Murkowski on Allowances in Cap and Trade Legislation

WASHINGTON, D.C. – U.S. Sen. Lisa Murkowski, R-Alaska, today gave the following opening statement at a Senate Energy and Natural Resources Committee hearing on the costs and benefits for energy consumers and energy prices associated with the allocation of greenhouse gas emission allowances:

"Good morning. I’d like to welcome our witnesses to the third in an ongoing series of hearings about some very complex issues related to climate policy.

"Our Committee’s conversation has been constructive so far, and I want to credit Chairman Bingaman for his willingness to make sure we fully evaluate our options without pre-judging the outcome. My top priority is to ensure that our focus stays broad, because while it’s important to address climate change in a timely manner, I believe it’s more important to find the right policy.

"The legislation we’ve been focused on – the House energy and climate bill – is not a product of that type of debate. On the other side of the Capitol, there was only one piece of legislation considered. And Members and stakeholders seemed to be more concerned about who would receive free permits under that bill than the program’s overall direction and design.

"While this approach did lead to the bill’s passage, it has now created a situation in which our nation’s energy producers are “battling one another over policy decisions worth hundreds of billions of dollars in coming decades.” That isn’t my observation – it’s a direct quote from last Sunday’s New York Times.

"Some may view division within the energy industry as useful, but I think it should actually be seen as a warning sign. By picking winners and losers within its cap-and-trade system, the House did not develop a better bill; it merely advantaged some energy resources while disadvantaging others.

"This has become particularly clear over the past several months, as a wide range of groups have formed with hopes of receiving favorable, or at least fair treatment in a Senate bill. Permit allocations – rather than the merits of any given technology – are viewed as the key to keeping entire industries and companies competitive. Of course, this has done little to improve the counterproductive and polarized nature of the climate debate.

"The House managed to complete its bill by giving permits away to more than 20 categories of recipients – an exercise akin to doling out pieces of a pie. But as climate legislation is developed in the Senate, we’re faced with a harsh reality: there aren’t enough pieces left to satisfy the groups vying for them to repeat this process a second time. And we should remember that each additional permit we give away will take us further from the full auction endorsed by the president, who will have final say on any legislation that reaches his desk.

"So, this morning I hope we can discuss not only who wants free permits, and how they might be distributed, but whether or not those permits should be given away for free in the first place. I’m committed to finding out which of our options is most economically efficient and environmentally effective – not the most politically expedient. I intend to approach this entire debate from that perspective, but it is particularly important for the issue before us today.

"Our climate policy, no matter what form it takes, is meant to be an environmental program – not an appropriations bill. By imposing cap-and-trade, we would create a new form of currency – make no mistake about that – and any permits given away will hold massive financial value.

"In this context, free permits are essentially decades-long earmarks, and immediate decisions about who should receive them will have lasting consequences. Accordingly, we should view attempts to secure free permits with a healthy dose of skepticism and, frankly, concern.

"We should also ask ourselves if certain permit distribution schemes expose us to a proliferation of middlemen, and we must determine if there is a more transparent, efficient way to ease the impacts of cap-and-trade. The reality that free permits will phase out over time should allow us to have this conversation now, instead of postponing it to some future date.

"In the end, I suspect our witnesses will tell us that no matter how we approach permit allocation, American consumers will ultimately bear the burden of compliance costs. And those costs are significant – testimony received last week from a number of federal agencies put the cost per household as high as $1,870 per year in 2030.

"It’s time for us to acknowledge these costs, as well, instead of trying to hide them. We need to admit that the impacts of climate policies are as real as the consequences of climate change itself. Only then can we have an honest debate over the best ways to move forward on this issue.

"I want to thank the witnesses for appearing before the Committee, and thank you Chairman Bingaman – again – for making sure we have an opportunity to fully discuss these important issues."

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