The changing political dynamics in Washington, DC due to Democrats’ loss of a Senate seat in Massachusetts means that “cap and trade” climate legislation is given little chance of passing this year. The only hope for passing a bill in 2010 that would cut carbon emissions may be what most pundits have long thought as the least politically viable approach: a tax on carbon.
But if that’s going to happen, a strange bedfellows alliance will have to coalesce in short order, bringing together extremes on the left and right. The key players will be large oil companies such as ExxonMobil, which has long been viewed as the chief climate change skeptic, but which has also been publicly pushing a carbon tax under recent shifts in upper management. Radical environmental groups and leading economists also prefer this approach.
While the general media like to portray the issue of regulating carbon as a simple business versus environment dynamic, as always, the politics surrounding corporate policy includes many shades of grey. In fact, the business case for addressing global warming is apparently so compelling to some in the private sector that 80 U.S. corporate leaders — including CEOs from companies such as eBay, Virgin America and Pacific Gas & Electric — signed a joint letter in late January urging President Obama and Congress to pass comprehensive climate and energy legislation this year. The prime message in the letter is that unless the U.S. sets clear carbon reduction targets, it will fall behind in the current global race to develop new carbon-free renewable technologies.
But most of those companies hold little sway among conservatives in Congress. ExxonMobil and other energy companies not invested in coal do carry weight in Washington, DC. If they place a high priority on passing climate legislation in the form of a carbon tax, they could bring with them the prized 60th Senate vote environmentalists need to avoid a filibuster against climate legislation.
The Environmental Protection Agency (EPA) will soon be issuing its rules governing greenhouse gas emissions, including carbon. Once these rules are released, coal companies might be willing to come to the table and negotiate a better deal in Congress, and interest in climate legislation may increase, but action delayed until 2011, hampering the growth of renewable resources in the U.S. in the short term.
Over 400 groups comprising a loose coalition of environmental justice, low-income and faith-based organizations known as “Climate Reality Check” prefer the Cantwell-Collins “cap-and-dividend” approach, which seems to be gaining the most momentum in Congress right now, with companies such as the FPL Group, Calpine Iberdrola SA, Berkshire Hathaway and Chevron Corp. all registering to lobby on the bill.
“The architecture is far better,” said Daphne Wysham, a policy expert with Climate Justice Now!, an environmental justice coalition. “There are also no offsets, which are impossible to verify. But I think the dividend approach makes the Cantwell bill politically palatable. For example, ARRP has already endorsed it,” she said. Her main problem is that the targets are still too not aggressive enough, as they are similar to those in the House/Senate cap and trade bills. “But with Cantwell, maybe we can at least get the architecture right, and then ratchet up the targets over time. With the other two omnibus House and Senate cap and trade bills, polluters can get away with doing nothing until 2030 by using offsets and engaging in ‘paper reductions’ that are not real.”
Elaine Kamarck, with the Kennedy School at Harvard University, and co-chair of the U.S. Climate Task Force, thinks a separation of the most popular energy provisions– such as efficiency and renewable energy standards – have the best chance of passing on their own, absent a carbon cap. She thinks the political viability of a carbon tax and other approaches beyond cap and trade has actually increased over time, but that it is too early whether to determine whether anything solid will come out of Congress this year.
“If a consensus emerges that cap and trade is just not going anywhere – and that seems to be just sinking in – then they will go back to the drawing board and examine other options,” she said. “You have to realize that cap and trade was initially being pushed before the economy fell apart. Markets were God and Wall Street was still filled with heroes. In that kind of political environment, cap and trade had some ‘umph’ behind it. Now, Goldman Sachs and the rest of Wall Street are in the same category of bad guys as big polluters.”
It remains to be seen whether corporate support for climate regulations, including lobbying by the renewable energy sector, will be sufficient to pass significant legislation in Congress in 2010, but shifting priorities among a growing number of key players may signal a deepening split, with mainstream environmentalists, utilities, and coal companies on one side, and grassroots environmentalists, social justice groups, and non-coal energy companies such as ExxonMobil on the other.
The best hope for the renewable energy sector may be to separate the federal Renewable Portfolio Standard, among the most popular of features of the current omnibus federal cap and trade bills. At least in that regard, a clear market would be created for solar, wind, geothermal and biomass projects. The downside to that approach is that Congress may then never get around to regulating carbon, which would hamper international efforts to create a sustainable market for renewables, since the rest of the world is still looking to the U.S. for leadership on the global climate change front.