Lieberman-Warner Climate Change Bill: Just a Warm-up

Wonks are in a tizzy today in preparation for the debate of the Lierberman-Warner bill, which will bring climate change and carbon cap-and-trade to the Senate floor. But while the debate will highlight the obstacles to climate legislation, it’s unlikely that this bill will get out of the Senate and even less likely that it will be passed by the House — in fact it’s almost guaranteed to get a veto from the White House. But America’s Climate Security Act of 2007, as bill S.2191 is officially known, will be a landmark in America’s carbon constrained future.

It’s not clear if any of the three major presidential candidates will take time out of their busy schedules to cast votes, even though it’s widely expected that it will be under the next administration that climate change legislation like this gets passed. Regardless, don’t expect anyone to vote along traditional party lines. Dems and Reps will likely be making alliances across the aisle as senators jockey for carbon allowances under the bill’s proposed cap-and-trade system. Indeed, the blue vs. red battle lines are being redrawn as the green debate takes shape.

The bill’s overarching emissions reduction targets include an 18 percent cut below 2005 levels by 2020 and a 70 percent cut by 2050. To achieve these cuts, the bill proposes using a cap-and-trade system, under which carbon emitters would be issued federal emission credits, allowing them to pollute, while those who reduce their emissions can sell their leftover credits on the open market.

It will likely be the specifics of this proposed carbon cap-and-trade system that will raise the greatest debate. This bill lays out in great detail the functioning of that trade system, how credits would be issued, and what activities would qualify for offsets. However, debating all the particulars, especially the meticulous specifics of auctioned vs. free emissions permits, will boil down to regional interests as senators try to get their constituents the biggest slice of the pie.

The White House has already voiced its opposition to the legislation, warning that it could hurt GDP to the tune of 7 percent by 2050. This makes the moves of the presidential contenders, all of whom support a cap-and-trade approach, all the more important. The Washington Post reports that while he may not be voting, McCain has made his opposition to the bill clear over it’s lack of support for nuclear power, his “alternative” power of choice. Meanwhile, Barack Obama and Hilary Clinton both support the bill but may not leave the campaign trail to cast their votes.

We’ll keep an eye on this dress rehearsal this week, but don’t expect any big movement. Cleantech startups, entrepreneurs and VCs should be paying attention to the language used in debating this legislation, but there are far more near-term policy battles to be had — like the renewable energy tax credits — that will affect their business plans much sooner.