Large-scale efforts to pass a broad U.S. climate policy are off the table for at least a couple of years, Washington insiders say, but the noxious political atmosphere shouldn't upend bipartisan energy reforms geared toward cutting industrial emissions.
Building a serious plan around renewable energy and efficiency, support for nuclear power and help for "clean coal" and electric utilities is a starting point, said Jason Grumet, president of the Bipartisan Policy Center. "That's a package you could get some bipartisan support for, and at least enter into a meaningful discussion."
Carbon remains in the cross-hairs, but Grumet and others at the Atlantic Green Intelligence Forum yesterday said a mandatory emissions limit won't lead the policy debate. It can't if Democratic candidates are blown out on Nov. 2, in the race for leadership of one or both chambers of Congress. The incremental approach echoes a suggestion made by President Obama in an interview with Rolling Stone magazine last month that climate policy is likely to be done in "chunks" rather than as comprehensive omnibus bill.
"I worry that we're not going to have any centrists," said Eileen Claussen, president of the Pew Center on Global Climate Change. "It's going to be really hard for the Republicans to maintain discipline and get together, depending on who gets elected."
Climate policy advocates have spent the past several months turning over theories as to how the White House and Democratic Congress lost their grip on the climate change debate, given it had been one of Obama's political priorities. In late summer, Senate Democrats and embattled Majority Leader Harry Reid scuttled any energy and climate debate before the election.
A framework, with utilities at the center
"We lost progress on the fundamental concerns about climate change, and I think we chose not to talk about economic benefits," Grumet said. "I don't think we're going to recover from that by next January. Rather than crashing into that same wall again, there are other important legislative strategies."
James Connaughton, executive vice president of Constellation Energy and former White House official under the George W. Bush administration, said the challenge for Republicans is picking an idea to replace cap and trade. Public polls suggest legislation passed in the U.S. House in the summer of 2009 that would cap greenhouse gas emissions and create an economywide program for trading pollution permits is more a symbol of Democratic profligacy than a well-understood policy. But Republican and tea party candidates are pummeling the legislation as a jobs killer and drain on future economic growth.
The policymaking challenge hasn't changed, Connaughton said. How far and how fast should the government go to force reductions in conventional air pollutants and carbon dioxide emissions tied to climate change, remains a question, he said.
Further, Grumet said, pressure to address toxic air pollutants that affect future generations forces the issue in Congress, regardless of its political persuasion.
There remains a framework for a debate, Connaughton contends. The bulk of the electric power industry agreed to slash carbon emissions 80 percent by 2050, he said, matching the White House's emissions-reduction goals. It's unclear the extent to which this is true, given that Senate meetings earlier this year were behind closed doors. A utility-only proposal to ratchet down emissions emerged at the end of months of tense discussions about how to achieve consensus on a broad plan addressing industrial emissions.
'Small ball' with focus on natural gas
With or without direction from the U.S. government, electric utilities and other companies are making investment decisions.
Jeffrey Holzschuh, chairman of the Morgan Stanley Global Power and Utility Group, said the sclerotic pace of implementing regulations remains an issue for industries. "It's a very difficult environment for a board of directors or management team to figure out what's best for shareholders," he said.
"It makes capital incredibly expensive," Holzschuh added. "It's not only how the rules get constructed and what the rules are; it's the timing of it, and it's so far out in some cases."
Holzschuh and Connaughton said companies are considering short-term options before pulling the trigger on longer-term investments.
"You make minimalist decisions," Connaughton said. "You operate within all the constraints of uncertainty."
Earlier this month, Constellation slowed development of a nuclear reactor project in Maryland after rejecting the terms of a loan guarantee offer from the U.S. Energy Department. Its partner, Electricite de France (EDF), has offered to restructure the financial package to keep the project alive.
Connaughton characterized Constellation's decision to press hard to build an expensive nuclear power plant -- despite great uncertainty about financing and natural gas prices -- as a bold step in the right direction.
"That's what you want to see in this space, just like you see in telecom. The big companies can compete nationally. They put in big fiber-optic networks and go after the big things," he said. "What you're going to see here is a lot of small-ball, a big focus on natural gas."
Without some longer-term policy guarantees for renewable energy, that clean energy source also isn't part of Constellation's long-term portfolio. "We'll stop when the incentives run out," he said, "because it's not profitable anymore. There are lots of small, incremental decisions."