The “Energy-Only Bill” Mirage

Why an Energy Bill Could Fail Without Pollution Reduction Measures or Revenue

Daniel J. Weiss explains why “comprehensive” energy bills that don’t reduce pollution or raise revenue are set up to fail.

Solar City employees install a solar panel on a home in south Denver. (AP/Ed Andrieski)
Solar City employees install a solar panel on a home in south Denver. (AP/Ed Andrieski)

“Oh, just like the desert shows a thirsty man
Green oasis where there’s only sand
You lured me into something I should have dodged
The love I saw in you was just a mirage”
William Robinson, M Tarplin

The time for Senate action on clean energy legislation is rapidly leaking away, yet some senators continue to advocate passage of an “energy-only” bill that ignores comprehensive reductions in global warming pollution. And most of the proposed energy-only bills would not pay for the clean energy or nuclear power subsidies sought by many proponents of this narrow approach. CAP analysis determined that the clean energy incentives and loan guarantees in these bills would cost $70 billion (see chart). Sen. Mary Landrieu (D-LA) noted that, “In all of the climate bills, there are significant revenues generated, so that is a possibility. But if we did an energy-only bill, we’re going to be struggling about how to provide revenues.”

Sen. Richard Lugar (R-IN) supports an energy-only bill even though he voted for previous global warming bills in 2003 and 2005—at a time when the science was less conclusive than it is today. His alternative to a comprehensive attack on climate change pollution is his Practical Energy and Climate Act, S. 3464, which would reduce oil use via additional fuel economy standard improvements and building efficiency retrofit programs. According to the American Lung Association, the Lugar bill would also weaken existing protections from mercury and other air pollutants that come from power plants.

Sen. Lugar asserts that, “A carbon tax or cap and trade system is a non-starter in this Congress. Instead, we should pass an energy bill that will reduce our need for imported oil and save Americans money, even while it cuts greenhouse gas emissions…The savings I offer are real and the policies I propose are achievable this year.” Yet the savings Sen. Lugar claims are not real because they depend on reductions from home, building, and industrial efficiency programs that would cost $5 billion, but have no funding source.

Sen. Byron Dorgan (D-ND) is another proponent of the “energy-only” approach. He believes that there is not enough support for action on global warming in the Senate, so he is advocating for a vote this July on the American Clean Energy Leadership Act, S. 1462, which the Senate Energy and Natural Resources Committee passed in 2009. He says that it is a “bipartisan energy bill that does address production, efficiency, and a lower-carbon future.”

This bill includes $5 billion for assistance to the nuclear industry and $10 billion in funding for the Clean Energy Deployment Administration, or Green Bank. But these and its other programs are not funded. Sen, Dorgan admitted that, “We do have to find ways … to have a revenue source.”

The Congressional Budget Office determined that full funding for ACELA would add $13.5 billion to the federal deficit. And this underestimates the actual impact on federal spending since the CBO analysis assumes there will be royalties from drilling for oil in the Destin Dome area in the eastern Gulf of Mexico off of Florida’s coast. The BP oil disaster dramatically reduces the likelihood that drilling will be allowed there. The deficit increase would go up to $14.5 billion without the royalties from this drilling.

The same is true of other worthy proposals to create incentives or subsidies for electric vehicles, natural gas trucks, or energy efficiency measures. These bills do not include a way to pay for their programs, which means that they must rely on federal appropriations. Such spending would only add to the deficit unless there are spending cuts or revenue raisers to offset the expenditures. And given the likelihood that Congress will increasingly focus on deficit reduction, the least painful budget cuts to make are for programs that have not yet been funded. So these clean energy investments may receive little or no funding, thereby reducing or eliminating their oil savings, carbon pollution reductions, or other benefits.

This is a stark contrast to proposed global warming legislation, which would actually generate enough revenue to reduce the deficit, prevent major price increases on consumers, and still invest in clean energy technologies. These bills would generate billions of dollars in revenue from the auction of “pollution allowances” that the largest emitters must hold for every ton of greenhouse gas pollution emitted annually.

CBO determined that the Clean Energy Jobs and American Power Act, S. 1733, would reduce the federal budget deficit by $21 billion. The House-passed American Clean Energy and Security Act, H.R. 2454, would cut the deficit by $24 billion. There is not a similar score for the draft American Power Act, but it would likely reduce the deficit since Senate budget rules require some of its revenue to go toward deficit reduction.

These three bills would also refund a large portion of their revenue to consumers to offset possible energy or other price increases. Such refunds would keep total household cost increases to $1.50 to $3 per week, and that does not include savings from energy efficiency measures included in the bill. For instance, EPA predicts that the American Power Act would reduce consumers’ household energy bills (excluding gasoline) by 10 percent in 2020.

These global warming bills would generate ample funds to make significant investments in various clean energy technologies and programs even after reducing the deficit and refunding money to consumers. ACES could produce $65 billion for state and local energy efficiency programs between 2012 and 2020.

An energy and global warming bill that only limits carbon pollution from electric utilities, but not from transportation fuels or industrial emitters, would still generate billions of dollars to invest in the clean energy technologies of the future. The carbon pollution reduction program for utilities in the draft American Power Act, for example, could generate as much as $80 billion for clean energy investments from 2013 to 2020, according to CAP estimates. These revenues could boost wind and solar energy, efficiency, electric vehicles, natural gas trucks, and other programs favored by so many senators.

Politics is the art of the possible. Some senators believe that it is not possible to pass comprehensive clean energy and global warming legislation this year, and instead propose to pass an energy only bill to make at least some progress. Yet their efforts to achieve some energy savings and pollution reductions are little more than an illusion since they rely on programs that lack funding.

We could make at least some real progress if these senators were to support establishing reductions for carbon pollution from at least one of the biggest sources—such as power plants. Instead, their reluctance to address our growing energy and climate problems could doom real solutions to the dustbin of missed opportunities. And their offer of clean energy programs without any revenue is just a cruel mirage that will condemn the United States to growing dependence on foreign oil and costly global warming pollution.

Senate clean energy bill proposals

Programs by bill Estimated cost
American Clean Energy Leadership Act passed by the Senate Energy Committee (S. 1462)  
Nuclear energy research, demonstration projects, and commercial application $5.2 billion
Clean Energy Deployment Administration $10.0 billion
Interstate transmission lines siting n/a
Practical Energy and Climate Plan Act sponsored by Sen. Lugar (S. 3464)  
Increased nuclear loan guarantees $360 million
National building energy performance standards $1.5 billion
Energy retrofit program for homes and buildings $2.0 billion
Industrial energy efficiency $2.5 billion
Electric Vehicle Deployment Act sponspored by Sens. Dorgan, Alexander, and Merkley (S. 3442)  
National electric vehicle deployment program $10 million
Targeted electric vehicle deployment communities program $2.0 billion
Federal fleets $30 million
Advanced batteries for tomorrow prize $10 million
Research and development program $1.5 billion
Carbon Capture and Sequestration Deployment Act sponsored by Sens. Rockefeller and Voinovich (draft bill)  
Carbon capture and sequestration research and development $850 million
Loan guarantee program for CCS deployment in power plants $2.0 billion
Other clean energy bills  
Home Star Energy Retrofit Act (S. 3177) $6.0 billion
Building Star Energy Efficiency Act (S. 3079) $6.0 billion
Investments for Manufacturing Progress and Clean Technology Act (S. 1617) $30.0 billion
NAT GAS Act (S. 1408) n/a
Total $70.1 billion

Sources: Practical Energy and Climate Plan Act of 2010; American Clean Energy Leadership Act of 2009; Electric Vehicle Deployment Act of 2010; Carbon Capture and Sequestration Deployment Act of 2010.

Thanks to Richard Caperton and Susan Lyon.

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Daniel J. Weiss

Senior Fellow