One year ago this Friday, Senate Majority Leader Harry Reid, D-Nev., abandoned an effort to pass comprehensive climate-change legislation in Congress.
The bill would have penalized polluters and created financial incentives for cleaner fuels. Its failure is affecting far corners of the economy and the nation’s policy and political landscapes. Here’s a rundown of major repercussions.
1. Natural gas becomes “explicit” winner. When passage of a comprehensive climate policy was within sight in the last Congress, natural gas—the cleanest fossil fuel—was dubbed a “bridge” fuel to help the economy make a transition from dirtier sources, like oil and coal, to greener ones, like solar and wind. Now, natural gas is like either a really long bridge or a never-ending one. Prices have plummeted to near-record lows in light of massive discoveries of shale gas, and the industry is thriving. “The price on carbon was supposed to make natural gas an implicit winner,” said Kevin Book, managing director at ClearView Energy Partners, a Washington-based energy consulting firm. “The lack of a price on carbon makes natural gas an explicit winner—and for longer, too.” The industry faces criticism over its controversial hydrofracking process (for extracting gas from shale) and other issues. But those concerns are unlikely to dent its burgeoning economic prospects.
2. Nuclear power renaissance is (still) not. The nuclear industry lost big when Congress failed to enact a price on fossil-fuel carbon emissions, and the setback was magnified by the low price of natural gas. Then it was jolted in March by Japan’s Fukushima meltdown, which raised new worries about the safety of U.S. nuclear plants. “If there was one parameter you could use to track new interest in new nuclear over the years, it’s the price of natural gas,” said Tony Pietrangelo, the Nuclear Energy Institute’s chief nuclear officer. Natural gas prices are now hovering at about $4.50 per million British thermal units and would need to hit at least $7 for new nuclear power to be competitive, Pietrangelo said. There hasn’t been a new nuclear plant built in the United States for three decades. And despite lofty promises, the Obama administration has doled out only one loan guarantee to build two new reactors.
3. Renewables’ growth spurt languishes. Buoyed by billions of stimulus dollars doled out at the onset of Obama’s presidency, wind- and solar-power companies exhibited record growth in 2009 and 2010. And with climate legislation in play last Congress, they seemed poised to soar. But now that the stimulus dollars have run out, and there are no immediate prospects for a policy to penalize carbon emissions, the growth of renewables in this country has slowed. The industry has been forced to subsist on state renewable standards and uncertain federal tax policies, although it is growing elsewhere in the world. “The renewable-energy space is shifting abroad because we have no demand here in the United States,” said Eileen Claussen, president of the Pew Center on Global Climate Change.
4. “Clean coal” remains out of reach. Citing an “uncertain climate policy” and a still-weak economy, American Electric Power, one of the nation’s largest coal-burning power companies, recently shelved plans to develop “clean-coal” technology at a power plant in West Virginia. The process, known as carbon capture and sequestration, had been considered the industry’s best chance for thriving in a time of tough controls on carbon pollution. But the prospect of those controls receded when Democrats all but abandoned their efforts to pass cap-and-trade legislation this year. American Electric Power’s retreat was one of the clean-coal industry’s most concrete setbacks. Cap-and-trade legislation would have provided both an imperative to burn power more cleanly and money to invest in carbon-capture technology. “Lack of a price [on carbon] means you have neither the carrot nor the stick to get those kinds of retrofits built,” said ClearView’s Book.
5. EPA reluctantly rolls out carbon regulations.The most politically explosive repercussion of failing to pass climate legislation has been the role that the Environmental Protection Agency is now being required to play. President Obama did not want EPA to control greenhouse-gas emissions; the implicit threat of such regulation was supposed to be the stick to prod lawmakers into coalescing around a market-friendly cap-and-trade system. But EPA is now bound by a Supreme Court decision to fill the legislative void with its less business-friendly command-and-control regulations. EPA is drafting the rules this year and hopes to finalize them in 2012. Congress could succeed in delaying the standards until after the 2012 elections. That uncertainty is creating a mishmash of business decisions, with industry groups warning that the rules will wreck havoc on the economy, as well as an overall stalemate in energy policy.
This article appears in the July 20, 2011, edition of National Journal Daily.