Washington Insider -- Friday

Carbon and the New Green Deal

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Ross: Trump won't lift tariffs on Mexican & Canadian metals

Commerce Secretary Wilbur Ross Wednesday said that the Trump administration will not lift the steel and aluminum tariffs against Mexico and Canada without some kind of limits on those shipments.

“The president is not going to take tariffs off unless there are other things that protect national security,” Ross said in an interview on Fox Business. “There are other ways to solve that problem and there have been serious discussions with both Mexico and Canada about alternative routes.”

Mexico and Canada continue to resist the Trump administration’s offer to replace the tariffs with quotas.

Several lawmakers, including Sen. Chuck Grassley, R-Iowa, have warned that the U.S.-Mexico-Canada Agreement (USMCA) has little chance of being approved unless those tariffs are removed.

EPA Signals No Timeline for Decisions On RFS Exemption Requests

The decision timeline for EPA relative to small refiner exemptions from their Renewable Fuel Standard (RFS) obligations remains uncertain, though Reuters reported that the decisions could come in late May.

The Department of Energy (DOE) has provided their scoring of the exemption requests to EPA relative to the 40 requests that have been received for the 2018 compliance year. EPA has yet to act on any of those requests. Politico reported Wednesday that the DOE information was delivered to EPA last week.

"No decisions regarding 2018 SREs [small refiner exemptions] have been made," Michael Abboud, a spokesman for the EPA said. "Many aspects of the decisions for exempting individual refineries are based on confidential business information."

As for EPA Administrator Andy Wheeler telling Reuters in an interview that he thought with Renewable Identification Number (RIN) prices lower, that should ease the financial strain on refineries and that could mean fewer exemptions would be granted by EPA.

However, Reuters quoted a source as saying that the DOE process for scoring the requests put little weight on RIN prices.

Washington Insider: Carbon and the Green New Deal

In something of a surprise, the Green New Deal — widely regarded as a left-leaning idea being advocated among Democrats, “could play a future Republican policy role under some circumstances,” Bloomberg is reporting this week. The idea is that the plan “doesn’t have a carbon tax at its core” which could be a blessing in disguise, according to a leading advocate for a Republican-led carbon pricing proposal.

Keeping a carbon tax off the plate in the Green New Deal “was a brilliant political decision because it leaves that wide open for Republicans,” Robert Litterman, a founding partner and chairman of the Risk Committee at Kepos Capital, said this week.

“If the Democrats were saying, ‘We need a carbon tax,’ it would be radioactive for the Republicans,” Litterman added. He has considerable political credibility since he was formerly head of risk management at Goldman Sachs and now serves on the board of the Climate Leadership Council which advocates for a carbon fee and dividend plan developed by former GOP Secretaries of State James Baker and George Schultz.

Litterman’s remarks come as some Republican lawmakers have recently shifted their rhetoric on climate change, Bloomberg says. They’ve said they are open to working on bipartisan solutions, citing opportunities to increase federal support for technologies like nuclear energy and carbon capture and storage.

“We are very close to getting Republicans,” Litterman emphasized. “They know the future is to have good policy on climate. They understand that.”

But Republicans have slammed the Green New Deal on the grounds that the sweeping climate policy framework championed by progressive Democrats is “a government takeover.” And few Republicans have been willing to publicly back Litterman’s group’s proposed carbon price.

The GND as now discussed calls for a significant economic transformation to achieve net-zero greenhouse gas emissions by 2030. It also incorporates a number of other progressive goals around the workforce, healthcare, and social justice. But a price on carbon and the GND aren’t “necessarily mutually exclusive,” Evan Weber, political director for the Sunrise Movement, told a recent conference. The GND is a set of solutions, not just one policy, he added.

The Sunrise Movement, a youth-led climate group, has galvanized political momentum behind the GND and its supporters are touring the country to build support for it.

“But we’ve been talking about a price on carbon, particularly in this town, for about three decades,” Weber added. “All that talk hasn’t really moved the needle much.”

Republican lawmakers have so far avoided signing on to the Climate Leadership Council’s plan in significant numbers. For example, just two Republican lawmakers — Rep. Brian Fitzpatrick, R-Pa., and Rep. Francis Rooney, R-Fla. — have partnered with Democrats on carbon pricing legislation. Fitzpatrick has not yet done so in the current Congress.

The Climate Leadership Council’s plan would set a carbon fee of $40 per ton of carbon dioxide, increasing over time, with the proceeds going back to the public as dividends.

It would also include a border adjustment fee for imports from other countries without climate rules and would eliminate many of the Obama administration’s climate regulations, including first-time carbon pollution standards for existing power plants.

The latter point has drawn criticism from some environmental groups, who say regulation is a critical piece of climate policy alongside carbon pricing. Others—such as the World Wildlife Fund, the Nature Conservancy, and the World Resources Institute—have backed the plan.

Litterman defended the plan’s elimination of regulation arguing many of the Obama-era climate rules don’t create the right incentives to cut pollution.

Renewable energy mandates, for example, are “a very expensive way to drive the economy toward lower emissions,” Litterman said. “The direct way is to create the right incentives on the emissions that we’re trying to reduce.”

Several energy companies — including ExxonMobil Corp., Royal Dutch Shell Plc, and BP Plc — as well as major corporations such as Microsoft, General Motors Co., and Unilever back the carbon fee and dividend plan.

But Weber noted the GND has the backing of nearly every major candidate vying for the Democrats’ 2020 nomination. “The choice in 2020 will likely be between the GND and whatever Trump has been doing for the last two years,” Weber said. “That’s what’s going to be on the ballot as far as climate policy is concerned.”

Climate policies do seem to be gaining support across the U.S. in response to widely publicized indicators like melting ice in the Arctic, and others. However, massive economy-wide interventions seem to make many voters nervous and it will be important to note how attractive the “New Deal” approach proves to be as the 2020 campaign unfolds. This is a debate producers should watch closely as it intensifies, Washington Insider believes.

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