GE, Lehman Backing for Emissions Curbs Puts Heat on Congress

By Kim Chipman and Tina Seeley

Feb. 26 (Bloomberg) -- Senator James Inhofe, who calls the consensus that humans cause global warming a corruption of science, shot off a warning letter to more than 60 chief executive officers in December. The Oklahoma Republican told the leaders not to support bills this year to cap carbon dioxide emissions, saying Wall Street might penalize shares of their companies.

The admonition was Inhofe's latest salvo to derail the growing movement of companies, scientists and lawmakers pushing for mandatory limits on the release of greenhouse gases.

In January, a new alliance of corporations including General Electric Co. called for caps in the U.S., which emits a quarter of the world's carbon pollution. Two weeks later, a United Nations panel released its finding that humans are the main cause of global warming. Both moves emboldened Democrats, who've introduced five bills to reduce greenhouse emissions.

Inhofe isn't conceding defeat yet. The 2008 presidential election makes it less likely the U.S. will enact carbon caps anytime soon, says Christine Todd Whitman, a former Republican governor of New Jersey and head of the Environmental Protection Agency.

``It's going to be hard,'' says Whitman, who's now a consultant on environmental issues. ``Watch out for the very fulsome discussion that always ends with a poison pill. One side will insert something into the final bill that they know the others can't accept in order to have it as a campaign issue in 2008.''

The United Nations panel predicts temperatures are likely to increase by 1.1 to 6.4 degrees Celsius (2 to 11.5 degrees Fahrenheit) by the end of this century and the global sea level may rise 18 to 59 centimeters (7 to 23 inches). That jump might submerge large parts of the barrier islands and damage property along the coasts of Florida and the Gulf Coast, scientists say.

McCain's Cap Bill

The warmer temperatures are accelerating the melting of Arctic sea ice, which spurred the U.S. Fish and Wildlife Service in December to propose listing polar bears as a threatened species. James Hansen, the U.S. government's top climate scientist, says the U.S. must begin to slow carbon emissions in the next 10 years to prevent large-scale, irreversible damage to ecosystems and economies around the globe.

Presidential hopeful John McCain, a Republican senator from Arizona, helped draft legislation for a ``cap and trade'' program: Polluters emitting less carbon than allowed under the law would be able to sell or trade their excess pollution permits to others.

The measure has been co-sponsored by nine senators, including two Democrats running for the White House: Hillary Clinton of New York and Barack Obama of Illinois.

``The political ground has shifted,'' says Senate Energy Committee Chairman Jeff Bingaman, a New Mexico Democrat. ``There's a real prospect for passing legislation.''

Corporate Climate Alliance

The U.S. Climate Action Partnership, an alliance of 10 corporations including securities firm Lehman Brothers Holdings Inc. and power producer Duke Energy Corp., gives Democrats a boost, says Timothy Wirth, a former senator and climate negotiator for President Bill Clinton. Wirth calls the alliance the most significant development in addressing climate change since the 1997 Kyoto Protocol, the multinational agreement that President George W. Bush opposed because he said it would hurt the economy.

``It will provide every political figure with a lot of cover,'' Wirth says.

Duke Energy, one of the nation's largest generators of coal- fired power, says carbon regulation is inevitable and would prefer Congress to enact rules so it can plan for the future. For members like GE, carbon caps are also a market to exploit, says James Rogers, CEO of Charlotte, North Carolina-based Duke Energy.

``It's an opportunity for many of our businesses to develop technologies that could be used worldwide,'' he says.

Edison Electric Institute Row

Inhofe, the ranking Republican on the Senate Committee on Environment and Public Works, said that carbon caps legislation wouldn't likely get the votes needed to pass. Carl Pope, executive director of the Sierra Club, an environmental group that lobbies in Washington in favor of carbon limits, agrees.

``You still have a lot of senators from states that view themselves as carbon producers,'' Pope says. ``And you have a lot of senators ideologically opposed to having the federal government do anything.''

Edison Electric Institute, a Washington-based lobbying group for utilities such as Southern Co. and Duke Energy, has a divided membership on emissions caps. The participation of Duke Energy and other utilities in the alliance caused a row within the EEI, with some members suggesting Rogers should be stripped of his title as chairman of the group, according to people who requested anonymity because they aren't permitted to talk on the matter. Rogers declined to comment on this matter.

China Waits

In February, EEI issued a statement in favor of federal legislation to reduce emissions. The vaguely worded release, which made no mention of mandatory caps, said any legislation must have minimal economic impact. Electricity prices would jump as much as 13 percent as utilities passed on the costs of compliance to consumers under a bill Bingaman is drafting, according to a U.S. Energy Department estimate.

China and India are waiting for the U.S. to impose caps before they do, says Abyd Karmali, a managing director at Fairfax, Virginia-based ICF International Inc., an adviser to nations on the Kyoto Protocol.

``China and India will definitely not take on caps before a country they believe has the moral responsibility to reduce emissions first,'' Karmali says.

The U.S. released 19.7 metric tons of energy emissions per person in 2004 compared with 3.7 metric tons for China, the International Energy Agency says.

Bush's Legacy

European Union lawmakers say the region plans to cut its greenhouse gasses 20 percent by 2020 compared with 1990 levels. The EU would increase that figure to 30 percent if the U.S. imposed caps, says European Environment Commissioner Stavros Dimas.

Bush, who acknowledged that climate change was a serious challenge in his State of the Union address in January, may be more willing to support legislation as he considers his legacy, says Senator Tom Carper, a Delaware Democrat. Carper says he spoke to Bush the day after the State of the Union at a visit to DuPont Co. in Delaware.

``A parade is forming, a consensus is forming here,'' Carper says he told the president. ``You need to lead the parade.''

The senator, who also raised the matter with the president nine months earlier at the White House, perceived a change in Bush. ``I think he was just more receptive,'' Carper says.

If not, the next president will have to decide whether higher electricity bills are a cost worth paying to reduce the risk of devastation from melting icecaps and rising seas.

To contact the reporters on this story: Kim Chipman in Washington at kchipman@bloomberg.net ; and Tina Seeley in Washington at tseeley@bloomberg.net .

Last Updated: February 26, 2007 00:27 EST

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