While Congress battles over proposals for stripping U.S. EPA of its power to regulate greenhouse gases, two Democrats from manufacturing states are in talks with the White House over how to keep emission curbs from driving U.S. companies overseas.

Sen. Sherrod Brown (D-Ohio) and Rep. Mike Doyle (D-Pa.) say their discussions with the Obama administration and other lawmakers are aimed at protecting the steel, cement and other energy-intensive industries from climate change rules that could put them at a disadvantage in global competition.

Both lawmakers say they support EPA regulation -- Brown calls tackling climate change a moral issue, while Doyle voted for a controversial climate bill that cleared the House in 2009 -- but both fear EPA could craft rules that impose unnecessary costs on industry.

"Industries that drive Ohio's and our nation's economy -- manufacturers, farmers, electric power generators -- need assurances that greenhouse gas reductions will be crafted to enhance our nation's competitiveness by not impeding business and job growth," Brown said in a recent letter to President Obama. He suggested a strategy of "investments and well-defined incentives" for industry to meet the desired targets.

For his part, Doyle prepared an amendment offering trade protection for industry during the March 15 Energy and Commerce Committee markup of a bill by Chairman Fred Upton (R-Mich.) that would prevent EPA regulation of carbon dioxide emissions from stationary sources. A co-sponsor of the Doyle amendment was Washington Democrat Jay Inslee, who with Doyle added language in the 2009 climate bill that allocated free emissions allowances to industry.

The Doyle-Inslee amendment was not granted a vote in Energy and Commerce because it dealt with trade, an issue beyond the committee's jurisdiction.

The Upton bill is on track to clear the House before the Easter break, while its Senate companion measure sponsored by Sen. James Inhofe (R-Okla.) could receive a vote as soon as next week, as part of an unrelated measure. The Senate appears less likely to approve a permanent stay on EPA authority, though it could attract strong support.

Doyle said in an email that he is "continuing to work on this issue" and notes he has been in contact with Brown and Sens. Max Baucus (D-Mont.) and Jay Rockefeller (D-W.Va.) on "the Upton-Inhofe bill."

"As you know, the Senate gets the next bite at the apple, and I wouldn't dream of predicting how that's going to play out, but I think it's important the White House continue to be involved throughout the process," Doyle wrote.

A Brown aide said his boss was frustrated that more lawmakers were not seeking middle ground on EPA regulation, instead of claiming that any greenhouse gas rules would spell disaster for the entire manufacturing sector.

A polarized Congress has made comprehensive climate legislation a virtual impossibility, and so some of the strategies Brown and Doyle have pursued in the past appear less practical. For example, without a cap-and-trade program for carbon dioxide, industry has no use for the free allowances Doyle helped negotiate as part of the 2009 carbon bill.

The 2009 measure by Reps. Henry Waxman (D-Calif.) and Ed Markey (D-Mass.) would also have allowed for a de facto tariff for energy-intensive goods imported to the United States beginning after 2020 from major emitter nations that lacked similar carbon constraints.

Brown has supported such a program in the past but has said more recently that it would require a new authorization from Congress, which is unlikely given the current political environment. Trade experts have also raised concerns about whether a program of this kind would be found to violate international trade agreements.

Instead of focusing on protection measures that would require new legislative authority, a Senate aide said talks with the White House and EPA focus more on how Clean Air Act rules can be crafted in such a way as to minimize costs to manufacturers.

"There are just a couple of things that we're concerned about, and if we can focus and fix a couple of things, EPA regulation of greenhouse gases is a lot better," the Senate aide said.

Focus of talks

EPA has already phased in some Clean Air Act rules for carbon and is moving to put additional requirements in place later this year and in 2012, including New Source Performance Standards (NSPS) for electric utilities and oil refineries. EPA has not said when it will phase in NSPS for other sectors, but such rules are expected to eventually take effect for heavy manufacturing.

Brown has said he is concerned about the Prevention of Significant Deterioration (PSD) rules that took effect in January and has floated the idea of supporting a one-year timeout to allow more time to reach an agreement on regulations.

Doyle has taken a slightly different view. Following the Energy and Commerce Committee markup of the Upton bill, Doyle said current PSD rules for greenhouse gases would have very little effect on industry, because they kick in only when a new facility is brought online or expanded in such a way to significantly increase emissions.

"Unless there are plans to dramatically increase capacity or build new plants, which are not really in the cards for the foreseeable future in these industries -- they're not expanding, they're contracting somewhat -- these regulations that are being talked about really have no practical effect on them right now," Doyle said.

The Senate aide said there had been discussion about dropping PSD permitting requirements for carbon. But David Doniger, policy director at the Natural Resources Defense Council's Climate Center, said that even if a facility does trigger those requirements they would have minimal effect on that plant's balance sheet, let alone on the industry as a whole.

Doniger noted that any upgrade to a plant that resulted in a net improvement in emissions -- like the purchase of a new boiler -- would not trigger New Source Review.

"You can't have in a broad sense a significant competitiveness impact from applying New Source Review to an isolated project here and there," he said. "So that's why we disagree with Senator Brown's concern about this impact of the permitting program; it's just not going to affect enough facilities and it doesn't impose particularly demanding requirements for facilities."

Even when new source standards eventually phase in for various manufacturing industries, Doniger said they would cost emitters less per ton of carbon than the same emitters would have owed for allowances under the Waxman-Markey bill -- though the Doyle language would have provided manufacturers with enough free allowances to offset all of their emissions in the early years of the program.

Doniger pointed to an analysis by Dallas Burtraw, a senior fellow at the think tank Resources for the Future, which found that in the first decade of the program, 14 percent of industry costs under the House-passed climate bill would have gone to carbon-control efforts and retrofits for facilities. Burtraw said that the cost of ratcheting down emissions might be slightly higher under EPA regulation than it would have been under the more flexible market-based program.

The Senate aide said many of the talks between the Capitol Hill staff and administration officials centered on how best to craft future NSPS programs, because there is "a lot of flexibility there to do either the right thing or the wrong thing."

Cap and trade by another name?

Michael Livermore, executive director of the New York-based Institute for Policy Integrity, said that if lawmakers and the administration are concerned about achieving maximum reductions at minimum cost they should revisit the idea of using a cap-and-trade model.

"The New Source Performance Standards can be written in a lot of different ways," Livermore said. "To the extent that they're written in a way that allows for flexibility and that kind of thing it will look like a cap-and-trade program and therefore be less expensive."

Cap and trade has become a politically charged phrase since the breakdown of the climate debate in the Senate last year, and EPA Administrator Lisa Jackson has said her agency won't use a similar approach for its climate regulations.

But Livermore said that by capping overall emissions and allowing emitters to find the most cost-effective ways to limit emissions, EPA could contain costs while still making significant overall reductions.

"There are basically two things you can do to reduce cost: You can allow more greenhouse gases to be emitted or you can build more flexibility into the program," he said.

His suggestion for EPA: "Just make it more like a cap-and-trade program, but you don't call it a cap-and-trade program."

Meanwhile, Alicia Meads, energy and natural resources policy director for the National Association of Manufacturers, said that no matter how EPA crafted its rules -- even if it exempted manufacturing but continued to regulate the energy sector -- curbing carbon would be "extremely costly."

"A lot of uncertainty still exists, and that uncertainty is difficult for manufacturers to deal with as they decide on expansion plans and increasing employment numbers in the United States," Meads said.