Edge of Climate Change
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|Marianne Lavelle and M.B. Pell||December 28th 2009|
Center for Public Integrity
The next round of the battle over climate change policy on Capitol Hill will involve more than the usual suspects. Way more. Watch soup makers face off against steel companies. Witness the folks who pump gas from the ground fight back against those who dig up rock. And watch the venture capitalists who have money riding on new technology try to gain advantage in a game that so far has been deftly controlled by the old machine.
In short, even though President Obama pledged to the world at Copenhagen that the United States is committed to action on global warming, the domestic politics are only growing "curiouser and curiouser," as Alice might say from Wonderland. An analysis of the latest federal records by The Center for Public Integrity shows that the overall number of businesses and groups lobbying on climate legislation has essentially held steady at about 1,160, thanks in part to a variety of interests that have left the fray. But a close look at the 140 or so interests that jumped into the debate for the first time in the third quarter shows a marked trend: Companies and organizations which feel they've been overlooked are fighting for a place at the table.
In other words, as the action moved to the Senate in recent months, still more sectors of the economy waded into the battle. This occurred even though the issue and interests are already so complex that Congress failed to pass legislation this year as hoped, and even though the House more than doubled its draft bill to 1,428 pages to address an array of industry concerns and gain passage back in June. The amount of money involved likely rose as well. Although amounts spent on lobbying by issue are not disclosed, if the groups involved spent just 10 per cent of their lobbying budgets on climate, they shelled out $30.5 million in the third quarter—up nearly 13 per cent over the previous quarter.
Of course, the framework for climate change legislation developed by a trio of Senators—Massachusetts Democrat John Kerry, South Carolina Republican Lindsey Graham, and Connecticut Independent Joe Lieberman—already makes clear that the climate debate will expand into new realms. Incentives for nuclear power construction and more offshore oil and gas production are key proposals they've floated for gaining Republican and moderate Democratic votes for a climate change package. But beyond what are sure to be high-profile battles over those issues, the lobbying records also reveal that a host of smaller battles are brewing—sure to greatly complicate the challenge of writing a successful bill. It's one of the reasons that—despite the pledge by President Obama and other world leaders of "strong political will" on climate—it likely will be months before the Senate finalizes a measure to curb fossil fuel emissions.
Campbell Soup and Kellogg
Take the concerns raised by the world's largest maker of soup, Camden, N.J.-based Campbell Soup Company, one of a slew of grocery producers (including Kellogg Company, Del Monte Foods, and the Alliance of Food Associations) registered to lobby on climate change for the first time in the July-September quarter. "It wasn't until we analyzed what was going on in the House that we thought, 'Oh, gosh, we are being affected by this,'" said Kelly Johnston, Campbell Soup's vice president for public affairs, in an interview. At issue are the free "allowances," or carbon dioxide pollution permits that the House-passed climate bill would give to manufacturers that use a lot of energy to produce internationally traded products, like steel and aluminum. Those energy-intensive industries fighting international competitors successfully lobbied for protection from loss of jobs to China and other cheap-energy countries if the United States unilaterally enacted a carbon reduction program that would make coal-burning more expensive here. But the House bill's approach means manufacturers that don't use as much energy—like Campbell—would have to bid at auction for carbon emissions allowances from the federal government. Johnston argues that Campbell should either be exempt from that process or provided some freebies, too. "I think it's clear from our view that we're not being treated as fairly as carbon-intensive industries," Johnston said. "There needs to be some recognition of the role the food industry plays in our economy."
The Natural Gas Lobby
Also sure to shake up the climate debate are companies that produce or sell natural gas—the fuel that produces that blue flame on the stovetop, heats half the homes in America, and can generate electricity with 40 per cent less carbon emissions than coal. "The gas companies really missed out on influencing [the House bill]," says lobbyist C. Kyle Simpson, who was an Energy Department official in the Clinton administration. Among his 14 climate change clients is the Gas Technology Institute, a research organization, and several natural gas-related firms that have recently begun to weigh in more heavily on climate change legislation, like DCP Midstream of Denver and Denbury Resources of Plano, Texas.
Because natural gas is the least carbon-intensive fossil fuel that can be burned to produce electricity, companies that produce it stand to gain significant share in the power generation business if Congress passes legislation that makes coal—its competitor—more expensive. In theory, climate legislation would do that, but lawmakers have been lobbied by the coal industry to endorse a ramp-up of the program slow enough to discourage such fuel switching.
The natural gas industry is diverse, so it had trouble organizing as a politically cohesive force to urge a quicker transition from coal power to protect the climate. Many natural gas players are first and foremost oil companies that produce natural gas "conventionally" as a by-product of oil—a sector that hasn't been at the forefront of calling for greenhouse gas regulation. But recent technological advances have allowed companies to produce huge amounts of natural gas all by itself, "unconventionally," by breaking up underground shale formations with horizontal drilling and high-pressure water fracturing. Just days before the House voted on the climate bill last June, a widely watched industry group announced a 35 per cent increase in U.S. gas reserves—the largest jump in its 44-year history of supply tracking. Abundance and relatively low prices already have some electric power producers switching from coal to natural gas. In one of the largest such moves, Raleigh, N.C.'s Progress Energy this month announced it would shut down 11 aging coal plants and replace them with natural gas generation.
That trend surely would continue under the climate change bill passed in the House, says Simpson, but natural gas companies might win an even larger share of the U.S. electricity market with an all-out push in the Senate. "If they would say there should be a price on carbon, the fundamental change could be extraordinary," Simpson says. He could see, for example, a scenario in which utilities were given a kind of "cash for coal clunkers" credit in the carbon market for making the switch to natural gas.
Venture Capitalists and Clean Tech
Up to now, the push for a slower phase-in and more modest carbon emissions reduction has been apparent in the Senate machinations on the bill. The original legislation authored by Kerry and California Democrat Barbara Boxer, and passed last month by the Environment and Public Works Committee she chairs, would have called for a 20 per cent reduction in carbon emissions by 2020, but that bill failed to garner a single Republican vote on the panel.
The Kerry-Graham-Lieberman framework ratchets the goal back down to a 17 per cent cut—the House bill's target—as "reasonable and achievable"—and it is also the figure that Obama touted at Copenhagen. But the latest figures from the U.S. Energy Information Administration show that the nation already has made significant progress toward that benchmark thanks to the economic slowdown and the switching from coal to natural gas. Energy-related carbon emissions, which account for the bulk of greenhouse gases by far, are expected to fall 6 per cent this year after a nearly 3 per cent drop in 2008. So among those who will be pushing the Senate to reach for more ambitious goals earlier: would-be investors in clean energy solutions, who have been waiting for a signal that there will be a market for new technologies.
"We'd like to see a price on carbon that escalates at a reasonable rate in the early years, not just the later years," says Will Coleman , a partner with Mohr Davidow Ventures of Menlo Park, Calif. A venture capital firm with $2 billion under management that invests in early-stage business development, the company registered to lobby on climate change for the first time in the third quarter, joining about a dozen investment and private equity firms weighing in on the issue on Capitol Hill. Investors want to see returns in five-to-10-year cycles, says Coleman. Therefore, clean tech investors—much like the natural gas industry—would like to see a climate bill that makes coal more expensive in a shorter time frame. That would allow alternatives like solar energy—currently expensive, but perhaps cheaper in the future if mass produced—to be more competitive earlier, and to deliver returns sooner to investors. But the House bill, for example, would have the effect of keeping the pollution-price added to coal relatively low for 15 years, because it would not begin phasing out many of the free carbon allowances that the government distributes until 2026.
Mohr Davidow is already investing in new technologies to reduce carbon emissions—like solar that uses a thinner, and therefore cheaper, layer of photovoltaic material, biomass fuel, and new ways to extract the lithium needed for advanced batteries. But Coleman says that there would be a much wider range of venture opportunities if investors were surer that companies could gain an early competitive foothold against coal. "My biggest concern is that if we are less aggressive in carbon targets and carbon pricing, we may incur more costs in the future, because we'll drive less investment into the space," Coleman says.
But he admits that it's been a rather subtle argument for Washington policymakers more accustomed to lobbyists for businesses who want clearer, nearer-term issues addressed. "They sort of say, 'What do you want?'" Coleman says. What the venture capitalists want isn't a hand-out or carve-out, as traditionally seen on Capitol Hill, but a regulatory environment that creates a more favorable playing field for new tech investments. "Our effort was to talk to as many people on the Hill and in [the Department of Energy] and White House as we could about the way the innovation economy could work," he says.
Of course, put the 60 or so venture and investment firm lobbyists together with the 170 alternative energy lobbyists and 160 environmental lobbyists, and they are still outnumbered 5-to-1 by the approximately 2,000 representatives of major sectors that are looking for a slow-down or hand-out—traditional manufacturers, power companies, oil and gas, transportation, and agriculture. And it likely will be weeks after the Copenhagen conference until climate legislation that begins to weigh all these interests takes shape in the Senate. Kerry said he expects movement on the bill in the late spring, after the Senate has dealt with two other massive undertakings—health care and financial regulatory reform. The total number of climate lobbyists working for all those interest groups, new and old, stands at about 2,780—five for every member of Congress. That's 400 per cent more than when lawmakers first considered a nationwide greenhouse gas emissions reduction program six years ago. If they all want a place at the Senate's table, there had better be plenty of chairs.
Marianne Lavelle and M.B. Pell write for the Center for Public Integrity, from where this article was adapted. Data editor David Donald and reporting fellow Dan Ettinger also contributed to this article. For more investigations, visit the Center for Public Integrity.