Harry Reid Pronounces Cap & Trade Dead

Senate Majority Leader Harry Reid (D-Nev) announced today that he is abandoning efforts to include cap-and-trade as part of a energy bill. Reid nor the White House had persuaded 60 senators to support even a limited proposal seeking to restrict emissions from electric-power companies. Reid will push instead for more limited legislation, aimed at holding oil giant BP PLC accountable for the Gulf of Mexico oil spill. Specifically, he said the measure would include a provision to remove the cap on economic damages paid to residents and small businesses by oil companies after oil spills. Mr. Reid said the bill would also include incentives to encourage the production and purchase of vehicles fueled by natural gas, and to fund various land and water-conservation programs.

The Center supports Cap & Trade.

Republicans have objected to proposals to eliminate the cap on oil companies' liability for damages related to spills—currently set at $75 million—on the grounds that it would make offshore drilling unaffordable for all but the largest oil companies and foreign-owned nationalized oil giants. Some business groups are also rallying to defeat the provisions related to natural gas.

Some trade groups and corporations representing farmers and manufacturers—including Dow Chemical Company the National Corn Growers Association and Kimberly-Clark Corporation—released a letter calling on the Senate not to include any provisions in energy legislation that would "artificially" increase demand for natural gas in the power and transportation sectors—an apparent reference to Mr. Reid's support for tax breaks for purchasers of natural-gas vehicles and incentives to build natural-gas fueling stations.

Those provisions have been promoted by some natural-gas producers, who have pointed to the growing domestic discoveries of natural gas as evidence that natural gas can provide the U.S. economy with a "bridge fuel" from oil to lower carbon sources of energy. The corporations and farm groups said they worry such incentives—along with potential new state and federal regulations on shale drilling—could result in a supply crunch, causing higher electricity prices and the shift of more domestic manufacturing jobs to foreign countries. (WSJ, 7/22/2010)