January 25, 2020

Climate Issues; Budget; Jobs Bill-Biofuels; and WASDE Update

Climate Issues

Alexander Bolton reported yesterday at The Hill Online that, “Record snowfall has buried Washington — and along with it, buried the chances of passing global warming legislation this year.

“Cars are stranded in banks of snow along the streets of the federal capital, and in the corridors of Congress, climate legislation also has been put on ice.

“Democratic senators say a bill that was once a top priority for the party and for President Barack Obama cannot be dug up again during 2010.”

Mr. Bolton noted that, “Voters are mostly concerned with jobs and the economy. Global warming is at the bottom of their list. And now, on top of that, the paralyzing snowfalls have made the prospect of winning support for a climate bill this year even less likely.”

Yesterday’s article indicated that, “‘I don’t think that the climate change with cap-and-trade is going to pass this year,’ said Sen. Kent Conrad (D-N.D.), who as Budget chairman is putting together Congress’s annual estimate of how much revenue the government will collect next year and in future years.”

The Hill article added that, “‘I think that there’s a general understanding that maybe cap-and-trade is dead,’ said Sen. Mary Landrieu (D-La.), a member of the Energy and Natural Resources panel, after Senate Democrats held a retreat last week.

“Sen. Barbara Boxer (D-Calif.), chairwoman of the Environment and Public Works Committee, which approved a cap-and-trade proposal last year, acknowledged that there are not yet 60 votes for an energy reform and cap-and-trade proposal.”

The Washington Post editorial board noted today that, “Climate change legislation, according to conventional wisdom, is all but dead for the year. It fell victim to Senate gridlock, yawning gaps between lawmakers over how and even whether to tackle the issue and President Obama’s decision last year to place it third on his list of priorities, after the stimulus and health care. The president himself seemed to admit at least temporary defeat last week; at a town hall meeting in New Hampshire, Mr. Obama cited speculations that the Senate might pass only a modest energy bill. Such a bill inevitably would contain expensive subsidies and research programs, but it would not place a price on carbon.”

The Post opinion item stated that, “A version of such a scaled-down energy bill passed the Senate Energy Committee last year, and it contains some worthwhile provisions, such as updating building codes and the electricity grid. It is also incomplete, lacking both much in the way of revenue to pay for its programs and any economy-wide emissions limit. The House-passed Waxman-Markey climate bill, by contrast, contains a cap-and-trade provision aiming to provide for both, but that bill is marred by giving away far too many valuable pollution permits to politically favored groups, a scheme of which many senators are rightly skeptical.

Is there no alternative between simple do-nothingism and House complexity? In fact, there is. An alternative proposal increasingly capturing interest on Capitol Hill is the CLEAR Act, sponsored by Sens. Maria Cantwell (D-Wash.) and Susan Collins (R-Maine). The bill would cap the amount of carbon the United States produces and sell pollution permits to those who produce or import dirty fuels. Suppliers would pass these costs to customers, which would discourage carbon-guzzling. It would also raise costs, of course, but the government would rebate 75 percent of the revenue from the permit auctions back to the populace.

Ms. Cantwell and Ms. Collins estimate that 80 percent of Americans would break even or come out ahead, even as consumption patterns shifted toward greener goods and greater energy efficiency. Congress would use the rest of the money to pay for some of the things in that energy bill, things that merely raising the price of carbon might not accomplish — investing in transmission infrastructure, for example, or basic research and development. There is a risk that lawmakers will waste some of this cash, but it’s a defensible one.”

Jim Snyder reported yesterday at The Hill Online that, “Clean-energy advocates talked more about tax breaks and a mandate for renewable electricity production than a controversial cap-and-trade bill when laying out their 2010 wish list on Tuesday.

“During a presentation from five leaders of clean-energy trade groups on their legislative goals, climate change legislation was mentioned only briefly.

Instead, the executives from the five trade groups focused on the thousands of new jobs their industries would create with the right incentives from Washington.”

Meanwhile, Senate Agriculture Committee Chairman Blanche Lincoln (D-Ark.) discussed jobs and energy legislation briefly in an interview with Scott Inman of KATV (Arkansas) that was posted yesterday at Sen. Lincoln’s campaign webpage. To listen to an audio excerpt from this interview, just click here (MP3-1:04).

Also on the climate/energy issue, Harvard University Professor Robert Stavins indicated in a blog update on Monday that, “Even more likely is that the Congress would develop a so-called energy-only bill, which would – to a large degree – consist of killing the one part of Waxman-Markey worth saving (the comprehensive CO2 cap-and-trade system), and moving forward with the worst parts of that legislation – the smorgasbord of regulatory initiatives. As I’ve written previously, those additional elements of the legislation are highly problematic. When implemented under the cap-and-trade umbrella, many of those conventional standards and subsidies would have no net greenhouse-gas-reducing benefits, would limit flexibility, and would thereby have the unintended consequence of driving up compliance costs. That’s the soft under‑belly of the House legislation.

Without the cap-and-trade umbrella, that same set of standards and subsidies will accomplish very little, and do so at exceedingly high cost. Take just one example that seems to be popular among politicians – ‘renewable portfolio standards’ (RPS), requirements that all states or all electricity utilities derive some fixed share of their power, say 20%, from renewable sources. Note, for example, that such an approach does not distinguish between coal and natural gas, despite the dramatically different impacts these fuels have on CO2 emissions (and a host of other environmental outcomes). Furthermore, although an RPS may displace some new coal-fired generation with other types of generation, there is little, if any, effect on the operation of existing coal-fired power plants.

If those other, regulatory parts of the climate legislation are so ineffective and so costly, why are they so popular with politicians? The reason is simple. The costs are hidden. The government simply mandates that electric utilities or manufacturers take particular actions, employing the best technology available. Where’s the cost? Unlike a cap-and-trade system, there’s no analysis and debate about the cost of allowances (and the marginal abatement costs they represent); and unlike a carbon tax, there’s no analysis and no focus on the dollar amount of the tax and the aggregate cost. That is the unfortunate but fundamental political economy behind much of U.S. environmental policy since the first Earth Day in 1970.”

In other climate related developments, Washington Post writers Juliet Eilperin and Steve Mufson noted yesterday at the Post Carbon Blog that, “U.S. special climate envoy Todd Stern gave a surprisingly blunt talk at the Center for American Progress Tuesday about the state of international climate negotiations.”

And with respect to the Copenhagen talks last year, Trevor Houser noted last week in an update posted at a Peterson Institute Blog that, “Now that the dust has settled from the climate change conference in Copenhagen last December, it’s a good time to step back and take stock. Policymakers and the public had high expectations for the summit and its conclusion left many confused and disappointed. But while the meeting did not reach consensus among all 192 countries required to formally adopt a climate pact, it produced a political agreement called the ‘Copenhagen Accord,’ which left it to individual countries to choose whether or not they wanted to sign up.

The results are in and offer hope that the bottom-up approach the accord adopts can move the world in the right direction.”

And, Jeffrey Ball and Keith Johnson reported in today’s Wall Street Journal that, “Some top officials of a Nobel Prize-winning climate-science organization are acknowledging the panel made some mistakes amid a string of recent revelations questioning the accuracy of some of the information in its influential reports.”


The AP reported today that, “If history and the political lineup are any guides, President Barack Obama’s latest effort to cut subsidies for wealthy farmers likely will fare no better than his first try – or his predecessor’s attempt.

“Congress twice overrode President George W. Bush’s veto of the 2008 Farm Bill. When Obama tried reforming the system last year, his proposal was dead on arrival on Capitol Hill, where farm state lawmakers largely control the agriculture committees.”

The AP article added that, “House Agriculture Committee Chairman Collin Peterson, D-Minn., said he’d oppose significant changes to the current Farm Bill. To Peterson, most criticism of subsidies is based more on ideology – whether it be small-farms-are-better or free trade – than sound policy considerations.

“‘We’re not smart enough to decide how big a farm should be, even on the ag committee,’ Peterson said. ‘And that’s really not our job. Our job is to make sure we have an affordable, abundant food supply in this country.’”

“Peterson said he plans to hold hearings on the 2012 Farm Bill starting as early as next month, but he downplayed the likelihood of radical changes to subsidy policy,” the article said.

An update posted yesterday at the AgMag Blog (The Environmental Working Group (EWG)) stated that, “The debilitating cuts to US Department of Agriculture conservation programs proposed in President Obama’s budget will do permanent damage to America’s conservation efforts. These programs are critical to conserving and protecting our soil, water and air. Unless backers of these vital initiatives emerge in Congress and fight these cuts, 4 million acres that should and could be enrolled in conservation programs will fall through the cracks — permanently.” (Note: “EWG arrived at the 4 million acre figure by factoring in the President’s proposal to permanently cut the number of acres to be enrolled in three conservation programs by more than 1 million acres along with cuts mandated for other key conservation programs.”)

In other budget perspectives regarding agriculture, an update posted yesterday at Brownfield included an audio interview with Nebraska GOP Sen. Mike Johanns who explained the interaction of the budget proposals with the Farm Bill. In part, Sen. Johanns noted that lawmakers would have little appetite for reopening the comprehensive multi-year Farm Bill to focus on some of the budgetary aspects of the Presidents proposals.

Jobs Bill-Biofuels

An update posted yesterday at reported that, “Senate Majority Leader Harry Reid, D-Nev., said Tuesday he intends to push for a vote by this weekend on job creation legislation, though another winter storm bearing down on Washington made the Senate schedule increasingly tenuous.”

“Senate Minority Leader Mitch McConnell, R-Ky., told reporters after the White House meeting that there is ‘a chance’ that his party could get behind the tax-related provisions, but he called it ‘kind of a work in progress’ and said most Republicans hadn’t seen it yet.”

Lisa Lerer reported yesterday at Politico that, “Several key Democrats say there is no deal on an $80 billion jobs bill — even as Majority Leader Harry Reid has been pushing for quick action in the Senate ahead of a snowstorm that has largely shut down Capitol Hill.

“‘There’s no agreement on what it all is yet,’ said Senate Finance Committee Chairman Max Baucus (D-Mont.), who’s playing a key role in the negotiations. ‘We’re working as well as we can but again a lot of senators are gone and they’re just not going to make it this week.’”

Ben Geman reported yesterday at The Hill’s Energy and Environment Blog that, “Draft Senate jobs legislation would provide a one-year extension of lapsed tax credits that are vital to the battered biodiesel industry.

“The draft bill follows House tax legislation approved last year by extending the $1-per-gallon credit until the end of 2010. The Senate will vote on the jobs package as soon as this week.

“The industry has been pressing hard for extension of the credits.”

However, Philip Brasher reported yesterday at the Green Fields Blog (The Des Moines Register) that, “The snowstorms that are paralyzing Washington have made it unlikely that Congress will act quickly to revive the tax credit that subsidizes the biodiesel industry, says Sen. Charles Grassley. He is working to have an extension of the credit included in a jobs bill that Democrats want to get through the Senate. But the federal government is closed for a second day in a row today and a new storm is expected to dump another foot or so of snow tonight through Wednesday. And since next week is an off week for lawmakers because of the President’s Day recess that means the Senate likely couldn’t get to the jobs bill before the last week of the month. Grassley says the jobs bill is the ‘only avenue’ for getting the credit extended, because the measure is under the jurisdiction of the Senate Finance Committee, of which he is the top Republican.”

Also with respect to the jobs bill, Shailagh Murray and Paul Kane reported in today’s Washington Post that, “The proposed package is expected to cost about $85 billion and would include a payroll tax break for companies that hire new employees, extensions of a variety of expiring tax breaks, and help for small businesses seeking loans. The measure also would extend unemployment insurance and COBRA health benefits by three months and provide a temporary adjustment in Medicare payment rates to physicians to prevent a scheduled cut.

“The bill being crafted would reauthorize the Highway Trust Fund for one year, provide money for Build America Bonds and extend the USA Patriot Act, which is scheduled to expire at the end of February. The package also is expected to include $1.5 billion in agriculture assistance sought by Sen. Blanche Lincoln (Ark.), one of the most endangered Democrats facing reelection in November.”

WASDE Update

The World Agricultural Outlook Board released its monthly World Agricultural Supply and Demand Estimates (WASDE) report yesterday.

With respect to corn and ethanol, yesterday’s report stated that, “Corn used for ethanol is projected 100 million bushels higher reflecting the latest ethanol production data from the Energy Information Agency. November’s record ethanol production was up 3 percent from the previous record in October as higher prices for ethanol and distillers grains boosted ethanol producer returns. November-December corn use for ethanol was up 16 percent from the same period in 2008/09. Although returns have declined since November, recently lower corn prices continue to support profitability for ethanol producers.”

“The projected marketing-year average farm price for corn is narrowed 5 cents on both ends of the range to $3.45 to $3.95 per bushel,” the report said.

A complete summary of corn related data from yesterday’s report can be viewed here.

Bloomberg writer Jeff Wilson reported yesterday that, “Ethanol processors will use 4.3 billion bushels of corn, more than last month’s estimate of 4.2 billion and last year’s total of 3.677 billion, the USDA said. Total domestic use by makers of fuel, feed and food products will increase 9 percent to 11.115 billion bushels from a year earlier, the agency said.

“The U.S. is the world’s largest producer and exporter of corn.”

A news release issued yesterday by the National Corn Growers Association noted that, “‘This report reinforces the importance of ethanol to corn growers across the country,’ said NCGA President Darrin Ihnen, a grower from Hurley, S.D. ‘NCGA consistently advocates for government policies that reflect the important role that ethanol plays for growers and the public as a cost effective, environmentally friendly domestic fuel option.’”

With respect to soybeans, yesterday’s WASDE report stated that, “The U.S. season-average soybean price range for 2008/09 is projected at $8.70 to $10.20 per bushel, down 20 cents on both ends of the range;” and for wheat, the report noted that, “The projected marketing-year average farm price is narrowed 5 cents on both ends of the range to $4.75 to $4.95 per bushel.”

A news item released yesterday by the University of Missouri-FAPRI stated that, “The latest USDA crop report appears friendly to corn and soybean producers, said Melvin Brees, crop economist with the Food and Agricultural Policy Research Institute (FAPRI).

“Strong use will lower the projected ending stocks for both corn and soybeans. Lower supplies can be positive for higher futures prices, said the University of Missouri Extension economist.”

To read the complete analysis on yesterday’s report by Mr. Brees, just click here.

Keith Good

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