Getting the “Brown Dogs” to Yes

Last week 10 moderate Democratic Senators sent President Obama a letter outlining provisions they need to see in climate legislation to address the concerns of states that are heavily dependent on energy-intensive manufacturing and coal-fired electric power.

Some news outlets read the letter darkly.  "Climate Bill Is Threatened by Senators," said the New York Times headline.  But on a close reading, I think the letter is rather constructive.  

The letter - written by Sens. Sherrod Brown (OH), Debbie Stabenow (MI), Carl Levin (MI), Russ Feingold (WI), Evan Bayh (IN), Bob Casey (PA), Arlen Specter (PA), Robert Byrd (WV), Jay Rockefeller (WV) and Al Franken (MN) - outlines the provisions that they insist must go along with an emissions cap that covers energy-intensive, trade-exposed manufacturers. 

In short, the letter signals what these "Brown Dogs" - as an early version of the New York Times story dubbed them - need to get to "yes" on the climate bill.

The Senators are concerned about the potential to shift production, jobs, and emissions to other countries that do not have appropriate carbon-curbing policies.  They laid out three elements to guard against this problem: 

  • Energy intensive and trade exposed industries making commodities such as steel, cement, and aluminum should get free allowances for a transitional period to address compliance costs they can't pass on because their some of their customers would buy from foreign manufacturers that don't have carbon limits; 
  • Some allowances should be available to help manufacturers fund energy efficiency and clean technology investments to make them cleaner and more competitive; and  
  • In the longer term there should be "border adjustments" - a requirement for importers of these products to buy carbon allowances at the border - if the country where they were made hasn't adopted appropriate carbon limits by the time the transitional free allowances phase out. 

There's already broad agreement on the first two.  The friction is only over the border adjustments.  And even on that there are smaller differences than meet the eye.  

The House-passed American Clean Energy and Security Act (ACES) already contains generous free allocations for these industries.  Firms that qualify will receive 100 percent of the average allowance needs in their sector, without even having to show what fraction of their costs they cannot pass on.  And while these free allowances decline with the overall cap, they do not completely phase out until as late as 2035.  

The House bill also includes Senator Brown's "IMPACT" proposal for loans and grants for energy efficiency and clean tech investments by small and medium sized manufacturers. 

Finally, the House bill creates a border requirement for importers of covered products to buy allowances, coming into effect in 2020 if other countries have not yet taken steps to curb carbon and eliminate the cost differentials that can lead to shifting jobs and emissions abroad.  

President Obama saluted passage of the House bill at the end of June, but he added a note of concern about the border measure.  "I think we have to be very careful about sending any protectionist signals out there," Obama said.  "I think there may be other ways of doing it than with a tariff approach." 

The 10 Senators' letter is a direct response to the President's comments.  But it is not an unbridgeable divide.  The letter does not commit them to immediate, provocative action.  It calls for "a longer-term border adjustment mechanism" coming into play "if other major carbon emitting countries fail to commit to an international agreement requiring commensurate action on climate change."  In short, the Senators recognize the need for time to negotiate the needed international agreements. 

The New York Times cites a State Department response that doesn't specifically mention the border adjustments, but operates in much same space - the Administration's goal is to get to appropriate international agreements, possibly not in their full glory by the Copenhagen climate summit, but in a step-by-step process that starts there and is completed over the next few years.  And there's time to do that in the window of time the House bill creates before any border adjustment takes hold. 

The Brown Dogs may want to make changes in the House provisions. We'll have to see what specifics they propose. But as yet they haven't drawn lines in the sand that will prevent them from supporting climate legislation, or that will put that legislation irreconcilably at odds with our international goals.

So rather than a signal that these 10 Senators are "no" votes, I see this letter as a hopeful sign of how they get to "yes."