Prospects for passing a climate bill in 2010 have gone from slim to almost none, after the legislation’s co-sponsor Senator Lindsay Graham (R-SC) withdrew his support on April 24. The remaining co-sponsors, Senators Kerry (D-MA) and Lieberman (I-CT), were forced to cancel an April 26th unveiling ceremony. Senator Graham is protesting a recent decision by Democrats to address immigration reform before the climate and energy which would effectively kill the climate bill’s prospects for 2010. Democrats have quietly backed away from that position, but Senator Graham is still not supporting the climate bill. Polling data indicates that Democrats will perform better in the midterm elections if they address immigration.
The climate bill will not pass without the support of Senator Graham. There are 20 undecided Senators from Central and Mid-Atlantic States who opposed the climate legislation passed by the House of Representatives, and 17 of them are needed to pass a Senate version. These Senators represent states with an abundance of coal and natural gas, but limited wind and solar resources. Senator Graham was able to craft a Senate bill with incentives for offshore drilling and nuclear energy, which puts many of the undecided votes in play. We believe the climate bill is dead without an advocate from Senator Graham’s geographic region and political party.
Even if Senator Graham comes back to the table, the bill is still likely to fail because the time left in 2010 is inadequate. In the three months before the August recess, the highest priorities are Jobs legislation, Wall Street reform, the FY2011 budget and a Supreme Court Justice confirmation. Though the odds of passing a climate bill have been slim all year, the Senate was still poised to take a shot because the prospects are likely to be even weaker after the midterm elections. Even if immigration reform is put back on the shelf, it will still be very difficult to get a climate bill to President Obama’s desk by this August. It will require fast action on Wall Street reform, an uncontroversial Supreme Court justice nominee, and House members willing to abandon many provisions in their version of the climate bill.
If the Senate bill were to become law, it would be a positive for cleantech, but less so than the Waxman-Markey bill passed by the House. Waxman-Markey includes an economy-wide cap and trade system, a federal Renewable Portfolio Standard (RPS), and various provisions to advance smart grid and transmission infrastructure. The Senate’s version of cap and trade only applies to utilities beginning in 2012, with the manufacturing sector integrated by 2016. The federal RPS and other clean energy incentives exist in a Senate Energy committee bill and it is still up for discussion whether to add them to the climate bill.
Failure to pass a climate bill in 2010 will have consequences for various government entities. In the U.S., the Administration will increase efforts to unilaterally regulate greenhouse gas emissions, give renewable energy project developers access to public lands, and spend the stimulus bill funding which remains largely untapped. Congress will have to access its options after the midterm elections; an “energy only” bill is one possibility, but it is not favored by the Administration. State governments may look to increase or create new RPSs, but the challenge there will be enforcing the targets with electricity price increases. On the international scene, a failure to pass a U.S. climate bill may also lead to a failure in Mexico this December when the UN attempts to negotiate a binding global climate change agreement, just as it did in Copenhagen last December.
Robert Lahey is the Senior Legislative Analyst at Ardour Capital Investments, LLC, and can be reached at [email protected]. Founded in 2002, Ardour Capital is the leading research and investment-banking firm exclusively focused on energy technology, alternative energy and power, and clean & renewable technologies. Ardour Capital publishes in-depth company coverage and industry specific research. Ardour Capital offers private and public companies a full range of corporate finance, investment banking and capital market services. Ardour Global Indexes is a family of pure play alternative energy indexes that is the primary measure of cleantech equity performance.