having lawmakers on his side well prepared for the battle they ultimately won.

“While the defeat of the Lieberman-Warner bill was not unexpected, the margin of defeat was larger than expected,” said Sterling Burnett, a senior fellow at the National Center for Policy Analysis. “Also, the margin of defeat would have been [even] larger if many Democrats had been forced to vote up or down on the actual bill. The margin of defeat shows global warming alarmists have actually lost ground since the Senate last addressed the issue.”

Unacceptable Costs

The economic climate surrounding the debate could hardly have been more unfavorable for the bill’s supporters. Unemployment in the United States reached 5.5 percent in May, up from 5.0 percent in April and 4.5 percent last June, and the price of regular gasoline at the pump rose above $4 per gallon in early June.

Further poisoning the atmosphere for aggressive action on global warming was a June 6 report issued by the Paris-based International Energy Agency (IEA), which concluded people around the world would have to invest $45 trillion in energy during the next 40 years and build 32 nuclear power plants every year and 17,500 wind turbines every year in order to reduce greenhouse gases by 50 percent by 2050.

The agency also said the cost of emissions, set by carbon taxes or cap-and-trade schemes, would have to rise to $200 a ton to make investments in technologies such as hydrogen-fueled vehicles commercially viable. The price of emissions in the European Union’s trading scheme is currently $43.

Unwilling to ask their constituents to bear additional energy-related burdens in an election year, lawmakers chose to put off a decision on climate change to next year–at the earliest.

Bonner R. Cohen ([email protected]) is a senior fellow at the National Center for Public Policy Research in Washington, DC.