A Free-Market Energy Blog

Post-Carbon Left Enviro Blues (Why the Senate rejected cap-and-trade)

By -- September 1, 2010

Everyone knows that our industries contain a large collection of minds that are almost indecently fertile. Name the business and you can see lots of people who were quick to spot the growth possibilities in climate policy, whether they were financial, political or technological. The semiconductor industry turned sand into wealth, and we were going to do the same with the world’s exhalations.

And now it’s as good as over. Only the problem is that those of us who were smart enough to get into carbon on the ground floor refuse to acknowledge what is becoming more obvious by the hour.

The great bulk of groups that call themselves “nonprofit” and “nonpartisan”are little more than shills for environmentalists and Democrats. But here is an unusual one: the Breakthrough Institute.

“Breakthrough” is usually a word reserved for psychotherapy, but the Breakthrough Institute is green with an attitude. It has managed to separate itself from the other carbon controllers, thanks to a sense of realism about both technological issues and political reality. Co-founder Michael Shellenberger recently appeared in the Washington Post and pretty much set the world straight about why the Senate finally dropped cap and trade and a national renewable quota, and what it all means.

He says that the usual explanations for the change generally fail. Republicans aren’t to blame, because they needed and got enough Democrats to also reject the policies. Environmentalists in fact made massive efforts and didn’t change a single vote. The administration pushed it hard and also failed to influence marginal votes.

And you can’t blame business, because as Shellenberger points out, cap and trade “arguably had more industry support than any other environmental policy in history.” A protégé  of Ken Lay, James E. Rogers, once at Enron and now head of Duke Energy, for example, got the electric utility industry to the table and behind cap-and-trade.

Cap and trade died because voters correctly perceived it as a tradable tax intended to raise energy prices, and they gave little credibility to both scientific scares and promises of green jobs. Shellenberger still wants a small carbon tax to subsidize research, but acknowledges that the Big Top has folded. For better than a year Gallup has persistently reported that climate is the lowest-ranked environmental issue in the public’s mind, and that environmental problems as a group pale relative to economic and diplomatic ones. My bets are that a lame-duck session will not sneak it into a conference bill (their big issue has to be immigration), and that EPA’s initiatives will not go far, at least with the next Congress.

But what about us? These pages remain full of enthusiastic prognoses for carbon trading, but while Europe is wrapped up in scandals, the rest of the world doesn’t want to start it, and the US will most likely end up with the Potemkin Regional Greenhouse Gas Initiative and little else. The “Western Climate Initiative,” which originally encompassed the entire region, now expects to start trading with only two Canadian provinces, California and New Mexico on board. Politics in the two states may drop both of them out by the end of the year.

Requirements for uneconomic renewable power are largely rationalized by promises that as carbon becomes expensive, renewables will look better and better. What happens to their producers and political supporters as the carbon issue vanishes, along with all the other carbon-based get-rich-quick schemes?

All the big arguments for smart grid investments are predicated on a belief that power will get lots more expensive thanks to carbon policy, and that consumers can protect their finances by installing remotely controlled dryers.

State regulators in places as dissimilar as Maryland and Hawaii (actually, both have lots of crabs) are already questioning the entire process, and more are on the way. Utilities are still talking carbon, but they have always been slow on the uptake. Or maybe they’re in denial since their executives will no longer sit on national commissions to deal with some crisis or other and have to go back to their old business of pushing electrons through wires reliably.

Do you want your power delivered by a company whose CEO’s life lacks meaning?

So many of us are still dithering about carbon, which is fast becoming a non-issue, still trying for one last bite of the apple. The big question is how to make our fortunes and maintain our social usefulness post-carbon.


  1. David Schnare  

    I would not underestimate the intentions of EPA and big green to apply the Clean Air Act vigorously. Although there will be legal challenges, EPA wins these far more often than it loses.

    The only way a new Congress will be able to stop EPA under the current administration is to restrict use of appropriations for climate change rules. That it might be able to do even if the Senate does not go Republican, based on coal and oil interests.


  2. Marlo Lewis  


    Funding restrictions are a two-edged sword. Yes, appropriations language could prevent EPA from developing/finalizing New Source Performance Standards (NSPS) and National Ambient Air Quality Standards (NAAQS) for CO2 and other greenhouse gases.

    However, emitters would still have obligations under the Clean Air Act’s Prevention of Significant Deterioration (PSD) preconstruction permits program. They would still have to determine best available control technology (BACT) to obtain a PSD permit, and they would still need a permit to construct or modify a major stationary source.

    So, if EPA were unable to approve a BACT determination or issue a permit, firms that build or modify would not be in compliance with the applicable law. Paradoxically, restricting EPA funds would empower eco-litigation groups to sue thousands of development projects and bring construction activities to a screeching halt.

    Similarly, restricting the agency’s funds would empower eco-litigators to sue potentially millions of firms for operating without an EPA-approved Title V operating permit.

    Several options are available to the next Congress, especially if Republicans take control of one or both chambers:

    (1) Rep. Marsha Blackburn’s bill to preclude EPA regulation of greenhouse gases under the Clean Air Act;
    (2) Sen. Lisa Murkowski’s resolution to overturn EPA’s endangerment finding;
    (3) Sen. Jay Rockefeller’s bill to suspend EPA regulation of stationary sources for two years;
    (4) Funding restrictions to preclude development/enforcement of greenhouse gas regulation.

    Options (1) and (2) do not create litigation risks for business. Option (3) need not do so but would have to be revised to clarify that sources have no obligations with respect to greenhouse gases during the two-year suspension of EPA regulation.

    Options (1) and (2) are obviously the hardest to enact. However, in the current Congress, Marsha Blackburn’s bill has 154 c0-sponsors and Lisa Murkowski lined up 47 votes (including all 41 Republicans) for her resolution. A big GOP win in November could significantly pump up these numbers.

    Rockefeller’s bill is definitely a weak-sister, but once adopted, re-enactment could become a biennial ritual, indefinitely suspending EPA regulation of CO2 from stationary sources.


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