Economists Moving Beyond Carbon Pricing

Over at the Economist, Ryan Avent notes that economists are beginning to move beyond a simple reliance on carbon pricing as the sine qua non of climate policy:

The typical baseline economist response to the problem of global warming is a very simple and straightforward one. Climate change is a negative externality, and the carbon emissions that generate it are easily targetable. The clear thing to do, then, is to place a tax on carbon emissions which will lead economic actors to internalise the cost of the warming they create with their decisions. This will discourage carbon-intensive activities and contribute to the development of clean alternative, reducing emissions and climate change.

Easy enough. Unfortunately, this strategy quickly runs into difficulty. One big problem is political. It's very difficult to convince people to accept higher energy costs, and it's very difficult to coordinate policy across countries, which is necessary to ensure that the policy works correctly. But there are also economic challenges. ... Economies are good at finding substitutes for key technologies, but it does take some time. And so because the world has waited so long to act, it now seems that the disaster-avoiding carbon tax path may itself be too economically damaging. So what's an economist to advocate?

Avent writes that while many economists continue to advocate carbon pricing -- even if they recognize that such policies, when implemented in real world political systems, are inadequate on their own terms -- a growing body of researchers are putting their focus elsewhere: "the potential role of positive policies--measures that encourage, rather than constrain, activities."

The authors of one recent paper on this subject presented at a great session on climate policy in Denver. "The environment and directed technical change", begins by arguing that the carbon externality isn't the only relevant externality in the mix. There is another important dynamic in which technological innovation draws on previous research, and so firms are more likely to continue on established innovation trajectories than to start new ones. Put simply: if most firms have been researching and building coal technologies in recent decades, they're much more likely to keep on working with coal than they are to switch to, say, solar. ...

What that means is that clean energy research will lag, even in the presence of a carbon tax. And the optimal policy response then is to subsidise clean technology research. Even a temporary subsidy will do; because of the innovation externality, the clean innovation trajectory will run on its own once established.

This isn't the only obstacle to clean energy innovation and a rapid and economic transition to a clean energy system. While economists risk stretching the term 'externality' beyond recognition in attempts to incorporate each of these obstacles into their neo-classical economic worldview, more and more economists have identified 'spill-over risks,' 'network failures,' 'incumbent infrastructure lock-in,' and many barriers to clean energy innovation and adoption.

(For a good summary of these barriers, see the discussion, "Barriers to Widespread Clean Energy Adoption and the Public Investment Imperative" in our Rising Tigers, Sleeping Giant report, or this excellent paper from energy economist and analyst Karsten Neuhoff,)

After a thorough accounting of each of these challenges, a carbon price looks much less like the holy grail of climate action and more like just one tool to help overcome one (of the many) barriers to a clean economy -- and a tool plagued by political difficulty at that...

As Avent concludes:

At any rate, economics is clearly moving beyond the carbon-tax-alone position on climate change, which is a good thing. If the world is to reduce emissions, it needs technologies that are both green and cheap enough to be attractive to economically-stressed countries and people. And a carbon tax alone may not generate the necessary innovation.

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Does November GOP Win Spell the End for Clean Energy Progress? Maybe Not

By Jesse Jenkins, originally at the Breakthrough Institute

According to most electoral prognosticators, Republicans are poised to win major victories in the upcoming November midterm elections, with control of both the House and Senate within their reach. That should spell the end for climate and clean energy legislation, according to many observers, at least for the next Congressional cycle.

But what if it doesn't? Over at SolveClimate, Elizabeth McGowan takes a fresh look at what a GOP win in November could mean for clean energy progress, noting that split control in Washington could actually improve chances for bipartisan energy legislation.

New dynamics in a Washington under divided rule

With one party in control of the White House and both legislative branches, it's far too easy for priority issues to become politically polarized -- so the argument goes. The majority party lacks significant incentive to reach out to the minority party from the beginning to craft solidly bipartisan bills. Meanwhile the minority party can simply become 'the Party of No,' attempting to block any of the majority party's legislative priorities while riding electoral angst at a "broken Washington" back into power in the next Congressional cycle.

With the White House in the hands of one party and the House, Senate, or both under the other party's control, the dynamic can be quite different, according to Capitol Hill observers.

McGowan quotes Paul Bledsoe, a strategist at the Bipartisan Policy Center's National Commission of Energy Policy with a long resume of inside-the-beltway experience:

When one party has a supermajority, Bledsoe pointed out, those in charge tend to write legislation without consulting the minority. That can make it virtually impossible to "sell" complex and significant mechanisms such as cap and trade--which now appears to be dead on arrival.

Even Republicans who once supported cap and trade approach as valid now dismiss it as an unacceptable tax.

"Traditionally, energy is not a partisan but a geographically focused issue," Bledsoe said, adding that the 2005 and 2007 energy bills passed with bipartisan support, the former in a Republican Senate and the latter in a Democratic Senate. ...

"A strange dynamic can develop when the balance of power is narrower," he said, adding that polarization along party lines can dissipate. "I think senators will feel a greater sense of urgency to initiate legislation together. I see senators of goodwill coming together to create bipartisan approaches."

Moving beyond cap and trade could yield bipartisan clean energy progress

According to Josh Freed, director of the clean energy program at the moderate Democratic DC think tank Third Way, a bipartisan clean energy strategy -- one that moves beyond the failed cap and trade debate toward a renewed public-private partnership aimed at developing and marketing improved clean energy technologies -- is ripe for passage in a Washington under split rule.

Freed spoke with SolveClimate's McGowan, saying:

Some sort of climate and energy legislation will eventually emerge but first, the public and private sectors need to cooperate to invent, demonstrate, deploy and market the green batteries, plug-in hybrid electric vehicles, advanced nuclear power, renewables and other technologies that are actually competitive with fossil fuels.

"As a country, we seem to have lost our way on that model," Freed said, adding that it propelled the success of the airline industry, the Internet and the biotechnology sector. "How do we go about turning that around?"

Congress needs to champion this push with thoughtful, comprehensive and bipartisan legislation, Freed explained, but the American public, business leaders, universities, entrepreneurs, large companies and the financial sector have to act in tandem.

Building a new bipartisan consensus for clean energy progress may take some time, but according to Freed, the effort can begin in the next Congress and external pressures may keep the heat on Congress to act sooner rather than later:

"This is going to take longer than a campaign. It's much like the health care debate in 1993," Freed said, adding that the need for reform was obvious but the mechanism being deployed all those years ago collapsed under its own weight. "It took 17 years to rebuild that coalition. With energy, we don't have the time to wait 17 years but we need to learn those lessons."

Politicians and everybody else involved have to realize that America is playing catch-up because its dawdling has ceded much of the clean technology market to China, South Korea, Spain, Denmark, the Netherlands and Germany.

"This has to be an issue that resonates in Minnesota, Tennessee and Ohio as much as it does in Oregon, Washington and Connecticut," Freed said.

Beware the Tea Party

While there are many strong motivations for bipartisan legislation to clean up, secure, and modernize the U.S. energy system while developing competitive U.S. clean energy industries, progress may ultimately depend on what kind of Republican party takes office in November.

According to Jim DiPeso, vice president of the Michigan-based non-profit Republicans for Environmental Protection, the radicalizing influence of the surging Tea Party movement may torpedo chances for clean energy legislation in the coming Congress. As DiPeso tells SolveClimate:

"All bets are off because those [Tea Party] newcomers will have different ideas about what priorities should be tackled. ... Then, you're looking at gridlock."

His wish is that President Obama, [House Minority Leader John] Boehner and [Senate Minority Leader Mitch] McConnell will be "smart" enough to mollify dissenters and follow President Clinton's lead of the mid-1990s by collaborating on a centrist agenda. ...

[DiPeso] and [Bipartisan Policy Center's] Bledsoe echo one another with their comments about why partisan bickering and backing on the climate front can be so detrimental.

"It's a huge mistake for climate activists to become partisan," Bledsoe emphasized. ...

"You can blame both sides for the polarization but it doesn't matter who is to blame. We need to fix it and that's the only way forward."

Read more!

Republican Candidates Wield Cap and Trade as Political Weapon

If you live in states like Delaware, Pennsylvania, West Virginia or Kentucky, you may have already seen them: new political hatchet ads attacking Democrats and even some moderate Republicans for support of Congressional cap and trade bills.

According to E&E News ($usbcription required), the climate policy, which narrowly passed the House of Representatives last year before stalling in the Senate, is the latest weapon wielded by conservative Republican Congressional candidates across the country, who are trying to ride a wave of anger over perceived, out-of-control big government policies into office.

E&E reports:

Candidates in Delaware, Pennsylvania, West Virginia and Kentucky are all using cap and trade to boost their profiles. Republicans who voted for the House energy bill, which included cap-and-trade provisions, are being assailed by conservative opponents. Among them is Delaware Rep. Michael Castle, who is being attacked by opponent Christine O'Donnell.

"It's a very big deal," said Brian Walsh, spokesman for the National Republican Senatorial Committee.

The issue is already drawing comparisons to last year's health care bill, which was a catalyst for conservative anger and launched the tea party movement. Conservatives are pegging cap and trade as an energy tax, saying it would increase prices.

If support for cap and trade is perceived as a key contributor to the political demise of vulnerable moderate Democrats (or even Republicans), count it as yet another nail in the coffin for the repeatedly-failed policy. New, innovative policy strategy will be necessary to secure climate and clean energy progress in the coming Congress...

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"Climate Bill Set Aside, What's Next for U.S. Energy Policy"

I appeared last Friday on 88.9 KCRW Santa Monica and Public Radio International's nationally-syndicated show "To the Point" to discuss the recent withdrawal by Sen Harry Reid (D-NV) of a compromised Energy bill based on largely on a framework of Cap and Trade.

After more than $100 million in lobbying by green groups and allied industry players, and the bill's eventual watering down to a "utility-only" cap, Majority Leader Reid confessed that there was still no way he or the party would be able to muster the sixty votes necessary for the beleaguered legislation to pass.

This is the fourth time in seven years that this cap and trade strategy has been shot down. This time, with the Democrats just one seat shy of a super-majority and with the White House occupied by a president who came to office promising to make climate change a top priority, perhaps the latest episode in the serial failure of cap and trade indicates that it is time to bury the failed policy and develop an entirely new strategy -- one capable of overcoming the political obstacles that doomed cap and trade while successfully making clean energy cheap enough to sustainable power an energy-hungry planet.

You can listen to the roughly eight-minute discussion below. Just hit play and skip to 45-minute mark for the segment.

Read more!

Time to Bury Cap and Trade and Plan Anew

By Jesse Jenkins and Devon Swezey

Cap and trade is dead. Again. For real this time.

Reports put the time of death at 1 P.M. EST, July 22nd, 2010. That is when Senate Majority Leader Harry Reid emerged from a meeting of the Democratic Caucus without enough support for even a severely weakened and scaled-back emissions cap on the utility sector.

With that, recognition has finally set in everywhere: the United States Senate is not going to enact any form of cap and trade. Not this year. And probably not any time in the foreseeable future.

Worse yet, clean energy progress this year has gone down with the long-sinking cap and trade ship.

Democrats in the Senate have now successfuly wasted what little time they had left on the Congressional calendar wrangling over a utility-only cap--already compromised beyond recognition and destined for political failure--instead of working to advance a package of measures that would have started to make real progress on clean energy.

Reid has made it clear he'll bring only an extremely narrow bill to the floor before the August recess, one pairing measures responding to the Gulf oil spill with some incentives for home efficiency retrofits and natural gas vehicles. That's it. After a full two-year Congressional cycle, Democratic super-majorities, and Barack Obama in the White House: home retrofits and natural gas vehicles are all the Senate will deliver. We should let that sink in for a moment...

Blame Game or Moment of Reflection?


After making his decision to drop cap and trade (and any meaningful clean energy measures with it), Reid wasted no time in pinning the blame on those recalcitrant Republicans, declaring in a statement:

"Many of us want...a comprehensive bill that creates jobs, breaks our addiction to oil and curbs pollution. Unfortunately, at this time not one Republican wants to join us in achieving this goal. That isn't just disappointing. It's dangerous."

Whether it was Republicans, the filibuster, oil and coal industry lobbyists or President Obama himself, blame has already been cast far and wide.

But if anything is deserving of blame, it is the cap and trade strategy itself.

Cap and trade has now died four times in the last seven years (this time, we can hope, for good). There is little evidence that Senate Democrats had substantially more votes for cap and trade this year than they did in 2003 (when it failed with 43 votes), 2005 (failed again with 38 votes) or 2008, when Reid also pulled the bill before it could go down in embarrassing defeat and insiders put the final tally at only 35-40 votes in support of the bill.

At this dark moment, the important question is whether any greens or Democrats in Congress are willing to seriously re-think a policy framework that was structurally flawed from the beginning and has consistently failed politically.

(Early indications are that they aren't, with Nancy Pelosi saying of the House-passed Waxman-Markey bill, "we're very proud of it and excited to take it to conference.")

The Serial Failure of Cap and Trade

Cap and trade has repeatedly failed because it doesn't address the main barrier to the widespread deployment of clean energy technologies: the technology-based price gap between new clean energy and mature fossil fuels.

Many renewables, like wind and solar power, are expensive, intermittent, and difficult to scale for example, while nuclear power is extremely capital intensive and faces substantial local opposition.

Because of higher costs and technical barriers to widespread clean energy adoption, efforts to move the U.S. energy system away from fossil fuels towards clean energy alternatives inevitably comes with a significant price tag.

The result: every country in the world has been unwilling to raise the price of fossil fuels--either through a carbon tax or a cap and trade system--high enough to close this gap for the majority of clean energy technologies.

The United States is a clear case in point, where the proposed cap and trade bill was riddled with so many loopholes and cost containment mechanisms--most notably the availability of up to 2 billion dubious carbon offsets--that the effective price on carbon was too low to effectively spur clean energy innovation and adoption and the "cap" on carbon was rendered effectively non-binding.

But there's another rub. For all the talk about the urgency of a "cap" on emissions in the United States, China has become the world's largest emitter of greenhouse gases and its voracious appetite for energy threatens to wipe out any gains we achieve here in the United States.

China has moved aggressively in recent years to become a leader in the clean energy industry; with timing so perfectly ironic it seems almost planned, China announced today that the national government would level a staggering $74 billion in annual investments over the next ten years (5 trillion yuan) to adopt clean fuels and build the nation's clean energy industries. But even while establishing itself as the dominant global clean energy power, China's insatiable energy demand is so large that the nation's demand for fossil fuels continues to rise almost unabated.

In the end, until we make clean energy cheap enough to be widely available and affordable throughout the world, countries like China will continue to satisfy the majority of their increasing energy demand with fossil fuels.

Planning Anew for Clean Energy Progress

Given the stakes for both the global climate and the nation's economic outlook, we can't afford yet another episode in the serial failure of the cap and trade strategy.

This moment demands a fundamentally new strategy designed to overcome the inherent political obstacles to carbon pricing and simultaneously achieve the primary objective upon which our climate future hinges: making clean energy cheap in real, unsubsidized terms.

History shows that such technological transformations do not occur through modest shifts in market price signals. We didn't tax the telegraph to get telephones or put a cap on typewriters to see the birth of the personal computer, as Breakthrough's Michael Shellenberger and Ted Nordhaus often note.

Instead, time-and-time again, the most reliably successful driver of new innovation and transformative technology changes has been an active partnership between private-sector entrepreneurs and innovators and a public sector acting as both an initial funder and demanding customer of new, cutting-edge technologies.

This will demand an unprecedented level of public investment in clean energy innovation and the accelerated adoption, scale-up, and improvement of a full suite of clean energy technologies.

Such a strategy can begin to cut U.S. emissions in the near-term, but most importantly it will be absolutely essential to establish the technological and economic foundations for deep emissions cuts in the long term.

As the International Energy Agency has been clear, a global clean energy technology revolution is urgently required, and we have not a moment left to lose.

Without clean, cheap energy, emissions both at home and abroad will continue their inexorable rise, while China and other economic competitors solidify their dominance of new global clean technology markets. With this latest death of cap and trade, will we finally bury a fundamentally flawed strategy and dare to plan (and act!) anew?

Read more!

In Defense of 'Energy-Only'

Over at NRDC, David Doniger writes a last-ditch defense of a diminished, utility-only cap and trade proposal while categorically rejecting any "energy-only" legislation -- e.g. legislation lacking a cap and trade component.

Unfortunately, Doniger, NRDC (and EDF) wind up clinging onto a "cap" on carbon they have already given away while at the same time standing opposed to a new clean energy strategy that could still salvage a substantive win despite what little time remains on the Congressional clock.

A flawed case against "energy-only"

Doniger's case for rejecting any legislation without a carbon "cap" rests on this central argument:

Unless the overall Senate bill includes a cap on stationary source emissions, some energy bill provisions would actually make carbon emissions worse.

Doniger cites four examples -- policies promoting new power lines, electric vehicles, synthetic fuels, and biofuels -- that he says could potentially result in an increase in emissions absent other regulations on carbon.

Some of his examples are just plain flawed; an NRDC-sponsored report on emissions from electric vehicles directly contradicts Doniger's assertion that EVs powered by coal-fired electricity would raise emissions (in reality, even a coal-powered EV would be a marginal win from a GHG perspective). Others are more legitimate concerns; coal-to-liquids synthetic fuels should clearly be off the table from a GHG perspective, for example.

But the specter of an "energy-only" bill doing more harm than good could be addressed in several simple ways -- GHG standards could be established for qualifying biofuels, and transmissions lines qualifying for incentives or expedited siting could be required to carry a certain percentage of zero-carbon electricity, for example. If NRDC is worried about bad outcomes, they could easily push for smart fixes to these policies, rather than categorically rejecting legislation that might include critical steps forward, including expanded transmission access to renewable energy zones, a vehicle electrification push, or the promotion of advanced, non-grain biofuels.

Furthermore, Doniger inexplicably ignores the fact that the EPA is already moving forward with efforts to limit carbon pollution from stationary-sources like power plants and is set to forge ahead in the absence of Congressional cap-and-trade legislation. Even in the face of likely litigation, the resulting regulatory uncertainty surrounding new EPA regulations will put the damper on any investments in new major emissions sources for the time being, including new coal-fired power plants.

Clinging to an illusory carbon "cap"

The real nugget though is that while NRDC et al. keep rejecting any substantive steps forward that lack a "binding cap" on emissions, they long ago ceded anything resembling a hard, binding emissions cap in their negotiations with industry stakeholders and Congress critters.

The Waxman-Markey bill passed the House loaded with enough offsets to render the cap completely non-binding on covered sectors. (What's the problem with offsets? See here). The Kerry-Lieberman draft bill is the same. And any utility-sector only bill is likely to include just as many offsets, yet cover only about one-third of U.S. emissions, making matters even worse.

The truth is that we've never been debating a real, binding "cap" on greenhouse gas emissions, just an emissions target and a (pretty modest) carbon price signal. Call it "visor-and-trade" not "cap-and-trade." And with that as the bar set by "cap" and trade legislation, it is certainly possible to get even better outcomes -- faster transformation of the U.S. energy sector, faster clean energy innovation, and even faster emissions cuts -- with a new clean energy strategy.

Snatching a win from the jaws of defeat

A series of proactive clean energy policy measures still have the chance to move the ball substantively forward before time runs out this year, while avoiding major concessions such as ceding EPA regulatory authority (something NRDC et al. was happy to give up in exchange for the deeply-flawed House-passed "cap" and trade bill, a fact Doniger fails to mention in his post). And if done right, such an effort could even start building a new bipartisan clean energy consensus, positioning things for a new strategy in the next Congress that marries a low but steadily rising carbon price to raise critical revenues with a series of proactive and comprehensive investments in energy technology innovation and deployment.

Alternatively, we can keep chasing the failed USCAP strategy down the rabbit hole...

"Do no harm" is a fine guiding principle

In the end, Doniger's case for a climate/energy bill that "first does no harm" is something I can agree with wholeheartedly. Doniger writes:

[In crafting energy/climate legislation] there are some things that the Senate absolutely must avoid - things that would actually dig a deeper carbon pollution hole. The Senate bill must not include measures that increase carbon emissions, take away the laws already on the books to cut those emissions, or weaken other protections for public health and the environment.

The reality is that there are bad "energy-only" bills and good "energy-only" bills. The good ones are hardly "energy-only" at all, and will make substantive progress towards a low-carbon energy system -- even without a "cap" on stationary source emissions.

The best chance of seeing a good energy bill pass Congress this year and drive America towards a clean energy future is if climate advocates, like NRDC's Doniger and EDF's Fredd Krupp rally behind a new play call to salvage clean energy victory from the jaws of impending defeat. Time is nearly up.

Read more!

With Seconds on the Clock, Democrats May Waste Last Chance for Clean Energy Win

With the final seconds ticking down on the Congressional clock, President Obama and Senate Democrats emerged from a White House summit with Republican moderates Tuesday still lacking any plan to score a last minute win for clean energy.

Wasted opportunity

Establishing a price (any price) on carbon pollution through a(n increasingly weak) cap and trade system continues to be the the preferred climate and energy approach of environmental advocacy groups and Democratic leadership. This preference holds despite the fact that for at least three years, that plan has consistently failed to uncover any route to securing the sixty votes necessary for passage in the Senate (a similar bill narrowly passed the House last June).

Heading into the Tuesday morning White House summit, Republicans eyed as key swing votes for any clean energy or climate bill telegraphed clear intentions: cap and trade would be a practical non-starter, but they were ready to act with the President on measures to promote zero-carbon electricity, electric and plug-in hybrid vehicles, and greater energy technology innovation, clean up dirty coal plants, and improve energy efficiency.

The summit offered President Obama a prime opportunity to reset the Senate energy debate by calling a new play: take up the energy provisions Republicans have offered, counter with a more aggressive proposal on similar fronts, and begin earnest negotiations with GOP swing votes to ensure passage of a final bill that could move America towards a clean energy economy before the Congressional clock expires.

Unfortunately, President Obama let this chance to break from the failed and increasingly desperate cap and trade agenda slip by, using the meeting, instead, to reiterate to the assembled Senators - and greens watching from the sidelines - that "he still believes the best way for us to transition to a clean energy economy is ... by putting a price on [carbon] pollution."

In what seemed to be an effort to convince outside audiences that Obama had not given up on cap and trade, rather than a real display of leadership, the President failed to present any clear plan of action or convince new supporters to back the much-diminished ambitions of a utility-only cap and trade bill. Instead, the White House team emerged from the meeting simply noting that, "Not all of the Senators agreed with this [carbon pricing] approach, and the President welcomed other approaches and ideas..."

Senator John Kerry (D-MA), the dogged architect (with Sen. Joseph Lieberman of Connecticut) of the increasingly embattled Senate cap and trade strategy, boldly declared that Democrats were willing to make even more concessions in the quest for permanently elusive GOP cap and trade supporters.

"We believe we have compromised significantly, but we're prepared to compromise further," Sen. Kerry told reporters.

This after Democrats had already stacked their "comprehensive" climate and energy bill full of enough offsets and cost containment mechanisms to render the emissions "cap" non-binding on covered sectors--and after recent offers to scale back the cap to cover only electric utilities, a sector responsible for just about one-third of U.S. carbon emissions...

Running out the clock

Thus, it seems that Democrats are now poised to waste what little time remains this year on what could be described either as an increasingly desperate effort to appease Republicans firmly opposed to what they've dubbed "a nationwide energy tax," or as an increasingly transparent attempt to assure green supporters they are 'fighting hard' for cap and trade in preparation for pinning their inevitable failure on 'those dastardly Republican obstructionists.'

Regardless, this strategy is all but certain to leave America empty handed on clean energy reform.

As oil gushes into the Gulf and global temperatures continue to rise, coming away from this Congressional year with nothing would be the greatest tragedy of all. But if Democrats can put aside their insistence on a wholly-compromised, "comprehensive" cap and trade bill, there may yet be hope for a political and substantive victory.

Republicans signal opening

Last week, Republicans invited to the White House summit emerged from a quick planning huddle to tell reporters that they would press Obama to drop cap and trade and work with the GOP to promote several provisions to advance clean electricity, electrification of cars and trucks, and research and development of low-carbon energy technologies.

The GOP has several "clean energy proposals which we are for and he's for too," said Senator Lamar Alexander (R-TN), who as Republican Conference Chair is at the center of GOP leadership.

After Tuesday's inconclusive meeting, key swing Republicans reiterated that there was still an opening to move forward on clean energy--if Democrats would drop cap and trade.

Senator Olympia Snowe (R-ME) stated:

"As I have long advocated, working toward energy independence is an imperative for our economic and national security. Which is why today I urged the President to seize control of our own energy destiny and, for the first time, establish clearly defined national timetables for clean energy production, benchmarks for oil consumption reduction, and goals for game-changing research - which no other president has ever done, to ensure we actually attain that independence.

The Maine moderate pointed to bi-partisan measures she had sponsored to promote energy efficiency, renewable electricity generation, and research, meanwhile stating that while she supported a limited carbon-pricing program in principle, "today we are in different and perilous economic times," stating that economy-wide cap and trade was something America "simply cannot afford."

Likewise, Senator George Voinovich (R-OH) characterized the White House meeting as "a clear signal to the president, Senator Kerry and Senator Lieberman that the chances of passing their cap and trade legislation are quite slim."

The senator went on to note:

"On the other hand, there seemed to be consensus that Senator Bingaman's energy bill may be a viable path forward in the Senate. While in need of improvement, it has bipartisan support and presents a variety of policy tools to expand domestic clean energy resources and reduce emissions.

Republicans have thus put a clean energy offer on the table constituting a clear path to bipartisan energy progress - focus on measures to boost clean electricity generation, oil reduction, energy innovation, and efficiency.

Scoring the last minute clean energy win

Herein lies the last opportunity for Democrats to score a win for energy reform. To date, Republicans have backed a number of key Senate proposals that collectively offer the foundations for a bipartisan clean energy bill that could achieve actual progress, despite the limited time to act in the crowded Congressional calendar [1 - see notes at end for more detail]:

Clean electricity generation: Republicans have backed both a (modest but first-ever) requirement that utilities nationwide purchase a portion of their electricity from renewable energy sources [2], as well as a more aggressive clean electricity requirement that would make nuclear power and carbon capture and storage at fossil fuels plants eligible alongside renewables [3]. Democrats have an opportunity to counter-offer with a slightly more expansive proposal, calling, say, for 25% of all U.S. electricity to come from new, zero-carbon electricity sources by 2020 and 35% by 2030, then negotiate from there. The end result would be a mandate to transform the U.S. electricity sector, putting American utilities on a path to a low-carbon future.

Similarly, Republicans have consistently championed financial incentives to deploy zero-carbon electricity sources. They, of course prefer nuclear power, but this offer still provides an opportunity for Democrats to counter. Instead of $10 billion to back loan guarantees for just nuclear power plants [4], Democrats could propose a similar (or even greater) amount of funding to capitalize a Clean Energy Deployment Administration capable of using a variety of flexible credit enhancement and financing mechanisms to spur the deployment of numerous innovative zero-carbon energy sources, including nuclear power, but also a suite of other cutting edge clean technologies [5].

Vehicle electrification and advanced biofuels: Senator Alexander has joined with Democrats Byron Dorgan (ND) and Jeff Merkley (OR) to propose a bill aiming to put the U.S. on track to electrify half of all vehicles on the road by 2030 [6]. A perfect bipartisan response to the unfolding Gulf oil crisis, the proposal represents a major multi-billion-dollar push to roll out charging infrastructure, incentivize the purchase of electric and plug-in hybrid vehicles and trucks, and invent and manufacture advanced batteries here in the United States that would do more to reduce U.S. oil consumption than any 10 or 20 cent increase in gasoline prices imposed by a cap and trade bill.

This electrification push could be coupled with financial incentives to spur advanced non-grain biofuels and escalating requirements to produce flexible-fuel vehicles that can run on gasoline biofuels (another Republican-backed proposal [7]). Combine these two measures to promote flexible-fuel, plug-in hybrids that can run on electricity as well and you've got essentially the very same plan proposed by the cogent David Sandalow (now an Assistant Secretary of Energy in the Obama Administration) to win America's "Freedom from Oil."

Clean energy research and innovation: Investment in energy technology innovation has consistently enjoyed bipartisan support, both from policymakers and the public, which routinely rank greater clean technology investment as their top policy response to energy and climate concerns. A doubling of DOE energy research [8], the scale-up of the newly established Advanced Research Projects Agency for Energy (ARPA-E), and the creation of a new nationwide network of clean energy innovation centers [9] or clusters [10] would each be critical components of a robust U.S. energy innovation system capable of driving both the incremental and transformational innovation needed to make clean energy cheap and ensure the next generation of clean technologies are invented and commercialized in America.

Cleaning up the dirtiest coal plants: Financial incentives to accelerate the shut down of the oldest, dirtiest coal plants in America and new air pollution regulations to clean up remaining plants could deliver huge public health gains and probably even greater emissions reductions than any weakened, utility-only cap and trade bill. Both provisions have enjoyed bipartisan support [11].

A "cash for coal clunkers" program could provide such financial incentives to close the old high-polluting coal plants (many of them pre-dating, and thus exempt from, Clean Air Act regulations) and replace them with cleaner power plants (with one level of incentive to replace the coal plant with a state-of-the-art natural gas plant, and progressively larger incentives for zero-carbon alternatives like renewables and nuclear power). Old, dirty coal plants provide just a small share of U.S. electricity but make up a disproportionately large share of U.S. power-sector greenhouse gas emissions and pollutants (with associated health impacts and economic costs).

Similarly, updated requirements to clean up conventional air pollutants - including toxic mercury as well as the smog and acid rain-forming sulfur dioxide and nitrogen oxide pollution - would both incentivize the worst culprits to shut down rather than install expensive new pollution controls, while requiring the remainder of the coal fleet to clean up its air pollution resulting in widespread public health benefits for everyone.

Enhanced efficiency: New efforts to boost the efficiency of American vehicles, buildings, appliances, lighting, and manufacturing have routinely enjoyed bipartisan support. Greater energy efficiency will help the U.S. economy get more economic bang out of our energy usage. Increasing economic productivity is a goal Republicans and Democrats can clearly come together to secure, and they have; wide-ranging efficiency measures have featured prominently in several bills currently backed by key Republicans [12].

Advancing the production of zero-carbon electricity, electrifying the American transportation fleet, catalyzing clean energy research and innovation, cleaning up the coal fleet, and boosting the efficiency and productivity of the U.S. energy system: these measures represent a nearly full list of the key levers needed to drive down emissions and U.S. dependence on coal and oil, all while building stronger domestic clean energy industries. What's more, these five areas are now ripe for bipartisanship and with Republican support, these clean energy measures presents a key opportunity for Democrats to drive America forward this year towards a clean energy economy.

What will the last play call be?

Obama and Senate Democrats now face a clear choice between two options...

They can waste precious time assuring green supporters they haven't abandoned cap and trade and meanwhile, come up empty handed by squandering the political opportunity presented by the oil catastrophe in the Gulf, appearing weak and inept before a public demanding energy reform, and handing another political victory to a GOP all too eager to enter the midterms having denied Obama and the Democrats one of their key policy priorities. More to the point, Americans will wind up without any substantive energy progress this year.

OR

Democrats can come out of the huddle prepared to build off of Republican proposals already on the table by offering more substantial counter-offers on each front: clean electricity, electrifying transportation, clean energy innovation, energy efficiency and even accelerated coal plant retirement. These energy-focused measures attached to a bill responding to the oil disaster in the Gulf would command strong public support, putting Democrats in a position to finally bargain from the high ground, secure stronger provisions, and score a real win on clean energy before the end of year.

Will it be a "comprehensive energy and climate bill?" No. And that's fine!

The inexorably-weakening "cap" and trade bills Senate Democrats seem willing to swallow are far from comprehensive already--and still unlikely to secure any passage this year.

Faced with ending up empty-handed and beaten, it is time for Democrats to bank these real wins now while making it abundantly clear to the public that this bill does not "check the box" on energy and climate for good.

If Democrats do that, they will have led America on the path to energy reform, and can tell the public that they will continue to lead a bipartisan effort to end America's dependence on dirty fossil fuels next year, if voters will back them in the November midterms.

If instead, Democrats insist on wasting these last few seconds on the obviously failing and increasingly desperate cap and trade agenda, Americans are likely to wind up without any substantive energy progress this year, and Democrats are likely to fare even worse at the polls. The ball is in their court.

Originally posted at the Breakthrough Institute

Notes:

[1] With just weeks remaining for floor votes in the Senate before the midterms hit, there's still a Supreme Court justice and a new Afghanistan commander to confirm, Financial Reform bills to conference, a budget to perhaps pass (prospects there don't look great), and on top of that, the White House just announced President Obama would give a big speech on Immigration Reform later this week, touching off yet another hot button domestic policy issue.

[2] The "American Clean Energy Leadership Act" (S.1462, or ACELA) passed the Senate Energy and Natural Resources Committee last June with bipartisan support from four Republican committee-members: Sens. Lisa Murkowski (AK), Sam Brownback (KS), Jeff Sessions (AL), and Bob Corker (TN). That bill would establish a (modest but first-of-its-kind) requirement that utilities nationwide purchase a portion of their electricity from renewable energy sources (15% by 2020). In addition to this requirement, known as a "Renewable Electricity Standard" (RES) or "Renewable Portfolio Standard (RPS), the ENR Committee bill would: establish a new federal agency to provide low-cost financing to spur the deployment of new clean technologies (the Clean Energy Deployment Administration); ramp up funding for Department of Energy R&D; establish new efficiency standards for buildings, lighting, appliances, industry and manufacturing.

[3] This is consistent with the "Diverse Energy Standard" included in the "Practical Energy and Climate Plan" (S.3464). Introduced by Senator Richard "Dick" Lugar (R-IN) and co-sponsored by Sens. Lisa Murkowski (R-AK and Ranking Member of the Energy Committee), and Lindsay Graham (R-SC, who backed the bill after walking away from the climate plan he drafted with Sens. Kerry and Lieberman in April), the bill has arguably surfaced as the GOP's preferred energy platform. In addition to the "diverse" clean energy standard that includes stronger requirements than the Energy Committee bill above (15% by 2015, 20% by 2020, 25% by 2025 ... 50% by 2050) but allows nuclear power and carbon capture and storage at coal plants to qualify for the utility requirement, the GOP-backed bill would: ramp up vehicle fuel efficiency standards and set the first ever standards for medium- and heavy-duty trucks; establish financial incentives for advanced biofuel production (from non-grain sources) and require new vehicles to be flexible fuel (capable of running on biofuels and gasoline); establish stronger building, appliance, and industrial efficiency standards; ; expand loan guarantees for zero-carbon nuclear power plants; and provide incentives for the retirement of the oldest and dirtiest coal plants in the country.

[4] The "Clean Energy Act" (S.2776) sponsored by Republicans Lamar Alexander (TN) and Mike Crapo (ID) and Democrats Jim Webb (VA) and Mark Warner (VA), would encourage the build-out of new nuclear plants with a major expansion of loan guarantees, providing $10 billion in appropriations to be leveraged into roughly $100 billion in loan guarantees. In addition, the bill would provide $750 million in funding to establish new "mini-Manhattan projects" to advance clean energy research.

[5] The Clean Energy Deployment Administration is included in the bipartisan ACELA bill, see note [2] above. A similar provision passed the House in the Waxman-Markey American Clean Energy and Security Act.

[6] The Electric Vehicle Deployment Act (S.3442), sponsored by Democrats Byron Dorgon (ND) and Jeff Merkley (OR) and Republican Lamar Alexander (TN), aims to put the US on track to electrify half of all vehicles on the road by 2030. The $7-10 billion bill would: launch pilot communities across country to spur adoption of electric and plug in hybrid vehicles (funded at $2 billion per year); subsidize the nationwide build-out of charging infrastructure and purchase of electric and plug-in vehicles, including new credits for medium- and heavy-duty hybrid purchases; provide $1.5 billion for advanced battery research and $250 million for related workforce development and education efforts.

[7] Incentives for advanced biofuels production and flexible fuel vehicles are included in the Lugar energy bill, see note [3] above.

[8] The Energy Committee bill, see note [2] above, would authorizing a doubling of applied research programs at DOE, and basic research programs at DOE and elsewhere are on track to double under the America COMPETES Act originally passed with bipartisan support and signed into law by President Bush in 2007.

[9] These innovation centers would be consistent to the "mini-Manhattan projects" proposed by the Webb-Alexander-Warner-Crapo bill, see note [5] above.

[10] Clean energy cluster programs would extend multi-sector, collaborative research efforts to enhance the strength of regional economic clusters and could be a natural and effective extension of the research programs supported by Republicans. See "Strengthening Clean Energy Competitiveness: Opportunities for America COMPETES Reauthorization"

[11] A "cash for coal clunkers" style program offering $11 billion in financial incentives to accelerate the closure of the oldest, dirtiest coal plants comprising 16% (49 GW) of the coal fleet but representing a disproportionate amount of U.S. pollution of both the carbon and conventional varieties appeared in draft legislation sponsored by Senator Dick Lugar (R-IN). The final version introduced as S.3464 (see note [3] above) included a narrower incentive program for coal plant retirement. Republicans Lamar Alexander (TN) and Susan Collins (ME) and Democrats Tom Carper (DE) and Amy Klobuchar (MT) have sponsored the "Clean Air Act Amendments of 2010" (S.2995) which would impose new 'three-pollutant' air pollution requirements on mercury, SO2 and NOx emissions at power plants.

[12] A wide range of efficiency programs are included in both the bipartisan Energy Committee bill, see note [2], and the Lugar bill, see note [3], as well as numerous other bills co-sponsored or introduced by Republican Senators.

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Consumers voting with their wallets on voluntary carbon offsets

Posted by Hugh Whalan

When you buy a plane ticket, rent a car, pay an electricity bill or even use your credit card, you will often be presented with an option to ‘offset your greenhouse gas emissions’. If you do choose to offset your emissions this way, you are participating in the retail section of the voluntary carbon market. Despite accounting for slightly less than 5% of the billion-dollar voluntary carbon marketplace, the retail market represents one of the clearest ways that carbon-conscious individuals can vote with their wallets on the issue of climate change.

It is surprisingly given this, that so little research has been conducted on retail carbon offset products. As the retail market is the only place where individuals rather than companies are the majority of buyers, this small segment of the market presents researchers with a unique and important chance to understand how and why consumers actively offset their greenhouse gas emissions, as well as their views on climate policy and climate change.

Over the last 18 months I have been fortunate to be involved in the design and implementation of a survey of retail market participants conducted by researchers with Appalachian State University and the University of Alaska at Fairbanks and Environmental Credit Corp. It is the first industry-wide survey focusing on individuals in the carbon markets and yielded some interesting results.

The most important conclusion from the survey is that retail demand for voluntary carbon offsets will likely remain strong even if regulations place a national limit on greenhouse gas emissions. In simple terms, these consumers demand a solution to the climate problem and are willing to pay for it. Cost is a concern, but one which the impacts of climate change trumps more often than not.

Other interesting results are:

• 96% of participants placed a high priority on purchasing carbon offsets that come from projects which generate or utilize renewable energy.
  
• Participants were most likely to purchase carbon offsets as a result of car travel and electricity usage.
  
• 67% identified themselves as Democrats (slightly more than 1% as Republican) and 61.2% had a household with 3 or more people. The average household income for participants was $90,000.

The survey will be conducted on an annual basis. For questions on the survey please contact Jason Hoyle at hoylejw@appstate.edu.

Hugh Whalan is the CEO and co-founder of Energy in Common, a non-profit organization, which allows individuals to make green energy micro-loans to the poor in developing countries.

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After Health Care, Can Democrats Bag Climate Bill?

The Democratic Congress and the Obama Administration have managed to score a historic win on health care reform, one that will pave the way for near-universal health coverage and improve the lives of millions of Americans. Now make way for a bazillion blog posts on 'what does this mean for my pet issue...'

So, what does it mean for the chances of a climate bill this year? My latest exclusive post at theEnergyCollective.com answers that question. Head over to the Energy Collective and check it out.

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“Cap-and-Trade is Dead” in the US: Implications for Australian Climate Policy

By Leigh Ewbank. Cross posted at The Real Ewbank.

It’s official: “cap-and-trade is dead” in the United States. The frank declaration was made by Republican Senator Lindsey Graham during a private meeting with environmental leaders at the weekend. The Washington Post report that the Senators spearheading national climate legislation have rejected an economy-wide cap-and-trade scheme. Senators Lindsey Graham, John Kerry (Democrat), and Joe Lieberman (Independent) are “engaged in a radical behind-the-scenes overhaul of climate legislation” and are “preparing to jettison the broad ‘cap-and-trade’ approach that has defined the legislative debate for close to a decade.”

The collapse of cap-and-trade in the United States has implications for Australian climate policy, making the Rudd Government’s mission to pass a cap-and-trade scheme even more difficult. The Australian Senate has twice rejected Labor’s Carbon Pollution Reduction Scheme (CPRS) and is set to reject the bill for a third time in May. Unlike the previous rejections, the stakes are higher this time around. A third strike for the proposal just months out from a national election would be a demoralising blow for the Labor Party.

The Rudd Government faces a tough political environment. The Opposition will use the US Senate’s abandonment of economy-wide emissions trading to attack the Government. Tony Abbott has shown considerable political nous by betting correctly that the US Congress would not pass emissions trading legislation in the near term. This foresight allowed the Coalition to corner Labor by proposing a suite of “direct measures” to reduce Australia’s carbon emissions. By staking out the logical alternative to carbon pricing measures, the Coalition hopes to position Rudd as a policy copycat or worse—incompetent.

The Greens add another layer of political complexity for the Government. Labor can only win Greens support for the CPRS by agreeing to substantial amendments, but Labor are too risk averse and evidently uncommitted to climate change to make the deal. Similarly, Labor could throw their weight behind the Greens’ interim carbon-pricing measure, but the move gives the minor party a much needed boost heading into the election and inadvertently bolsters the Coalition’s claim that carbon pricing is taxation by another name. In any case, the Government would still need two additional votes for either measure to pass the Senate.

While the Labor Government has the trigger for a double dissolution election they won’t risk one. On one hand, Tony Abbott is polling better than expected and Labor hasn’t quite figured out how to deal with the new Opposition Leader. On the other, public support for the CPRS has declined and the Government fears a scare campaign based on the easy-to-understand “ETS = great big tax” message.

By far the worst option for Labor is to abandon the CPRS entirely. The Prime Minister simply can’t walk back his “greatest moral challenge of our time” statement he made as Opposition Leader and reiterated in his pre-Copenhagen speech to the Lowy Institute. This move would make the Prime Minister and his government look weak and unprincipled in the eyes of the public. Labor is stuck between a rock and a hard place.

While the death of cap-and-trade in the US presents an obvious challenge to Rudd and Labor, it is also an opportunity. The recent development provides the PM with an escape route for his troubled emissions trading scheme. With consistent messaging citing the changes in US climate policy as the rationale for a new approach, Labor can avoid Opposition attacks. The key to success rests on presenting a credible alternative policy with an equally powerful political narrative.

Adopting a nation-building framework for climate change policy is the Government’s best way forward. In addition to providing a potent political narrative to frame their agenda, the approach deals with the technological problem at the heart of climate change. Australian renewable energy advocate Beyond Zero Emissions (BZE) has recently released the executive summary of its Zero Carbon Australia 2020 plan—a detailed blueprint for Australia to transition to 100% renewable energy by the end of the decade. BZE rightly emphasise the need for public investment in critical renewable energy projects as integral for reducing the nation’s contribution to climate change.

Beyond Zero Emissions spokesperson Mark Ogge concedes the Zero Carbon plan is expensive. The plan would require investment in order of $35-40 billion per year for a decade—the equivalent of the 2009 economic stimulus package each year to 2020. Some commentators, politicians, and vested interests will no doubt argue that this level of investment is difficult. Nonetheless, BZE are on the right track. Their cost estimates are based on the ambitious goal to generate all of Australia’s energy from renewable sources by 2020. Implementing the measures over a longer timeframe would make the plan more economically viable, more politically palatable, and still deliver considerable carbon emissions reductions.

The death of cap-and-trade in the US can make Rudd’s job harder, or could be used as the rationale for a new nation-building approach to climate policy. Let’s hope for the latter.

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