The Deal

The best thing you can do is deal from strength, and leverage is the biggest strength you can have. Leverage is having something the other guy wants. Or better yet, needs. Or best of all, simply can’t do without.

Donald Trump, The Art of the Deal

Global warming is not only the “biggest global health threat of the 21st century,” as the current issue of the British medical journal, The Lancet, points out. It is also the most complex problem we humans have ever devised for ourselves. (And, as the species responsible for the thermonuclear bomb, mass marketing of nicotine delivery systems and genocide — that is saying a lot.)

Henry Waxman (D-CA)

Henry Waxman (D-CA)

For Henry Waxman, however, the final days crafting a national legislative response to global warming that is big enough and nuanced enough to actually haul us back from the brink, came down to a simple reality that Donald Trump had articulated two decades ago.

Waxman needed Democratic votes. And he didn’t just need them. Waxman couldn’t do without them.

To get those votes, Waxman was forced to give up quite a bit.

Michigan Rep. John Dingell agreed to sign on to the bill after automakers were guaranteed some free carbon credits which would allow them a “grace period” in which they would not have to pay for exceeding greenhouse gas reduction targets.

For Texas Democrats Gene Green and Charlie Gonzalez, the price was free carbon credits for the oil refineries in their districts.

In exchange for votes from coal state, billions of dollars will be spent on research into “clean coal,” carbon sequestration, a technology that, if it could be made to work, would require coal-fired power plants to burn an estimated 30% more coal just to power the process itself.

The money for carbon sequestration was only a small part of the deal. More important were concessions on both the size of carbon reductions and on how soon utilities would have to meet the new standards.

Rick Boucher (D-VA)

Rick Boucher (D-VA)

Representative Rick Boucher of Virgina led the coal state caucus in negotiations. At yesterday’s press conference announcing Democratic solidarity on the bill, Waxman joked about their dealings.

“As Rick gave his comments,” said Waxman, “and he talked about the changes we made, I remembered each concession I made, and then when he talked about the things he still wants to discuss, I kept saying to myself, ‘Oy!'”

“Oy” is a Yiddish expression — part protest, part resignation — over whatever has befallen the one who utters the word.

It may help to remember that for every major piece of legislation that has moved through Congress, there have been groups of people saying the equivalent of “Oy!”

People on both sides of the issue.

Did we give up too much? Did we get too little?

The world can ill afford a United States that, having finally gotten serious about global warming, then loses its sense of purpose and falls back into squabbling. The stakes are too high and the opportunity to make real and lasting change is too great.

The bill now moves to markup. Whatever else can be said about it, one thing is certain: it’s the real deal now.

Transcript from the May 14, 2009, press conference on the Energy and Climate Change Bill

1:34 P.M. EDT, THURSDAY, MAY 14, 2009

REP. BOUCHER: Well, good afternoon to everyone, and thank you very much for attending our announcement.

Following more than a month of intensive negotiations with Chairman Waxman and Chairman Markey, I can announce this afternoon that we have achieved agreement on most key matters that are of greatest concern to me in the energy and climate-change bill. When the measure goes to markup next week in the full Energy and Commerce Committee, I intend to vote yes.

And I intend to encourage all other members of the committee to do the same.

While reserving the right to work for further improvements, in later states in the legislative process, I will strongly encourage reporting of the bill by the full committee. And I will discourage weakening amendments. Our negotiations have produced satisfactory outcomes on dozens of provisions.

And among others, those provisions include the free allocation of allowances, to electric utilities, to the extent of 35 percent of all national allowances. And that is 90 percent of the allowances that the electric utility industry will need, in order to satisfy its compliance obligation. Those allowances will largely prevent the allocation process for emission allowances from resulting in electricity price increases.

We also achieved success, in our discussions, with regard to the provision of bonus allowances, to electric utilities that deploy carbon capture and sequestration technologies. And a total of between 75 billion and $100 billion, in allowances, will be provided to electric utilities, in order to encourage them to deploy carbon capture and sequestration technologies.

We also at our negotiations achieved success with regard to the offsets that will be available, to CO2 emitters, to enable them to meet the carbon reduction targets that are contained, within the legislation, without having to change their fuel mix.

Fully 50 percent of the allowances are available on the international side and 50 percent on the domestic side, as a first matter, with a total of 2 billion tons of allowances available every year.

And in the event that it proves difficult to obtain up to 1 billion tons of allowances, on the domestic side, with offsets acquired for example from farmers or in forestry, then up to 1.5 billion tons of allowances could be available on the international side.

So one would first look to the domestic side. And if up to a billion tons would not be available, then up to 1.5 billion tons could be obtained, on the international side. And we anticipate that on the international side, that would largely be efforts to preserve the tropical rain forest.

The initial draft of the legislation had a ratio of five to four, with regard to offsets. The way that would have worked, in the initial draft, was that essentially $5 in value would have to be provided, for what amounts to $4 in offsets.

I urged that that ratio be removed. It has now been removed completely on the domestic side, when domestic offsets are required, and it has been removed for the first five years on the international side. It does come back after the fifth year with regard to international offsets.

We have made major improvements in requirements that new coal plants use carbon capture and sequestration technology, when that technology becomes available. A number of important changes were made in this provision. Key among those is to make sure that the plants that had obtained their air pollution permits as of January 1 of this year would not have to comply with these carbon capture and sequestration rules.

We were also able in our discussions to reduce the floor price for the auction of allowances from the Strategic Allowance Reserve, from what was a — 200 percent of the past three-year average of allowance prices in the emissions trading market in the initial draft, to what is now 160 percent of that three-year average. So in determining what the floor price for auctioning allowances from the Strategic Allowance Reserve would be, you look to the past three years of prices in the market, you average those, and then the floor price is 160 percent of that number, as compared to 200 percent in the original draft. Those allowances from the strategic reserve can be an effective buffer against sharp electricity price increases.

Helpful modifications have been made through these discussions to the citizen lawsuit provisions that were contained in the draft, and in negotiating with a broader group of our colleagues — including John Dingell, Bart Gordon, Mark Doyle in our office — Chairmen Waxman and Markey have agreed with us on what in my mind is an acceptable set of provisions for the Renewable Electricity Standard.

There were dozens of provisions that we addressed very successfully in these negotiations. I would categorize the ones I’ve just mentioned as the key ones. I do have remaining concerns about the bill, and in future stages of the legislative process I will be working for improvements. But I am committed in the full committee to be supportive of this bill, to encourage others to be supportive, and at further stages in the process will work for further improvements.

Let me just mention a couple of areas in which I have some remaining concerns. In the negotiations with Chairmen Waxman and Markey, we were successful in reducing the number for the required reductions of carbon dioxide emissions by 2020. The initial draft had a 20 percent required reduction by that time. The revision that will be considered in the committee has a 17 percent required reduction by that time. I personally believe that a 14 percent reduction is more appropriate and more achievable. And I also think that a broader group of the private sector companies that are concerned about this measure would be supportive of the legislation were we to come to that 14 percent number. So that is one area in which I will continue to seek improvements.

I’m also concerned about the timing of the phaseout of the free allocations that would go to the emitting stationary sources, now set to occur between 2025 and 2030. I think that’s a short period. And that short period might result in some significant increases in electricity prices during that period as we move from free allocation to auction. So a longer phaseout period, in my view, is more appropriate.

And I would simply indicate continuing concern about the reintroduction of the 5:4 ratio, the discounting ratio with regard to the international offsets, that will still be a feature of this measure. But I do support moving this measure through the full committee. I will be voting yes, I will be encouraging other members to vote yes, and working constructively with Chairmen Markey and Waxman as this measure goes to the floor of the House, and also, hopefully, with our Senate colleagues as it is considered there and in conference.

Let me just say a word about our negotiations. They have been intense but they have been collegial. They have been well structured. They have methodical. And ultimately, they have been successful. And I want to commend Chairman Waxman and Chairman Markey for a superb process in which they accommodated my concerns, they solicited my views, they listened to our arguments and were willing to make sure that our core needs were met. And I very much appreciate that process and their cooperation in this effort, and I’m pleased to be here with them today to announce that we have achieved agreement on these many very important issues.

Chairman Waxman?

REP. WAXMAN: I’m delighted to join with Chairman Markey and Chairman Boucher in this announcement today. Let me say, as full committee chair, I’m really very, very fortunate to have these two gentlemen involved in working on this issue. They have an enormous amount of experience, having served on the Energy Committee for a very long period of time. They know the issues inside and out. And it’s been a very helpful learning experience for me to be part of this whole process.

The — Rick Boucher is, as he said, intense but collegial in our negotiations. No one has the depth of knowledge that he has, not only about the subject matter but the details. And he has been a very strong advocate for the people in his district who are relying on the electricity produced primarily from coal, and the coal industry that is a very big part of his district, in trying to fashion this proposal.

What all three of us and other members in the committee shared was a commitment that the president set out, to pass legislation that would accomplish three goals. It would make us less dependent on going to other countries and, in some ways, compromising our national security in order to get the resources we need for our energy needs. He asked for legislation that could transform our economy with millions of new jobs as we move to a carbon-free environment, or certainly a dramatically reduced-carbon environment.

And then thirdly, we are hearing more and more alarm from people who are knowledgeable about global warming and climate change. And there is damage, we know, but the scientists are telling us there may be tipping points where the damage could be irreversible, and we need to get action now.

For the last eight years, we had an administration that denied the reality of global warming and the connection to pollution, carbon pollution. This administration understands the problem and wants us to act on it.

We had discussions, and we reached out to members of the committee, as we have reached out to the various industry groups. We had the benefit of a group called U.S. Climate Action Partnership, or USCAP, which was made up some of the CEOs of the major industries in our country, from the utilities, from the chemical industry, from the oil industry, from the — I’m sure I’m forgetting others that were involved, but people who know that we have to be mindful of what the impact would be on them as we make this transition.

We are talking about a transition that would allow the use of coal because we believe that coal is an important resource. It’s right here in the United States. We don’t import it.

The problem is, we need to be able to use coal in a way that does no harm to our environment. And this bill will invest an enormous amount of money in the research for carbon sequestration technology.

In the meantime, we will have a cap on the total amount of carbon emissions as we moved down the decades and eventually to the point where we have the technology that will allow carbon to be sequestered from the use of coal and some of the other sources of that — of those carbon emissions.

So the approach is to be as cost-effective as possible in the transition period, to protect the consumers, the rate payers for electricity and the consumers that will be purchasing gasoline at a higher price. We know we’re going to have a higher price, and we’re already seeing a higher price at — on — at the pump as our economy recovers.

We will try to protect the consumers and the rate payers and the industries as we make this transition to get to the goals that will ultimately in 2050 accomplish over an 80 percent reduction.

We know it’s a large amount, but if we look at the experience with the Clean Air Act, we’ve seen enormous amounts of reductions in air pollution that many people thought could never be accomplished.

And we’ve done it at a time when our economy has grown, that there are more vehicles, miles traveled in cars and other motor vehicles. And the industry has prospered.

So we stand together in trying to move a process of legislation that, I think, should be bipartisan and, I hope, will be. It should bring together the diversity of people, from the different regions of our country, because we take their concerns into our recognition, to try to address them. And I think it’s a bill that will accomplish what the president has said he wants us to do.

I am very, very grateful to Chairman Ed Markey. He, as the person in charge, had many, many hours of hearings from witnesses that had every possible perspective on this matter. And I think that no one knows more than he about the whole subject matter.

So when you get to questions, please address them to Mr. Markey or Mr. Boucher. (Laughter.) And I’ll fill in where I can. But I want to yield the time now to Chairman Markey.

REP. MARKEY: Thank you. I appreciate this historic moment. And like Henry, I want to express my enormous gratitude to Rick for the effort which he put into reaching this moment. If you look at the three of us up here, you’re looking at nearly 100 years of service on the Energy and Commerce Committee. And Rick made — I’m making everyone in the audience feel older.

But Rick made a commitment to use that legislative skill, to find a way to create the bridges that make this moment possible. And in doing so, we are now one huge step along the way towards creating a 100-year solution, to the carbon problem, but doing so in a way, because of Rick, that creates a transition that will protect the consumers.

And we appreciate the good-faith effort that Rick brought to this process. And at the end of the day, we think, the result is something that now defies conventional wisdom that was pronouncing this bill dead, for weeks and months, without recognizing the good-faith commitment that had been made, to reach this result.

So what we have in front of us now, and we will have next week, is a legislative Susan Boyle. (Laughter.) Everyone underestimated it until it started to sing. And today you see the chorus up here, that will be singing the praises of this piece of legislation. And it’s a partnership, we think, that can be sustained on the House floor and then used in the Senate as a template for passage of companion legislation that we can put on the desk of the president.

And I will say in conclusion that because of Rick’s efforts, we will spend the billions of dollars to find a way to sequester the carbon from coal, and in that, we will develop a technology that — with the Indians, with the Chinese, the Russians and others that burn coal, we will find a global solution to the problem, and it will be technological and driven by this bill.

So, thank you.

REP. WAXMAN (?): Questions?

Q Yeah. We’re hearing the story about 9 percent of allocation — (off mike). Can you tell us where those stand right now?

REP. : We will be releasing the text of the legislation today. And if we are not able to get the full text out today, we’ll have it out tomorrow. But we will release the details of the cap-and- trade bill, of the global warming bill, as well as the other parts of the legislation. So I don’t really have an answer to give you now because there are discussions still going on and I don’t want to conclude those discussions by making an announcement that you would think is the final result and it still may be in process.

Q Are you going to get this thing done next week, did you say? And also, when do we get to the top level of auction? Is it 100 percent? And what year does that happen?

REP. BOUCHER (?): The phase to auction begins in 2025 for the electric utilities. This is the 35 percent of total national emissions that go to the utility sector. And They are freely assigned until 2025. Beginning in 2026, the auction of those allowances would commence for a portion of them, and they would phase completely to auction about 2030. About 2030.

Q For utilities only?

REP. BOUCHER (?): That is in the utility sector. Now, for the other stationary sources, I believe it’s that same formula. You’d have to look at the text when the bill comes out to be absolutely certainly.

REP. BOUCHER (?): I might just note about Rick Boucher.

You can tell that he’s very (versed/conversant ?) in the details of this legislation. He was selected by a number of members of our committee to be their chief negotiator, some of the moderate members from the Midwest who had similar concerns to his. And they recognized not only his detailed knowledge of the issue and his concern that they shared, but his enormous skill as a negotiator.

As Rick gave his comments and he talked about the changes we made, I remembered each concession I made, and then when he talked about the things he still wants to discuss, I kept — saying to myself, “Oy.” (Laughter.)

Q Sir, are you going to get it done next week, then, in the committee?

REP. WAXMAN: Yes. We are going to mark up next week, and we’re going to report the bill out by the end of next week. And then we go into health care and other issues.

Q I just wanted some clarity on — (off mike) — again, the 35 percent. That is based on current emissions, on the retail sales? How is that —

REP. BOUCHER: There is actually a formula that takes into account both their historic emissions and also their retail sales. And this was a formula that, over a long period of time, through a series of discussions, was resolved internally among utilities themselves. There had always been an internal debate within the utility industry about how allocations would be made among them.

I asked them if it was possible for them to come to some determination internally about how that ought to be done. That has been achieved. And you suggested in your questions the very factors that will be taken into account in making those allocations. It is partly based on historic emissions; it is partly based on retail sales. My recollection is it’s half and half — 50 percent one, 50 percent the other.

Q And will it be 35 percent allocations up until 2025?

REP. BOUCHER: That’s correct. That’s correct. And then starting in 2026 it phases to auction, with a portion phasing to auction each year until, by 2030, it’s all auction.

Now, as I said in my initial remarks, I think that phase-out period is too short. I’m concerned it would result, in those years, in some rather significant electricity-price increases. I would like to see that buffered. And I think a slightly longer phase-out period is the way to do that. So that’s one of the things on which I think further improvements would be helpful.

Q Mr. Boucher, do you have an agreement yet on the refineries — (off mike)?

REP. BOUCHER: I actually have not been directly negotiating with Chairman Waxman on that, and I think some other members were.

Q Yes.

REP. BOUCHER: So I don’t have current information.

REP. WAXMAN: We’re still discussing it in with (the other ?) people.

Q Has there been any change in — regarding — (off mike) — allowances in (California ?) — (off mike)?

REP. WAXMAN: We’ll have to — we’ll have to —

REP. BOUCHER: The answer’s no. The answer is, not a final arrangement on how that will be done.

REP. MARKEY: But ultimately, obviously, this will supplant the regional agreements, because it will be a national agreement. So we have to work towards that goal.

And ultimately, the states that are already within their own regional agreements will do better, actually, because the standards will be tighter, but the benefits will also be greater over time. So we are going to ensure that that is a component part of this agreement.

REP. BOUCHER: We have a vote on the House floor, so —

REP. WAXMAN: Is there anything from somebody who hasn’t asked a question? We’ll have one last —

Q Do you have a revenue —

Q Chairman Waxman, have you heard from —

(Cross talk.)

REP. WAXMAN: Yes. You’re loudest, you get to — (laughter).

Q Have you heard from the president’s science adviser about whether the emission reduction targets will — (off mike) — particularly the 2020 target — (off mike)?

REP. BOUCHER: We’ve been very careful to look at what the scientists have been saying, including the science adviser to the president and others. And our goals and timetable have been geared toward that. We have a 2020 reduction of 17 percent, but added onto that will be some allotments that will be used to purchase offsets.

And we think that when the president goes to Copenhagen he will have the basis in this legislation to say to the international community it’s time to move forward together. And we can assume the leadership position that we have always had in the past, and have forfeited over the last eight years in these important environmental issues.

Thank you.

REP. WAXMAN: Thank you.


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