Update from Washington: June 2010

Jun 1, 2010 | Government News

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This new series, written by Paul Frazer, the Canadian Chamber of Commerce’s special advisor on Canada-U.S. Relations, will be providing briefs on issues and events that have implications for Canadian businesses. Based in Washington, DC, Mr. Frazer has 16 years of experience and is a well-known and influential player in Canada-U.S. issues. (for a full bio see * bellow).  

U.S. Energy/Climate Policy: Will there be one? It has been almost a year since the U.S. House of Representatives passed a landmark bill to mitigate climate change, create green jobs and lessen U.S. dependence on foreign oil. Attention then turned to the Senate, a body known for its much slower pace in crafting and passing legislation. Senators Kerry and Lieberman have issued their own language (America Power Act) which they hope to be the core of a Senate climate bill.  The bill has not yet been introduced in the Senate. The substance of the proposed bill is being assessed by the Environmental Protection Agency (EPA) and the Energy Information Agency (EIA). Those reviews may be completed by the week of June 7. Senate Majority Leader Reid is expected then to meet in closed meetings with the White House, Senators Kerry and Lieberman and with the chairs of the six Senate committees, with jurisdiction over aspects of the proposed bill in order to determine the bill’s content and to set a timetable for next steps. 

The Senate Majority Leader is expected to ask the six committee chairs for comments; the real horse-trading on the bill is expected to be in Reid’s office and not in committee hearings. Reid wants to short-circuit the system as much as possible. He already has a very loaded legislative calendar and it is not certain that he can pass the other bills already in the legislative pipeline before the summer recess (let alone before the November elections).  

Climate in an election year: Each of the 435 members of the House of Representatives and one third of the Senate are up for election in November. The closer to the date of the vote the more difficult it becomes for Congress to pass any legislation. The present acrimonious and fiercely partisan political atmosphere becomes more-so with each passing day. The very tough experience of passing health care legislation severely soured the political waters rendering bipartisan activity virtually impossible. The looming election affects every aspect of every bill put forward. The proposed climate bill is almost 1,000 pages long and contains a wide variety of components designed to appeal to the diverse range of stakeholders with interests in play.  It is not yet certain that the bill will garner the 60 Senate votes needed to overcome a filibuster and permit passage. 

What this means for Canada: The “waiting” stance of the government of Canada with respect to its own climate legislation will increase the longer it takes the U.S. to pass its own bill. This position bears a cost to Canadian business because of the lingering uncertainty in an already complex and competitive sector. Despite discussions between Canadian and U.S. officials on climate, at the end of the day the Americans will move at their own speed and will craft their own bill with their various national interests at heart. They will not look to Canada for advice nor for any undertaking to establish a bilateral arrangement on climate.

Canada has presumably drafted its own policy framework and climate action plan that can be adjusted when it sees the final U.S. Congressional product. 

Despite legitimate concerns about the costs of this delay, Canadian business and government can take heart from the conclusions of a study released May 21, 2010 by the Peterson Institute for International Economics. The study concludes that proposed U.S. legislation would create a decade of $41.1 billion in economic investment and create 200,000 jobs per year in construction and other activities associated with the transition to nuclear power and renewables. A creative Canadian bill could garner some similar economic benefits in Canada. 

The transition timeline of 2011 to 2030 bears other potentially important calculations as well. For example, Peterson estimates that “fuel switching and improved efficiency upgrades would help reduce (U.S.) oil imports by 33% to 40% below current levels by 2030. U.S. spending on imported oil would also fall by $51 billion to $93 billion per year.” This could have enormous implications for Canadian energy exports. Keep in mind that when U.S. legislators speak about “foreign” oil they are rarely if ever including Canadian oil in that description. 

Canadian business and governments need to keep a close eye on the evolution of the Kerry-Lieberman effort. They need to focus on what elements have economic implications for Canadian business in terms of exports, infrastructure and constraints on business. We won’t know with any certainty what any of it will mean for Canadian business until the new debate begins. We will need to see not only Congressional debate but also see more clearly whether President Obama is prepared to engage the Congress on the necessity and urgency of passing a Senate climate bill. 

*Paul Frazer is a Principal in 3Click Solutions LLC where he brings his expertise to bear on behalf of companies with interests to promote and protect in Washington. He has worked on a variety of economic/trade and policy cross-border issues affected by legislation or attempts at legislation for clients in financial services, energy, environment/climate, health care and natural resources sectors. He can be contacted at 202.683.6085 or [email protected]

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