The Jan. 19 election of Massachusetts Republican Scott Brown to the U.S. Senate effectively kills the so-called cap-and-trade provision of proposed environmental legislation bitterly opposed by many in the industry, a former transportation secretary and vocal opponent of the bill said today.
James H. Burnley IV, who served as DOT secretary under President Reagan from 1987 to 1989 and is now senior partner at the Washington law firm of Venable LLP, told DC Velocity in an e-mail today that "cap-and-trade was almost certainly dead" before the results came in from Massachusetts. "Now we can remove the 'almost.'"
Brown's historic election to the seat left empty by the death last year of Democratic Sen. Edward M. Kennedy gives the GOP 41 Senate seats, thus ending the Democrats' "filibuster-proof" 60-40 majority in the Senate and making it very difficult for Democrats to move bills through the chamber without Republicans invoking that parliamentary maneuver to delay the bills' progress.
The environmental legislation that included cap-and-trade language passed the House last year. However, no companion bill was offered in the Senate, and support there was seen as tepid at best. It is believed that many congressional Republicans opposed cap and trade, viewing it as an onerous tax on businesses and consumers.
As proposed in the House bill, the complex cap-and-trade system would set emission limits for each industry and require industries to amass credits or to buy allowances equal to their emissions levels.
Transportation interests worry the industry would be disproportionately affected by the cap-and-trade provision. For instance, the House language calls for 85 percent of all emissions credits to be given away for free initially. However, from 2014 to 2016, the so-called "refiners" category—under which transportation is lumped—will only receive 2 percent of the credits given out during that time, even though by most estimates, the supply chain is responsible for 30 percent of all CO2 emissions in the United States.
As a result, the transportation sector would have to buy credits equal to the 28 percent differential between the free credits it receives and the amount of carbon it emits. This would cost the industry billions of dollars, lead to a spike in oil prices that would be passed through to shippers, and contribute to a severe shipping and economic slowdown, critics warn.
At the just-concluded SMC³ winter meeting in Atlanta, transport executives predicted gasoline and diesel fuel prices could rise between 80 cents and $1.25 a gallon just from the cap-and-trade provision alone.
However, prior to Brown's election, executives at the SMC³ meeting were forecasting that cap and trade would be off the table for at least the rest of 2010, subsumed by the contentious and far-reaching legislative debate over health care reform.
"Health care has sucked all the energy out of the room," said Bruce Carlton, president and CEO of the National Industrial Transportation League, the nation's leading shipper group.