Oil Report

SCENARIOS-Climate change options for Congress in 2010

WASHINGTON, Feb 17 (Reuters) - President Barack Obama wants Congress to pass this year a climate control bill that has been stuck in the Senate, where it has proved difficult for his fellow Democrats to line up the 60 votes needed to advance controversial legislation.

In an attempt to move things along, Obama this week announced a $8.3 billion loan guarantee to help reinvigorate the nuclear power industry, a top goal of many Senate Republicans. Obama wants such funding to hit $54 billon.

A bipartisan group of senators is trying to come up with a compromise climate bill. Besides incorporating additional government incentives for nuclear power, the senators also are looking at ways to expand domestic oil and gas drilling.

Such provisions would be coupled with government-mandated reductions in carbon dioxide emissions blamed for climate change problems.

As the White House was unveiling the nuclear power loan guarantee, it suffered a setback: Three major companies announced they were ending their association with the U.S. Climate Action Partnership, the coalition of companies and environmental groups lobbying for a climate change bill.

The move by BP, ConocoPhillips and Caterpillar Inc. could undercut the Senate’s drive to pass legislation.

Following are possible scenarios for the fight over how to battle global warming and expand U.S. alternative fuels:


Some prominent Senate Democrats already have predicted that comprehensive climate control legislation, such as cap and trade, will not be approved this year.

Passing such sweeping legislation is an uphill fight in part because the U.S. economy has been in bad shape and politicians are uncomfortable debating election-year legislation that could raise energy prices.

Meanwhile, recent polls show the public’s concern about climate change is sagging, as unemployment and other economic worries take higher priority.

Under a cap and trade bill passed in June by the House of Representatives, utilities, oil refineries and factories would be required to reduce their emissions of greenhouse gases over the next 40 years. Companies would have to obtain permits for each ton of carbon dioxide they emit and those permits would be traded on a regulated exchange.

Failure to pass cap and trade would disappoint traders and banks looking to bring a financial mechanism -- projected eventually to generate trading valued at $1 trillion -- to fighting climate change.

If Congress can’t approve a bill this year, chances for passage next year could be worse as Democrats are expected to suffer losses in the House and Senate, which could further erode support.


While there’s wide agreement that the House-passed bill is dead, there’s hope that elements of it can be included in a Senate compromise that Democratic Senator John Kerry is trying to write with Republican Senator Lindsey Graham and independent Senator Joseph Lieberman.

Negotiations are still under way, with the goal of sending a bill to the full Senate in April or May.

It would contain some sort of mechanism for cutting carbon emissions: maybe cap and trade just for coal-fired electric utilities, maybe a cap on emissions but without the trading of permits or maybe even a carbon tax, or some “hybrid” approach.

The key to a successful compromise is the inclusion of expanded nuclear power and oil drilling to gain Republican votes without jeopardizing Democratic support.

The legislation also might preempt the Environmental Protection Agency from developing complicated carbon emissions regulations.

Senator Thomas Carper has introduced a bipartisan bill for a nationwide cap-and-trade program for some smokestack emissions other than greenhouse gases. That measure could be combined with a carbon-cutting bill to attack all the pollutants from power plants at once.


If Kerry fails to find a compromise, Democrats might push a narrower bill requiring more use of alternative energy sources, such as solar and wind power, without mandatory reductions in carbon dioxide emissions.

Environmental groups would have a hard time supporting the expanded oil and gas drilling and more help for nuclear power without imposing mandatory caps on carbon.


The EPA is threatening to regulate carbon emissions if Congress won’t.

Regulations could go forward as early as March. But a barrage of lawsuits from opponents already has begun, which could delay action.

Obama would rather have Congress act on a bill that could provide more protections for industry while also accomplishing more comprehensive pollution control. He’s using the threat of EPA regulation to encourage lawmakers.

Meanwhile, the White House is working to defeat legislation by Republican Senator Lisa Murkowski who might seek a vote on legislation stripping EPA of the power to regulate.


The political turmoil in Washington over passing a climate change bill has hindered international efforts to tackle global warming. At a U.N.-sponsored meeting in Copenhagen in December, the 190 participants could only hammer out a non-binding deal that aims to lure countries into setting new goals for reducing carbon pollution. Without the passage of U.S. legislation this year, chances worsen for a global binding treaty being approved in Mexico later this year. The United States is the world’s largest carbon polluter among developed countries.

Reporting by Richard Cowan and Timothy Gardner; Editing by Cynthia Osterman