Here’s the deal: Right now, two things are happening in parallel. The first is getting all the attention, but the second is, in practical terms, more significant. Yet the first may screw up the second. Let me explain.
The first thing is, Democrats in the Senate are now talking about passing a limited cap-and-trade system that only covers electric utilities. This is widely seen as a second-best measure, something short of an economy-wide system but better than no CO2 restrictions at all. Sen. Jeff Bingaman (D-N.M.), among others, is working on legislative language for such a system (though he has said he’s skeptical it can get to 60 votes). Senate Majority Leader Harry Reid (D-Nevada) is apparently going to go for it, including such a system in the coming energy bill, and he’s deep in negotiation with various stakeholders about it.
The second thing is, EPA is working on a whole suite of new Clean Air Act regulations. I’m not talking about the much-discussed EPA regulation of greenhouse gases—I mean tightened standards on traditional (“criteria”) air pollutants. The Clean Air Act dictates that EPA regularly revisit pollution standards and update them to reflect the best current science. Needless to say, that wasn’t done during the Bush years, so there’s a huge backlog of work. Every single criteria pollutant is being revisited. The upshot is, there are tons of new standards either recently released or on their way in the next year or so. (Also relevant are upcoming regulation of coal ash and tightened Clean Water Act standards.)
The utilities see an opening here. Their support will be crucial for getting the energy bill through the Senate. In exchange for their support, they are now asking to be exempted from the EPA’s new rules (as they are in Sen. Dick Lugar’s [R-Ind.] proposed energy bill). Darren Samuelsohn and Coral Davenport have a great story today on the heated negotiations going on around this issue as we speak.
I’ve been planning a long post, or even series of posts (whee!), on this subject for a long time. There’s a lot of complex history and background that needs to be understood to really get what’s going on. But I’m on vacation, dammit, and I’m not going to start writing that post now.
Instead, let me just cut to the core point: A deal to exempt utilities from new Clean Air Act rules in exchange for their support for a utility-only cap-and-trade system would be a terrible deal. Terrible. I’ve resisted the repeated tendency of greens to say this or that compromise renders the climate bill “worse than nothing,” but this deal really would do that: it would make the bill worse than nothing. It would be a step backward, on both climate and health grounds. Any environmental group that supports such a deal should be scorned by progressives and cut off by progressive funders. (I’m extremely gratified to hear Samuelsohn report that green groups are, so far, holding firm on this.)
Why would it be so bad? Because the new Clean Air Act regulations are going to have bigger, faster, and more substantial effects on the power sector than any watered-down utility-only cap-and-trade system. Those regulations will eliminate more pollution, shut down more dirty coal plants, and avoid more greenhouse gases than a utility-only cap-and-trade system.
The power sector is terrified. After putting off needed investments in new, cleaner generation for years and years—aided and abetted by simpatico regulators in D.C.—all the sudden they’re going to have to start making those investments. And quickly! They might have to scramble, and innovate, and maybe even change their business models! Some of them might even have to…gasp…raise rates (which have been artificially suppressed for years)!
Utilities are extremely accustomed to their moldy old business models and practically allergic to innovation, so they’re reacting to the coming regulations with the same strategy they’ve always used: whining to politicians. They’re telling politicians that the regulations will force coal plant shutdowns faster than replacement generation can be found. There will be reliability issues. Brownouts! Puppies will freeze! Grandma will bake!
It’s bull—the same bull they’ve been peddling for years. If they get away with it, it will mark the true devolution of the climate bill into farce.
More, probably much more, when I’m back next week.