Obama's Carbon-Reduction Plans May Be Scaled Back to Electricity Sector

President Barack Obama, who meets with lawmakers at the White House this week to discuss energy legislation, may have to abandon a pollution-reduction program for the whole U.S. economy and push instead for new laws that target the electricity-producing companies.

A plan to cap carbon-dioxide emissions from nearly every sector, favored by Obama and many Democrats, is stalled in the Senate and there isn’t enough time this year to get it passed, Eileen Claussen, president of the Arlington, Virginia-based Pew Center on Global Climate Change, said in a telephone interview.

“The longer we keep batting around proposals that do not have much of a chance, the less likely we are to get something that does have a chance,” Claussen said.

A cap-and-trade program for greenhouse gases, in which companies would buy and sell a declining number of pollution rights, was a major feature of the first budget plan Obama sent to Congress in February 2009. Still, after the House passed cap- and-trade legislation in June 2009, climate change took a back seat to overhauls of the health-care system and banking sector.

Obama’s best chance for getting new greenhouse gas limits through Congress this year is scaling back the economy-wide cap- and-trade program in the House bill so it applies only to the electricity sector, Claussen said.

Under another alternative, cap-and-trade would be dropped and replaced with a requirement that utility companies buy more electricity from carbon-free sources like wind farms and solar panels, Claussen said. Burning coal, oil and natural gas to generate electricity accounts for roughly one-third of U.S. greenhouse gases, according to Environmental Protection Agency data.

Obama Meeting

Obama plans to meet June 23 with a group of Senate Democrats and Republicans at the White House to discuss energy legislation. In an Oval Office address last week, he said the BP Plc oil spill in the Gulf of Mexico should spur new laws to “change how we produce and use energy.” He didn’t insist that the Senate pass the House cap-and-trade bill and said he’s open to “other ideas.”

Obama wants “to pass a comprehensive energy bill that reduces our dependence on foreign oil, makes key investments in the areas of alternative energy” and “deals fundamentally with the environmental degradation that happens from carbon pollution,” White House Chief of Staff Rahm Emanuel said yesterday on ABC’s “This Week.”

Senator Joseph Lieberman, a Connecticut independent who is pushing a revamped cap-and-trade bill that charges power plants, factories and oil refineries a price for the carbon dioxide produced from burning coal, oil and natural gas, said yesterday he’s willing to consider a scaled-back plan that begins with utilities.

‘Significant Step’

“That’s a significant step forward to a better, safer country,” Lieberman, who co-wrote the cap-and-trade plan with Massachusetts Democrat John Kerry, said on CNN’s “State of the Union” program.

It usually requires 60 out of 100 votes to pass major legislation through the Senate, and there are about 50 senators willing to support a carbon-pricing plan, Lieberman said. Passing legislation this year to limit the greenhouse gases scientists have linked to climate change is still possible because another 20 senators are undecided, he said.

Scaling back Kerry and Lieberman’s economy-wide plan for pricing carbon to the power sector, which accounts for roughly one-third of U.S. greenhouse gas emissions, won’t help it pass Congress this year, Senator Lisa Murkowski, an Alaska Republican, said yesterday on CNN.

“It still puts you in the world of cap-and-trade,” Murkowski said.

Economic Impact

Lawmakers are worried about the impact of a carbon price on energy prices and job growth as the economy emerges from the worst recession since the Great Depression, Murkowski said.

“I don’t think that there is the political ability to put a price on carbon as we’re speaking.”

Murkowski said Democrats should instead take up a bill that cleared the Senate Energy and Natural Resources Committee last year that requires utilities buy 15 percent of their electricity from renewable sources such as wind, solar, and geothermal power plants by 2021.

The renewable electricity standard, combined with the bill’s tougher energy-efficiency standards for buildings appliances and industrial equipment, “puts us clearly on that path to reduced emissions,” said Murkowski, who voted for the bill when it was before the energy committee.

Including Nukes

Last week, Murkowski also put forward a plan from Senator Richard Lugar, an Indiana Republican, as the basis for legislation that could win the 60 votes needed to pass the Senate this year.

Lugar’s plan would treat new nuclear reactors and coal- fired power plants that capture and store their carbon dioxide emissions the same as wind farms and solar panels under a “diverse energy standard.”

The Edison Electric Institute, which represents investor- owned utility companies, has been focused on economy-wide cap- and-trade proposals in the House and Senate and hasn’t yet taken a position on the alternative plans for the power sector, Dan Riedinger, a spokesman for the Washington-based trade group, said in a telephone interview.

Willing to Discuss

The Electric Power Supply Association, which represents companies that generate and sell electricity in wholesale power markets, is willing to discuss a cap-and-trade program that’s limited to the power sector or a renewable electricity standard, John Shelk, chief executive officer of the Washington-based industry body, said in a telephone interview.

Still, an economy-wide price on carbon dioxide emissions remains the EPSA’s “preferred position” and the alternatives to it may “have their own substantive and political difficulties,” Shelk said.

Some Senate Democrats are urging Obama to shelve plans to directly regulate greenhouse gases, either through new legislation or by the Environmental Protection Agency.

Energy legislation to be considered this year should focus on cleaning up the Gulf oil spill, caused by a fatal April 20 explosion on a BP-leased rig, compensating its victims and speeding development of “clean energy technologies,” Senator Jay Rockefeller, a West Virginia Democrat, said in an e-mail.

Energy Legislation

“We need to set aside controversial and more far-reaching climate proposals and work right now on energy legislation that protects our economy,” said Rockefeller, who is pushing for a two-year delay of the EPA’s carbon dioxide regulations for industrial sources like power plants.

Senate Majority Leader Harry Reid, a Nevada Democrat, wants to bring up energy legislation next month. Senate Democrats didn’t decide at a June 17 meeting whether the legislation should impose limits on carbon dioxide emissions or set a renewable electricity standard and Reid plans another set of talks this week.

“They need to decide very quickly what they’re going to do,” Robert Gramlich, a senior vice president at the Washington-based American Wind Energy Association, said in a telephone interview.

If energy legislation doesn’t clear the Senate in July, then it probably can’t pass Congress this year as lawmakers’ attention shifts to the November elections, Gramlich said.

“It’s time for everybody to get serious,” he said.

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To contact the reporter on this story: Simon Lomax in Washington at slomax@bloomberg.net.

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