Cloture Motion

Floor Speech

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Mr. WHITEHOUSE. Madam President, I am back with my trusty, battered ``Time to Wake Up'' chart, and the last time I spoke on the Senate floor on this subject, I reviewed some recent warnings from the Economist magazine, from the Potsdam Institute, and from the consulting firm Deloitte that climate change is poised to cause tens of trillions of dollars in damage around the world--tens of trillions of dollars. Much of it, of course, right here in the United States.

Well, not surprisingly, the insurance industry has concern about forecasts of damages in the tens of trillions. The Senate Budget Committee recently held a hearing examining insurance, property, and mortgage markets in Florida, a State that is on the leading edge of climate-related risks.

Insurance, property, and mortgage markets are intertwined. To buy property, most people need a mortgage. To get a mortgage, you need insurance.

In our hearing, Dr. Ishita Sen, a professor of finance at the Harvard Business School, told about the danger to Fannie Mae and Freddie Mac, our Federal mortgage giants. They require insurance from insurers that have a financial strength rating from a ratings agency, to assure that the mortgages they purchase are protected by reputable, financially solid insurers.

Bad insurance increases their risk of homeowner default, as homeowners are way more likely to walk away from properties if their insurance company can't pay claims or won't pay quickly.

Dr. Sen's research in Florida found several disturbing things. First, she found that larger, stronger insurers are exiting Florida and being replaced by smaller, less financially sound companies and by Citizens Property Insurance, the State-backed insurer of last resort.

Second, she found that these smaller private insurance companies were all receiving their financial ratings, required by Fannie and Freddie, from the same ratings agency, known as Demotech. If you haven't heard of it, it is because it hasn't been around long.

Third, she found that Demotech ratings appeared to systematically overestimate the financial strength of the rated insurers. Nineteen percent--nearly 1 in 5--of Demotech insurers in Florida became insolvent between 2009 and 2022.

Fourth, she found that mortgage lenders were loading up those mortgages insured by Demotech-rated insurers to Fannie and Freddie, compared to properties with insurers using other rating agencies.

What does that mean? It means Florida's mortgage risk is being transferred to the taxpayer and to pension funds for millions of Americans that commonly purchase mortgage-backed securities. All of this should ring a bell--a hell of a bell.

Remember the 2008 financial crisis. It, too, began in the residential real estate and mortgage markets. It too had Florida as its epicenter. It too involved ratings agencies handing out inflated ratings. It too involved mortgage-backed securities, securitized by Fannie and Freddie and sold around the world.

That 2008 financial crisis led to the great recession, in which millions of Americans lost their jobs, their homes, and much of their household wealth. Unemployment topped 10 percent. Five trillion dollars was piled on our national debt.

So when we start seeing parallels to things that went awry back then, we should wake up and take them seriously.

Dr. Sen said this about the climate risk we face:

Not only do we need to harden our homes, but we need to harden our financial institutions, our banks, and our insurance companies in order to make them withstand really large climate shocks that are for sure coming their way.

Well, when she talks about ``really large climate shocks that are for sure coming their way,'' that means they are for sure coming our way, because just like 2008, if this goes down, everyone suffers.

At this point, we have dawdled on climate for far too long. We have let the fossil fuel industry for decades obstruct action on climate change.

Now, with financial warnings in the trillions, the Deloitte report said:

The global economy needs to execute a rapid, coordinated and sequenced energy and industrial transition.

Well, I promised in my last ``Time to Wake Up'' speech that I would discuss how best to execute that rapid transition. So let me turn to that.

I will begin by acknowledging that Democrats took the first serious legislative step on climate in 2022 with the Inflation Reduction Act, or the IRA. The IRA was modeled to reduce emissions by around 40 percent by 2030, compared to a 2005 baseline, which is great. But we need to reduce emissions not by 40 percent but by 50 percent by 2030, and to get to net zero emissions by 2050, if we are going to hold warming to 1.5 degrees Celsius.

Even if we do that, the climate havoc we are already seeing will get worse. The climate havoc we are already seeing is at about 1.2 degrees Celsius.

So what more do we need to find a pathway to climate safety? And how do we do it globally, knowing that the United States only now accounts for about 12 percent of total greenhouse gas emissions?

Well, for years now, my team and I have been in constant communication with economists and other climate modelers who specialize in predicting the effects of various emissions reduction policies. Study after study, group after group, expert after expert have said the same thing: An economywide carbon price will drive the deepest emissions reductions--which makes sense.

The cost of a product's harms, under economic principles, should be reflected in the price of the product. When they are not, it is a subsidy.

And fossil fuel floats on the fattest subsidy in human history, now clocked at over $700 billion a year in the United States alone. Put a price on that free pollution, and markets emerge to reduce emissions in the most efficient way, whether by fuel type, new technology, efficiency measures, or preventing or capturing emissions.

Here is an example of how that works. This graph from 2021, before the passage of the IRA, examines emissions trajectories in a variety of policy scenarios. The green line here, at the top, is business as usual then, which assumed no new emissions-reducing policies, and, of course, had virtually no effect.

Drop down to this orange line. It is a package of clean energy tax credits very similar to what was ultimately included in the IRA. As you can see, those tax credits result in substantial, though insufficient, emission reductions through 2030, which is here, and then they more or less flatline.

The gray line below it here is a clean electricity standard, which would have incentivized cleaner electricity generation and penalized dirtier generation in the power sector. It does slightly better than the tax credits, but it also wanes in efficacy after 2030.

Yellow line, just below it, is those tax credits, plus that clean electricity standard. It is a bit better, but it is still pretty impotent after 2030.

Then you have this light-blue line, which represents a relatively modest carbon fee starting at around $15 per ton of emissions and remaining relatively low for the first 6 years and then ramping up in outyears to roughly $80 per ton. This model actually exempts unleaded gasoline. Yet even with that exemption, it drives dramatically deeper emissions reductions, particularly after 2030. Indeed, by 2040, it almost doubles the emissions reductions of the other two policies combined.

And the lowest line, this dark-blue line, represents doing it all. And the anchor of that outcome is that modest carbon price, which is ultimately far more potent at driving emissions reductions than all other policies.

Here is another study. This one was done this year after the IRA was passed, and it reaches similar conclusions. This top yellow line--which doesn't come close to our targets--represents what would happen if, as our Republican friends have threatened, the IRA were to be repealed and EPA's recently finalized emissions rules for powerplants, cars, and trucks were struck down or rescinded. As you can see, emissions very slowly trend down due, largely, to continued deployment of wind and solar--which are now the cheapest forms of energy--and to different States' decarbonization policies.

This next line, which gets to our targets around 2040, represents a scenario in which the Inflation Reduction Act stays, but the EPA rules are voided or rescinded. Again, we don't hit our targets for 2030 until 2040, a very dangerous decade to miss.

The next line, the red line, is essentially our new business as usual. It is the IRA and the EPA rules remaining in force, and there we hit our decarbonization targets around 2037, still off by 7 years.

This light-green and light-blue line, which are very hard to distinguish, respectively increase the value of the IRA power sector clean energy tax credits by 50 percent and add a clean electricity standard. Both result in delays hitting our 2030 target until 2035.

This purplish line here adds carbon pricing, similar to the one I just discussed, with repeal of the nonpower sector tax credits in the IRA.

So even with repeal of some of the IRA clean energy tax credits, adding a modest carbon fee results in emissions reductions that are the best in class so far, hitting our 2030 targets as early as 2033.

And the dark-green line, that just adds the carbon price. It nearly hits our 2030 target very close, and it drives, by 2040, an additional billion metric tons over the emissions reductions expected from the IRA and EPA's rules.

And let me show you one more chart. This one here was from Brookings. This one here is from the Potsdam Institute.

Together with the Washington Post, Potsdam Institute looked at over 1,200--one thousand two hundred--climate policy scenarios that have been run in recent years, and they found that of 1,200 policy scenarios that experts have run, there are only 11 left--only 11 left--that allow us to hit our 1.5 degrees Celsius target. And of those 11, every one requires a price on carbon pollution.

So the upshot of all of this is that you simply cannot continue allowing polluters to pollute for free, not if you want to find a pathway to climate safety. All of those other pathways without a carbon price have been foreclosed by our dawdling and our indolence and the pressure from the fossil fuel industry to do nothing.

One other point, as you can see, almost all of them overshoot. So if you want to get back to safe climate levels, you absolutely are going to need carbon capture technology and direct air capture to be specific because you are going to have to claw back excess emissions. At this point, it is not enough just to stop.

Happily, a carbon price gives carbon capture a revenue proposition. So it will dramatically encourage that technology.

Here is the other huge advantage of a carbon price: We can export it via carbon border adjustment. The European Union has just launched its carbon border adjustment mechanism called its CBAM--carbon border adjustment mechanism, CBAM--and it is about to be joined by the UK as well, and they will assess a carbon tariff on imported goods to the EU and the UK. Less carbon-intensive goods will pay a lower carbon levy; more carbon-intensive goods will pay a higher levy.

And that levy creates a powerful global incentive for clean manufacturing wherever products are made for export to EU and UK markets.

If we joined in, if the United States of America joined in and implemented a similar policy here at home, the downward pressure on global emissions--particularly Chinese emissions, which currently represent roughly a third of global emissions--would be even more powerful. A carbon border adjustment would be a big win for cleaner American manufacturing.

On average, the Chinese economy is about three times more carbon- intensive than the U.S. economy. So if a domestically produced good paid a $1 carbon levy, the equivalent good imported from China would pay, on average, a $3 carbon levy, which would help to reshore to the United States steel, aluminum, and chemical production, and all the well-paid manufacturing jobs that they generate.

Now, the fossil fuel industry, of course, complains that such a policy would harm consumers, the same consumers they happily gouge, but when it comes to remedy and climate, suddenly, they are interested in consumers. Well, A, these companies already make so much profit they could absorb the tariffs for their customers, and, B, we can spend tariff revenues in ways that boost consumers; for instance, return revenues earned from polluters to consumers as dividends, as Chairman Cantwell has proposed, for consumers to spend how they please. Indeed, I have got a bill that would do just that.

One of the big lies of the fossil fuel industry is to pretend the costs their pollution foists on the American public don't exist. In fact, Americans are already paying for the polluters' pollution and for their obstruction of climate action. We pay in higher home and auto insurance premiums, now exploding through Florida; higher grocery bills; higher home prices due to lumber shortages; higher prices for goods tangled in climate-related supply chain snarls. Americans are already paying the climate pollution price. It is just a very dumb one that does nothing to reduce the pollution and shifts the burden of harm from polluters to everyday Americans.

A carbon price would send a correct price signal into markets. It would reward innovators and innovation. It would rectify the fundamentally unfair situation of an industry passing the cost of its pollution onto ordinary Americans, and, as these various graphs all show, it would actually work at providing a pathway to global climate safety.

Opportunities are coming. Next year, a large swath of the Trump tax cuts, which were disproportionately skewed toward large corporations and the very wealthy, will expire and good riddance. This gives us an opportunity to make the Tax Code more fair, to reduce income inequality, and to use revenues from big polluters to reinstate, for instance, the Child Tax Credit, to do good things.

Taxing polluters could also help to improve the Nation's fiscal position. And another reconciliation bill is possible if voters take climate risk seriously and don't put fossil fuel flunkies in charge of their government.

In short, carbon pricing makes sense from all angles. It is the single most effective policy at reducing carbon pollution and heading off the massive, looming tens of trillion-dollar financial risks that we see coming from climate change, as Dr. Sen said, ``that are for sure coming our way.''

It provides a tool to help us tackle global emissions that will also spur domestic manufacturing and jobs. It raises real revenue to help Americans shoulder the burden we carry as a result of decades of fossil fuel industry pollution, denial, and obstruction, and it could even help reduce the budget deficit.

We have got no time left to waste. In the next Congress, you can be sure that I will do everything in my power to make sure that we finally embrace the winning policy that we should have implemented decades ago, back when we were first warned about the costs and dangers associated with carbon pollution.

It is well past time to make fossil fuel polluters pay for the harms they cause, and it is well past time for Congress to wake up.

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