Lies, Damn Lies, and Global-Warming Rules

The president is about to take a major step to fight global warming. Here’s what you need to know.

US President Barack Obama speaks during a press conference in the Brady Press Briefing Room at the White House in Washington, DC, October 8, 2013. Obama Tuesday sought to reassure jittery markets and nervous allies that the United States would continue to pay its bills despite the current political crisis. 
National Journal
Ben Geman and Clare Foran
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Ben Geman and Clare Foran
May 29, 2014, 9:09 a.m.

Pres­id­ent Obama prom­ised to take ac­tion on glob­al warm­ing with or without Con­gress’s per­mis­sion. Next week, he’ll tell the world how he plans to do it.

The ad­min­is­tra­tion is pre­par­ing to re­lease the cent­ral pil­lar of Obama’s cli­mate-change agenda: a pro­pos­al for far-reach­ing rules that will re­quire power com­pan­ies to cut car­bon emis­sions.

The rules will mark the most sig­ni­fic­ant fed­er­al ac­tion on cli­mate change since Demo­crats’ cap-and-trade bill died in the Sen­ate four years ago, and they’re Obama’s best shot at adding broad ac­tion on glob­al warm­ing to his leg­acy.

The rules will also touch off a polit­ic­al war of the first or­der, of­fer­ing battle­ground for en­vir­on­ment­al­ists, in­dustry groups, and politi­cians to fight over the na­tion’s en­ergy fu­ture.

Here’s what to watch for when the ad­min­is­tra­tion pulls back the cur­tain.

Don’t Be­lieve the Hype

In­dustry back­ers and en­vir­on­ment­al­ists are serving up plenty of spin in an at­tempt to win the pub­lic-opin­ion battle over the En­vir­on­ment­al Pro­tec­tion Agency’s cli­mate rules, but the mes­saging will be long on fic­tion — or, at the very least, on spec­u­la­tion — and short on facts.

The U.S. Cham­ber of Com­merce is claim­ing that the reg­u­la­tions for ex­ist­ing power plants will force con­sumers to pay bil­lions of dol­lars in ad­di­tion­al elec­tri­city costs, while the Nat­ur­al Re­sources De­fense Coun­cil, an en­vir­on­ment­al heavy­weight, claims that the rule will ac­tu­ally lower your util­ity bill.

The mes­saging re­flect both sides’ re­cog­ni­tion that the way to make the pub­lic care about these rules is to con­nect the policies to people’s wal­lets. But at­tempts at car­bon ac­count­ing on both sides of the polit­ic­al spec­trum are highly spec­u­lat­ive and vir­tu­ally guar­an­teed to come up short.

That’s be­cause these rules are in their open­ing act, and an­swers about them won’t come un­til we’re much closer to the fi­nale.

Monday’s reg­u­la­tions are a draft and aren’t ex­pec­ted to be fi­nal­ized for at least an­oth­er year. That means vari­ables that enter in­to elec­tri­city price de­term­in­a­tions — such as the way the rules af­fect state policies, mar­ket forces, and tech­no­logy in­nov­a­tions — won’t be set in stone for a long time. Eco­nom­ic mod­els used to pro­ject costs may serve as an edu­cated guess for now, but that still makes them a guess.

Then there’s the pro­jec­tion prob­lem. States aren’t ex­pec­ted to be­gin com­ply­ing with the rules un­til some­time between 2018 and 2020. That’s a long way off, and a lot could change between now and then.

Vari­ables like the cost of elec­tri­city ginned up by fossil fuels and re­new­able en­ergy are sub­ject to change over time. Nat­ur­al-gas prices, for ex­ample, are fam­ous for their volat­il­ity. And while gas prices are re­l­at­ively low right now, there’s no way to know with ab­so­lute cer­tainty how long that will last. As a res­ult, price pre­dic­tions based on as­sump­tions about the fu­ture price of gas and re­new­ables are likely to be wrong.

“Gen­er­ally, re­pla­cing low-cost sources with high­er cost sources can raise power prices. With this many un­knowns, however, any gen­er­al­iz­a­tion is likely to be gen­er­ally wrong,” said Kev­in Book, the founder of en­ergy ana­lys­is firm Clear­View En­ergy Part­ners.

The Hype Will Be Massive

The rule’s res­ults won’t be clear for years, but the massive polit­ic­al, lob­by­ing, and leg­al battle will be­gin im­me­di­ately.

In­dustry play­ers see the reg­u­la­tions as a threat to their bot­tom line, while en­vir­on­ment­al­ists view the cli­mate rules as their best bet to crack down on power plants’ car­bon pol­lu­tion. And so both sides are wa­ging a two-track cam­paign in which they will both lobby the ad­min­is­tra­tion and vie for pub­lic sup­port.

Cap­it­ol Hill is also clam­or­ing to get in on the ac­tion. Demo­crats who are se­cure in their seats have already giv­en the pres­id­ent plenty of cov­er by loudly de­fend­ing the reg­u­la­tions. Re­pub­lic­ans, on the oth­er hand, are do­ing their best to tear down any jus­ti­fic­a­tion for the rules. House Speak­er John Boehner sharply cri­ti­cized the cli­mate rules ahead of their re­lease on Thursday, say­ing: “Every pro­pos­al that has come out of this ad­min­is­tra­tion to deal with cli­mate change in­volves hurt­ing our eco­nomy and killing Amer­ic­an jobs.”

The White House is put­ting its highest-pro­file people front and cen­ter to de­fend the rule.

After the Cham­ber of Com­merce said on Wed­nes­day that the reg­u­la­tions would kill jobs and cause elec­tri­city prices to soar, EPA took the un­usu­al step of dir­ectly re­but­ting the re­port while seni­or White House ad­viser John Podesta took to Twit­ter to bash the ana­lys­is.

The cli­mate rules are the pres­id­ent’s best chance at shor­ing up a leg­acy on cli­mate change, and he knows it. For the pres­id­ent, it’s per­son­al. And it’s high-stakes for every­one in­volved.

The Whole World Is Watch­ing

EPA’s au­thor­ity ends at the U.S. bor­der, but the rules’ in­flu­ence won’t.

Get­ting the rules out ahead of up­com­ing United Na­tions talks is im­port­ant, said Robert Stav­ins, a Har­vard Uni­versity ex­pert on in­ter­na­tion­al emis­sions policy. World lead­ers will con­vene in Par­is in late 2015 for a make-or-break meet­ing that is sup­posed to yield a glob­al pact on green­house-gas emis­sions.

“It will in­crease the cred­ib­il­ity of the U.S. rep­res­ent­at­ives in the in­ter­na­tion­al ne­go­ti­ations in Lima in 2014 and Par­is in 2015, and may there­fore en­able the U.S. to be some­what more in­flu­en­tial in the talks,” said Stav­ins, who’s with Har­vard’s John F. Kennedy School of Gov­ern­ment.

Oth­er na­tions will be watch­ing care­fully.

“The Par­is Agree­ment will be heav­ily in­flu­enced by the sense of wheth­er the U.S. is tak­ing the is­sue of cli­mate change ser­i­ously or not,” said Jen­nifer Mor­gan, dir­ect­or of the cli­mate and en­ergy pro­gram at the World Re­sources In­sti­tute, an en­vir­on­ment­al think tank. “If the ad­min­is­tra­tion does pro­pose reg­u­la­tion that is am­bi­tious and demon­strates lead­er­ship to de­car­bon­ize the power sec­tor, it will cer­tainly in­spire more am­bi­tion from oth­er coun­tries.”

The White House, for its part, clearly views the do­mest­ic rules as a dip­lo­mat­ic tool. Obama has re­peatedly ar­gued that a more-ag­gress­ive U.S. car­bon policy is needed to cre­ate lever­age in in­ter­na­tion­al cli­mate talks, where the United States will at­tempt to win mean­ing­ful com­mit­ments from China (the world’s top car­bon pol­luter) and In­dia to ad­dress their con­tri­bu­tions to cli­mate change.

He made that point briefly in a for­eign policy speech Wed­nes­day while tak­ing a dir­ect shot at GOP cli­mate skep­tics.

“Amer­ic­an in­flu­ence is al­ways stronger when we lead by ex­ample,” Obama said in a speech to West Point gradu­ates. “We can’t ex­empt ourselves from the rules that ap­ply to every­body else. We can’t call on oth­ers to make com­mit­ments to com­bat cli­mate change if a whole lot of our polit­ic­al lead­ers deny that it’s tak­ing place.”

The Rules Will Make Their Mark in the Sen­ate’s Tight­est Races

Look for the rules to play a polit­ic­al role in sev­er­al close Sen­ate races where vul­ner­able Demo­crats are seek­ing reelec­tion in con­ser­vat­ive states.

Re­pub­lic­an polit­ic­al op­er­at­ives al­leging the rules will hurt the eco­nomy will seek to teth­er law­makers, in­clud­ing Louisi­ana’s Mary Landrieu and Arkan­sas’s Mark Pry­or, to Obama’s cli­mate agenda. Both have op­posed green­house-gas reg­u­la­tions in the past; look for them to try to sep­ar­ate their own en­ergy plat­forms from the one emer­ging from the White House.

Cli­mate change is nev­er a top-tier is­sue in polling. But it could emerge in the polit­ic­al fore­ground like nev­er be­fore this year. In ad­di­tion to the rules, bil­lion­aire en­vir­on­ment­al act­iv­ist Tom Stey­er is plan­ning to pour $100 mil­lion in­to Sen­ate and gov­ernor’s races to pro­mote can­did­ates who sup­port emis­sions curbs.

The Rules Could Cre­ate New Day­light for Car­bon Taxes — But Not Where You Think

The rules will re­portedly re­quire car­bon cuts in the range of 20 to 25 per­cent, but they’re ex­pec­ted to provide states and util­it­ies with lots of lee­way on how to meet that man­date: Think ini­ti­at­ives pro­mot­ing re­new­able en­ergy and en­ergy ef­fi­ciency.

Some states have already moved ahead with cap-and-trade sys­tems — which already ex­ist among a group of North­east and Mid-At­lantic states, as well as in Cali­for­nia — and those plans may pass EPA muster if their caps are tight enough.

But what about car­bon taxes?

They’re dead on ar­rival at the fed­er­al level, even though some eco­nom­ists call them the most straight­for­ward, mar­ket-based way to gain emis­sions cuts. They haven’t caught on at the state level, either, but some car­bon-tax ad­voc­ates want EPA to sig­nal that a state could de­cide to im­pose its own car­bon tax as an av­en­ue for com­ply­ing with the reg­u­la­tions.

This pa­per from ex­perts with Stan­ford Uni­versity and the Brook­ings In­sti­tu­tion, who say a car­bon tax is the most cost-ef­fect­ive way to cut emis­sions, makes the leg­al case that the Clean Air Act provides EPA plenty of lee­way. It also ar­gues, “EPA can en­cour­age this ap­proach by provid­ing the states with mod­el tax levels and com­pli­ance sched­ules in its emis­sion guideline.”

So will EPA use the “T” word?

“The hope is that EPA will give states broad flex­ib­il­ity to de­ploy whatever policy mech­an­isms make the most sense for them, which could in­clude a car­bon tax that would achieve the needed emis­sion re­duc­tions,” said Megan Cer­on­sky, a seni­or law­yer with the En­vir­on­ment­al De­fense Fund.

“I don’t know what kind of spe­cificity the agency will provide in terms of ‘ex­amples’ of policy mech­an­isms that would be ap­prov­able — you might in­stead see a set of cri­ter­ia that would en­sure that the needed emis­sion re­duc­tions will be achieved and are en­force­able,” she said.

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