This week National Journal’s Energy Experts Blog poses the question: “What’s holding back energy & climate policy.” So far 14 wonks have posted comments including yours truly. What I propose to do here is ‘revise and extend my remarks’ to provide a clearer, more complete explanation of Capitol Hill’s energy lethargy.

To summarize my conclusions in advance, there is no momentum building for the kind of comprehensive energy legislation Congress enacted in 2005 and 2007, or the major energy bills the House passed in 2011, because:

• We are not in a presidential election year so Republicans have less to gain from passing pro-energy legislation just to frame issues and clarify policy differences for the electorate;
• Divided government makes it virtually impossible either for congressional Republicans to halt and reverse the Obama administration’s regulatory war on fossil fuels or for Hill Democrats to pass cap-and-trade, carbon taxes, or a national clean energy standard;
• Democrats paid a political price for cap-and-trade and won’t champion carbon taxes without Republicans agreeing to commit political suicide by granting them bipartisan cover;
• The national security and climate change rationales for anti-fossil fuel policies were always weak but have become increasingly implausible thanks to North America’s resurgence as an oil and gas producing province, Climategate, and developments in climate science;
• Multiple policy failures in Europe and the U.S. have eroded public and policymaker support for ’green’ energy schemes;
• It has become increasingly evident that the Kyoto crusade was a foredoomed attempt to put policy carts before technology horses; and,
• The EPA is ’enacting’ climate policy via administrative fiat, so environmental campaigners no longer need legislation to advance their agenda.

Divided Government, Messaging Bills, Cap-and-Trade Casualties

Divided government can produce gridlock, yet the latter need not induce legislative torpor. In the 112th Congress, the House passed several energy- or climate-related bills drafted by the Energy and Commerce Committee. Those include the Energy Tax Prevention Act (H.R. 910), Farm Dust Regulation Prevention Act (H.R. 1633), North American-Made Energy Security Act (H.R. 1938), Jobs and Energy Permitting Act (H.R. 2250), Coal Residuals Reuse and Management Act (H.R. 2273), Transparency in Regulatory Analysis of Impacts on the Nation Act (H.R. 2401), Cement Sector Regulatory Relief Act (H.R. 2681), Pipeline Infrastructure and Community Protection Act (H.R. 2937), Resolving Environmental and Grid Reliability Conflicts Act (H.R. 4273), Domestic Energy and Jobs Act (H.R. 4480), American Manufacturing Competitiveness Act (H.R. 5865), Hydropower Regulatory Efficiency Act (H.R. 5892), and No More Solyndras Act (H.R. 6213). All died in the Senate.

This flurry of legislative activity can in part be explained by the political dynamics of the 2012 presidential election cycle. By holding hearings on and passing those bills, Republicans sought to frame the issues and clarify policy differences for the electorate. A central objective was to focus public attention on which party supports and which opposes creating jobs through domestic energy production. House Republicans may launch another ambitious energy offensive as we get closer to the 2014 mid-term elections and/or the 2016 presidential contest, but not likely before then.

Why though is there is no momentum on the other side of the aisle for the “comprehensive energy and climate legislation” once proudly championed by the Obama administration and environmental activists?

Starting with the most obvious reasons, 29 Democrats who voted for the Waxman-Markey cap-and-trade bill in June 2009 got pink slips from their constituents in November 2010. Key to defeating Waxman-Markey was its exposure as a stealth energy tax (“cap-n-tax”). This prompted a search for “other ways to skin the cat,” as President Obama put it, but finding other ways to fool the public was not easy.

With few options to pick from, some climate activists now advocate carbon taxes. But why should the public support an open, unvarnished energy tax when what doomed cap-and-trade was its outing as a sneaky energy tax? Cap-and-trade was in part an attempt to avoid a repeat of the political losses Democrats sustained in 1994 because of Al Gore’s Btu energy tax legislation in 1993. Most Democrats in Congress are reluctant to tax carbon unless the GOP gives them bipartisan cover, but most Republicans realize that if they cave on carbon taxes, they will demoralize and divide their base.

Even aside from partisan calculations, few members of Congress want to take responsibility for raising energy prices during a period of high unemployment and anemic economic growth.

Obsolescent Worldviews

Probing a bit deeper, we find that once-fashionable alarms about climate change and foreign oil dependence no longer have the intellectual cachet they did a few years ago. The period from 2005 through 2007 was not only a high watermark of U.S. oil import dependence, it was also a time when Al Gore’s An Inconvenient Truth, the Bali Road Map, and the IPCC’s Fourth Assessment Report (AR4) set the terms of national debate on climate change. A lot has happened since then.

Washington’s angst about oil embargoes, supply disruptions, and the link between Mideast oil and terror was always overblown, as Cato Institute scholars Jerry Taylor and Peter Van Doren explain:

• Because oil is a globally-traded commodity, the U.S. can circumvent any likely embargo by purchasing oil via third parties. Indeed, U.S. oil imports actually increased after the 1973 Arab oil embargo – from 3.2 million barrels per day in 1973 to 3.5 mbd in 1974.
• Petro-states have more to lose from catastrophic disruptions than do their customers, which is why there hasn’t been one since the Iranian Revolution.
• There is no correlation between OPEC profits and cross-border incidents of Islamic terror. The likely explanation is that terrorist attacks are low-budget operations (the 911 plotters spent less than half a million dollars) and therefore are not much affected by changes in oil prices or petro-state revenues.

In recent years, the national security rationale for regulating America ‘beyond petroleum’ has become increasingly implausible, as advances in unconventional oil and gas production transform North America into a major producing region. Imports as a share of U.S. petroleum consumption declined from 60% in 2005 to 45% in 2011. More than half of those imports came from the Western hemisphere, and Canada’s share was more than double that of Saudi Arabia. In both 2011 and 2012, petroleum products were the top U.S. exports. Some experts now view hydraulic fracturing and directional drilling as a source of U.S. geopolitical influence, arguing for example that the ‘shale revolution’ undermines Russia’s leverage over Europe.

A March 2012 Citi report concluded: “With no signs of this growth trend ending over the next decade, the growing continental surplus of hydrocarbons points to North America effectively becoming the new Middle East by the next decade; a growing hydrocarbon net exporting center.” Analyses by Citi, Wood McKenzie, and IHS Global Insight support the assessment of Manhattan Institute scholar Mark Mills that “unleashing the North American energy colossus” could create millions of new jobs by 2020 and provide hundreds of billions in cumulative new federal, state, and local tax revenues.

In short, a bright future for hydrocarbon energy now competes in the public mind with yesteryear’s gloomy forecasts of increasing oil depletion and dependency.

As for climate alarm, the Climategate emails exposed some of the world’s most prestigious climatologists as schemers using the pretense of scientific objectivity for political purposes. This blow to their credibility also tarnished the UN-sponsored climate treaty negotiations.

Also deflating the push for coercive energy transformation is the lack of any net global warming over the past 16 years. There are competing explanations, but a plausible hypothesis, based on recent studies ably summarized by Cato Institute climatologist Chip Knappenberger, is that Earth’s climate is less sensitive to greenhouse forcing than “consensus” science had assumed. What cannot be denied is that there is a disconnect between the IPCC’s best estimate of projected warming and observations over the past decade.

In addition, numerous studies (summarized here and here) undercut the credibility of scary climate change impact forecasts. A few examples:

• King et al. (2012): The rate of Antarctic ice loss is not accelerating and translates to less than one inch of sea-level rise per century.
• Weinkle et al. (2012): There is no trend in the strength or frequency of land-falling hurricanes in the world’s five main hurricane basins during the past 50-70 years.
• Chenoweth and Divine (2012): There is no trend in the strength or frequency of tropical cyclones in the main Atlantic hurricane development corridor over the past 370 years.
• Bouwer (2011): There is no trend in hurricane-related damages since 1900 once economic loss data are adjusted for changes in population, wealth, and the consumer price index.
• NOAA: There is no trend since 1950 in the frequency of strong (F3-F5) U.S. tornadoes.
• National Climate Data Center: There is no trend since 1900 in U.S. soil moisture as measured by the Palmer Drought Severity Index.
• Hirsch and Ryberg (2011): There is no trend in U.S. flood magnitudes over the past 85 years.
• Davis et al. (2003): As U.S. urban air temperatures have increased, heat-related mortality has declined.
• Goklany (2010): Global deaths and death rates related to extreme weather have declined by 93% and 98%, respectively, since the 1920s.
• Range et al. (2012): There is no evidence of carbon dioxide-related mortalities of juvenile or adult mussels “even under conditions that far exceed the worst-case scenarios for future ocean acidification.”

Skeptical blogs continually disseminate such findings to policymakers and the public.

During last year’s summer drought, NASA scientist James Hansen made a big splash with a study in Proceedings of the National Academy of Sciences and a Washington Post op-ed arguing that global warming was the cause of the four biggest hot spells of the past 10 years. However, as noted in skeptical blogs, meteorological analyses of the European heat wave of 2003, the Russian heat wave of 2010, the Texas-Oklahoma drought of 2011, and the Midwest drought of 2012 attribute those events principally to natural variability.

Policy Failures

Last week the European Parliament refused to stop the EU carbon market from crashing. This debacle, a setback to all who tout Europe as a model for U.S. climate and energy policy, was all but inevitable.

For months EU policymakers had been groping for the carbon price sweet spot. Were carbon prices too low or too high? The answer: both! Prices were criticized by environmental activists as too low to incentivize hoped-for technology innovation but criticized by industry as too high for Europe to stay competitive in the global marketplace. EU governments had to establish a “carbon compensation fund” to keep domestic manufacturers from off-shoring their operations. European manufacturers still would not support intervention to prop up falling carbon prices. So the EU Parliament decided to just let carbon prices crater, embracing in deed if not in speech the carbon policy advocated by G.W. Bush. Ha!

Fiscal realities have also forced EU governments to scale back green energy subsidies. USA Today reported last month: “European governments have now realized this growth – which saw consumers footing the bill for investors’ soaring profit margins – was out of control: The UK and Czech Republic have already cut their subsidies in half, while Italy imposed a cap on new renewable energy providers. Germany cut subsidies by up to 30% and announced a major overhaul of the program Thursday.” In this respect, too, Europe has become a model of what U.S. policymakers should avoid.

The Obama administration, predictably, has decided to double down on renewables. The President’s Budget proposes to make the controversial renewable energy production tax credit (PTC) “permanent.” That, however, is a tacit confession wind and solar will never stand on their own feet without subsidy, despite the wind industry telling us for years that it is on the verge of becoming competitive with coal and gas. With the nation $16.8 trillion in debt, the President’s $23 billion PTC initiative is likely D.O.A. in the House.

The growing list of Stimu-Losers also undermines congressional support for green venture socialism. Besides Solyndra, failed or troubled recipients of DOE loans or guarantees include Beacon Power, Evergreen Solar, Range Fuels, Amonix, A123 Systems, Nevada Geothermal Power, Abound Solar, and, recently in the news, Fisker Automotive. According to a Privco report, Fisker lost over $1.3 billion in private and taxpayer capital, spending $660,000 for each $103,000 electric vehicle it produced before firing three-quarters of its employees.

Lawmakers from both parties have even begun to reconsider and challenge the once popular Renewable Fuel Standard (RFS) program. This 15-year central plan increases consumers’ pain at the pump, expands aquatic dead zones, makes food less affordable to the world’s poorest people, plows up millions of acres of wildlife habitat, and puts at least as much carbon in the atmosphere as the gasoline it displaces. Although the RFS still has defenders in Congress, hardly anyone on the Hill today talks about beefing up the RFS with flex-fuel vehicle mandates or subsidized biofuel pipelines, blender pumps, and storage tanks.

Can’t Get There from Here

Green activists blame “oil-fueled, coal-powered” politicians for Congress’s ‘failure’ to address climate change. The real reason, however, is that nobody knows how to sustain a modern economy with wind turbines, solar panels, and biofuel.

The Breakthrough Institute developed this point in its Death of Cap-and-Trade blog posts. Because affordable energy is vital to prosperity and much of the world is energy poor, it would be economically ruinous and, thus, politically suicidal to make people abandon fossil fuels before cheaper alternative energies are available. That, however, is exactly what “comprehensive energy and climate legislation” aimed to do.

As the Breakthrough folks argue, if you’re worried about climate change, then your chief policy objective should be to make alternative energy cheaper than fossil energy. Instead, the green movement attempted to make fossil energy more costly than alternative energy, or to simply mandate the switch to alternative energy regardless of cost. Al Gore’s call in 2008 to “re-power America” with zero-carbon energy within 10 years epitomizes this folly. More “moderate” variants would only do less harm, less rapidly.

EPA Is Legislating Climate Policy

Lastly, energy is on the legislative back burner because the EPA is already enacting the green movement’s agenda via administrative action. Why risk voter ire over controversial climate legislation when it is easier to sit back and watch the EPA take the heat or implement regulations few people outside of Washington even know about?

This situation is likely to persist as long as divided government persists. Many Democrats are content to let the EPA run roughshod over the separation of powers and implement policies the people’s representatives would reject if introduced as legislation and put to a vote. Many Republicans fear to challenge the EPA, knowing how difficult it is to overcome a presidential veto and how easily efforts to reclaim Congress’s authority to determine climate policy can be villified as attacks on science and children’s health.

In a post last September, I observed that carbon prices in the EU’s emission trading system (ETS) were so low they failed to incentivize hoped-for technology innovation, yet so high EU governments had to establish a “carbon compensation fund” to keep manufacturers from offshoring their operations. At the time, Reuters reported, permit prices for December had fallen to €7.74 ($9.98) per ton.

Thurdsay’s Financial Times (registration required) reports that EU carbon prices crashed this week to a record low of €2.81 ($3.79) per ton, recovering slightly to €4.41 per ton. The FT observes that carbon permits “have lost 85 per cent of their value from mid-2011 as economic weakness has exacerbated the glut in supply.”

Once again traders and EU officials fret that carbon prices are too low to spur investment in ‘green’ technologies. But there’s a new wrinkle. During most of its history, the ETS was mainly a system of free permit allocations to covered entities. Critics complained that big energy producers reaped windfall profits at the expense of manufacturers and consumers. Their proposed cure was to auction most allowances and make ‘polluters’ pay. Yet the collapse of carbon prices is partly due to “a new system introduced this month to auction allowances,” which has added “millions more allowances . . . to an already oversupplied market each week.”

The one thing you can take to the bank is that the collapse of carbon prices will induce none of the EU firms receiving millions of Euros from the carbon compensation fund to return any of the money to taxpayers.

Note: A nearly identical version of this column appeared last week in Forbes Online. I am reposting it here with many additional hyperlinks so that readers may more easily access the evidence supporting my conclusions.

The November 2012 elections ensure that President Obama’s war on coal will continue for at least two more years. The administration’s preferred M.O. has been for the EPA to ‘enact’ anti-coal policies that Congress would reject if such measures were introduced as legislation and put to a vote. Had Gov. Romney won the presidential race and the GOP gained control of the Senate, affordable energy advocates could now go on offense and pursue a legislative strategy to roll back various EPA global warming regulations, air pollution regulations, and restrictions on mountaintop mining. But Romney lost and Democrats gained two Senate seats.

Consequently, defenders of free-market energy are stuck playing defense and their main weapon now is litigation. This is a hard slog because courts usually defer to agency interpretations of the statutes they administer. But sometimes petitioners win. In August, the U.S. Court of Appeals struck down the EPA’s Cross State Air Pollution Rule (CSAPR), a regulation chiefly targeting coal-fired power plants. The Court found that the CSAPR exceeded the agency’s statutory authority. Similarly, in March, the Court ruled that the EPA exceeded its authority when it revoked a Clean Water Act permit for Arch Coal’s Spruce Mine No. 1 in Logan County, West Virginia.

A key litigation target in 2013 is EPA’s proposal to establish greenhouse gas (GHG) “new source performance standards” (NSPS) for power plants. This so-called carbon pollution standard is not based on policy-neutral health or scientific criteria. Rather, the EPA contrived the standard so that commercially-viable coal plants cannot meet it. The rule effectively bans investment in new coal generation.

We Can Win This One

Prospects for overturning the rule are good for three main reasons.

(1) Banning new coal electric generation is a policy Congress has not authorized and would reject if proposed in legislation and put to a vote. Once again the EPA is acting beyond its authority.

The proposed “carbon pollution” standard requires new fossil-fuel electric generating units (EGUs) to emit no more than 1,000 lbs of carbon dioxide (CO2) per megawatt hour (MWh). About 95% of all natural gas combined cycle power plants already meet the standard, according to the EPA. No existing coal power plants come close; even the most efficient, on average, emit 1,800 lbs CO2/MWh.

A coal power plant equipped with carbon capture and storage (CCS) technology could meet the standard, but the levelized cost of new coal plants already exceeds that of new natural gas combined cycle plants, and “today’s CCS technologies would add around 80% to the cost of electricity for a new pulverized coal (PC) plant, and around 35% to the cost of electricity for a new advanced gasification-based (IGCC) plant,” the EPA acknowledges.

In short, the EPA has proposed a standard no economical coal plant can meet. Not surprising given President Obama’s longstanding ambition to “bankrupt” anyone who builds a new coal power plant and his vow to find other ways of “skinning the cat” after the 2010 election-day slaughter of 29 cap-and-trade Democrats. But the big picture is hard to miss: Congress never signed off on this policy.

The only time Congress even considered imposing GHG performance standards on power plants was during the debate on the Waxman-Markey cap-and-trade bill. Section 216 of Waxman-Markey would have established NSPS requiring new coal power plants to reduce CO2 emissions by 50% during 2009-2020 and by 65% after 2020 – roughly what the EPA is now proposing. Although Waxman-Markey narrowly passed in the House, it became so unpopular as “cap-and-tax” that Senate leaders pulled the plug on companion legislation.

Team Obama is attempting to accomplish through the regulatory backdoor what it could not achieve through the legislative front door. The “carbon pollution” rule is an affront to the separation of powers.

(2) The “carbon pollution” standard is regulation by misdirection – an underhanded ‘bait-and-fuel-switch.’

In Massachusetts v. EPA (April 2007), the Supreme Court held that GHGs are “air pollutants” for regulatory purposes. This spawned years of speculation about whether the EPA would define “best available control technology” (BACT) standards for “major” GHG emitters so stringently that utilities could not obtain pre-construction permits unless they built natural gas power plants instead of new coal power plants.

In March 2011, the EPA published a guidance document assuring stakeholders that BACT for CO2 would not require a permit applicant “to switch to a primary fuel type” different from the fuel type the applicant planned to use for its primary combustion process. The agency specifically disavowed plans to “redefine the source [category]” such that coal boilers are held to the same standard as gas turbines.

The EPA reiterated this assurance in a Q&A document accompanying the guidance. One question asks: “Does this guidance say that fuel switching (coal to natural gas) should be selected as BACT for a power plant?” The EPA gives a one-word response: “No.”

This bears directly on the legal propriety of the “carbon pollution” standard. In general, NSPS are less stringent than BACT. NSPS provide the “floor” or minimum emission control standard for determining an emitter’s BACT requirements. BACT is intended to push individual sources to make deeper emission cuts than the category-wide NSPS requires.

Yet despite the EPA’s assurance that BACT, although tougher than NSPS, would not require fuel switching or redefine coal power plants into the same source category as natural gas power plants, the “carbon pollution” rule does exactly that.

In April 2011, the House passed H.R. 910, the Energy Tax Prevention Act, sponsored by Rep. Fred Upton (R-Mich.), by a vote of 255-172. H.R. 910 would overturn all of the EPA’s GHG regulations except for those the auto and trucking industries had already made investments to comply with. Sen. James Inhofe’s companion bill (McConnell Amdt. 183) failed by one vote. In June 2010, Sen. Lisa Murkowski’s (R-Alaska) Congressional Review Act resolution to strip the agency of its Mass v. EPA-awarded power to regulate GHGs failed by four votes. One or both of those measures might have passed had the EPA come clean about its agenda and stated in 2009 that it would eventually propose GHG performance standards no affordable coal power plant can meet.

(3) The “carbon pollution” rule is weirdly contorted, flouting basic standards of reasonableness and candor.

Under the Clean Air Act, an emission performance standard is supposed to reflect “the degree of emission limitation achievable through the application of best system of emission reduction” that has been “adequately demonstrated.” The EPA picked 1,000 lbs CO2/MWh as the NSPS for new fossil-fuel EGUs because that is the “degree of emission limitation achievable through natural gas combined cycle generation.”

But natural gas combined cycle is not a system of emission reduction. It is a type of power plant. The EPA is saying with a straight face that natural gas combined cycle is an emission reduction system that has been adequately demonstrated for coal power plants. By that ‘logic,’ zero-carbon nuclear-, hydro-, wind-, or solar-electric generation is an emission reduction system that has been adequately demonstrated for natural gas combined cycle.

A coal power plant could meet the standard by installing CCS, but, as the EPA acknowledges, CCS is too costly to qualify as “adequately demonstrated.” The only practical way for utilities to comply is to build new gas turbines instead of new coal boilers. This is the first time the EPA has defined a performance standard such that one type of facility can comply only by being something other than what it is.

The EPA sets performance standards for specific categories of industrial sources. A coal boiler is different from a gas turbine, and up to now the agency reasonably regulated them as different source categories, under different parts of the Code of Federal Regulations – Subpart Da for coal boilers, Subpart KKKK for gas turbines. The EPA now proposes to regulate coal boilers and gas turbines as a single source category — “fossil-fuel EGUs” — under a new subpart numbered TTTT. But only for CO2! Coal boilers and gas turbines will continue to be regulated as separate source categories for criteria and toxic pollutants under Subparts Da and KKKK.

Why hold coal boilers and gas turbines to different standards for those pollutants? The EPA’s answer: “This is because although coal-fired EGUs have an array of control options for criteria and toxic air pollutants to choose from, those controls generally do not reduce their criteria and air toxic emissions to the level of conventional emissions from natural gas-fired EGUs.”

The same reasoning argues even more strongly against imposing a single GHG standard on coal boilers and natural gas turbines. Coal boilers do not have an “array of control options” for CO2 emissions, and have no “adequately demonstrated” option for reducing CO2 emissions to the level of gas-fired EGUs. Subpart TTTT is an administrative contortion concocted to kill the future of coal generation.

Why Care Even If You Don’t Mine or Combust Coal for a Living

At this point you may be wondering why anyone outside the coal industry should care about this cockamamie rule. There are several reasons.

First and most obviously, banning new coal generation could increase electric rates and make prices more volatile. For generations, coal has supplied half or more of U.S. electricity, and still provides the single largest share. The “carbon pollution” standard is risky because coal’s chief competitor, natural gas, has a history of price volatility and a future clouded by the environmental movement’s hostility to hydraulic fracturing, the technology transforming gas from a costly shrinking resource to an affordable expanding resource.

The “carbon pollution” standard itself could put the kibosh on new gas-fired generation if the EPA concludes, as Cornell researchers contend, that fugitive methane emissions from hydraulic fracturing make gas as carbon-intensive as coal.

The EPA is also developing GHG performance standards for refineries. “Unconventional” oil production from shale and oil sands is booming in North America, creating thousands of jobs, generating billions of dollars in tax revenues, and reducing U.S. dependence on OPEC oil. But unconventional oil production is energy-intensive and therefore carbon-intensive. It is unknown whether or how the forthcoming GHG standard for refineries will address the carbon intensity of unconventional oil. What we do know is that the environmental groups who litigated the EPA into proposing these standards are arch foes of unconventional oil.

In any event, the “carbon pollution” standard for power plants is just the start of a regulatory trajectory, not its end point. The EPA’s settlement agreement with environmental groups and state attorneys general obligates the agency to extend the standard to “modified” coal power plants and establish emission “guidelines” for non-modified units.

Moreover, the standard sets a precedent for promulgating NSPS for other GHG source categories, and for contriving new source categories (e.g. “electric generating units”) to hammer natural gas. As indicated above, if gas can set the standard for coal, then wind and solar can set the standard for gas. And at some point the refinery standard could undermine the profitability of unconventional oil. Although initially directed against new coal, the standard puts all fossil-energy production in an ever-tightening regulatory noose.

Pandora’s NAAQS

Taking a longer view, the “carbon pollution” rule moves the U.S. economy one step closer to the ultimate environmental policy disaster: national ambient air quality standards (NAAQS) for GHGs.

In December 2009, the EPA issued a rule under Section 202 of the Clean Air Act declaring that GHG emissions from new motor vehicles endanger public health and welfare. The endangerment rule was both prerequisite and trigger for the agency’s adoption, in January 2011, of first-ever GHG motor vehicle standards. The agency now claims that it need not issue a new and separate endangerment finding under Section 211 to adopt first-ever GHG performance standards for power plants, because subsequent science confirms and strengthens its Section 202 finding.

An implication of this argument is that the EPA need not make a new endangerment finding to promulgate NAAQS for GHGs under Section 108, because the Section 202 finding would suffice for that as well.

Section 108 of the Clean Air Act requires the EPA to initiate a NAAQS rulemaking for “air pollution” from “numerous or diverse mobile or stationary sources” if such pollution “may reasonably be anticipated to endanger public health and welfare.” Carbon dioxide obviously comes from numerous and diverse mobile and stationary sources, and the EPA has already determined that the associated “air pollution” – the “elevated concentrations” of GHGs in the atmosphere – endangers public health and welfare. Logically, the EPA must establish NAAQS for GHGs set below current atmospheric concentrations.

Eco-litigants have already put this ball in play. The Center for Biological Diversity and 350.Org petitioned the EPA more than two years ago to establish NAAQS for CO2 at 350 parts per million (roughly 40 parts per million below current concentrations) and for other GHGs at pre-industrial levels.

The potential for mischief is hard to exaggerate. Not even a worldwide depression that permanently lowers global economic output and emissions to, say, 1970 levels, would stop CO2 concentrations from rising over the remainder of the century. Yet the Clean Air Act requires States to adopt implementation plans adequate to attain primary (health-based) NAAQS within five or at most 10 years. A CO2 NAAQS set at 350 parts per million would require a level of economic sacrifice vastly exceeding anything contemplated by the Waxman-Markey cap-and-trade bill or the Copenhagen climate treaty, which aimed to stabilize CO2-equivalent emissions at 450 parts per million by 2050.

The EPA has yet to decide on the CBD-350.Org petition. Perhaps this is another case of punting unpopular regulatory decisions until Obama’s second term. The one instance where the administration addressed the issue is not reassuring. In a brief submitted to the Supreme Court in American Electric Power v. Connecticut, the Obama Justice Department described Section 108 as one of the provisions making the Clean Air Act a “comprehensive regulatory framework” for climate change policy.

Ultimately, only the people’s representatives can protect coal generation, hydraulic fracturing, and unconventional oil from hostile regulation. But nixing the “carbon pollution” standard would be a big setback to both the EPA and the eco-litigation fraternity, and would help safeguard America’s energy options until a future Congress reins in the agency.

Today, the American Enterprise Institute (AEI), a prominent conservative think tank, hosted a secret, four-and-a-half hour meeting of pols, wonks, and activists, including several self-identified ’progressives,’ to develop a PR/legislative strategy to promote and enact a carbon tax. This was the fifth such meeting to advance the ”Price Carbon Campaign/Lame Duck Initiative: A Carbon Pollution Tax in Fiscal and Tax Reform.” An annoted copy of the meeting agenda appears at the bottom of this post.

Perhaps not coincidentally, earlier this week former GOP Congressman Bob Inglis of South Carolina launched the Energy and Enterprise Initiative, an organization promoting carbon taxes. Inglis obtained funding for the project from the Rockefeller Family Fund and the Energy Foundation, both left-leaning foundations.

Left-right coalitions can be principled and desirable. For example, I worked with environmental groups to help end the ethanol tax credit, and I work with them now to develop the case for eliminating the ethanol mandate. We collaborate because we share the same policy objective, even if not always for the same reasons. The free marketers want to end political meddling in the motor fuel market and the environmentalists want to end federal support for a fuel they regard as more polluting than gasoline. The common objective is consistent with each partner’s core principles.

But such cases are the exception rather than the rule. In general, when left and right join forces, the appropriate question is: Who is duping whom?

My colleague Myron Ebell sent out an alert about the AEI-hosted carbon tax cabal earlier today. It appears immediately below:

From 1:30 until 5 PM today, the American Enterprise Institute is hosting a hitherto secret meeting to discuss how to enact a carbon tax in a lame duck session this fall or perhaps in the 113th Congress.  I have pasted the agenda below and an article from today’s Greenwire.  Note that this is the fifth meeting that they have held.  Also note that the comments made about the meeting in the Greenwire article (just economists brainstorming) bears no relation to the agenda, which is clearly about plotting political strategy to enact a carbon tax.

As my colleague Marlo Lewis noted, we defeated capntrade by convincing the American public that it was really capntax.  Twenty-odd House Democrats who voted for Waxman-Markey lost their seats.  The Democratic Senate refused to take it up.  It’s political poison, so naturally the more brain-dead parts of the Republican and big business establishment have decided how clever it would be to resurrect the carbon tax and push it as an alternative to regulation.  I don’t notice anything in the AEI agenda about repealing the greenhouse gas emissions standards as part of the deal.  Why don’t we do that first?  Then we can talk about alternative policies if any.

Also note the idea that a deal could be done so that a carbon tax would be offset by reductions in other taxes and would therefore be revenue neutral.  There are multiple problems with the idea of revenue neutrality.  First, it never works.  A new tax will quickly be raised.  Second, the poorer people are, the higher the percentage of their income that goes for energy.  Poor people already don’t pay much or any income tax.  So a consumption tax offset by, for example, cuts in the corporate income tax rate, will be highly regressive.  Third, the only way a carbon tax will reduce fossil fuel consumption is if it’s set quite high.  And the only way a carbon tax will raise much revenue is if it’s set quite high.  Thus they must be advocating European levels of taxation.  Say $5 dollars a gallon of gasoline.  Roughly $500 per ton of coal.

We must kill this incredibly harmful idea as quickly as possible.  We can start by letting our contacts at AEI know what we think of their plotting to foist a carbon tax on America.

This is troubling because the dumb party has an uncanny ability to snatch defeat from the jaws of victory. Stopping Obama’s war on affordable energy is a key GOP campaign theme in 2012, and the base is upset because the Supreme Court just upheld the Obamacare individual mandate as a tax. Yet some GOP influentials now call for an open, unvarnished tax on affordable energy.

The GOP’s only clear product differentiator – and most durable political asset — is its reputation as the no tax increase party. The Inglis and AEI initiatives, if successful, would destroy this asset.

Inglis, by the way, proposed a carbon tax bill in the last Congress. He was roundly defeated in the primary by a Tea Party candidate, now-Rep. Trey Gowdy (R-S.C.). At least in 2010 Inglis could claim that he was offering a less mischievous alternative to cap-and-trade. But cap-and-trade is dead. There is no longer a prudential case to be made for carbon taxes as the lesser evil.

Some proponents claim that a carbon tax can be structured to be revenue neutral. For example, revenues from the carbon tax could be used to lower Social Security (FICA) taxes. So why not tax ‘bads’ like greenhouse gas emissions rather than ‘goods’ like labor? This clever rhetoric glosses over serious risks and downsides.

• Substituting carbon taxes for FICA taxes would weaken the already tenuous link between Social Security contributions and benefits. It would doom any prospect of transforming Social Security from a Ponzi-like scheme to a system in which younger workers are ”allowed to save a portion of their payroll taxes through privately invested personal accounts.”
• As mentioned in Myron’s alert, a carbon tax is an energy tax and energy taxes are regressive.
• In a genuinely free society, taxes are used solely for revenue collection to fund essential (limited) government services. That is, taxes are not used to control behavior, reward friends and punish enemies, or pick winners and losers in the marketplace. While all taxes affect behavior and industrial competitiveness, carbon taxes deliberately aim to do so. Consequently, the extent of the tax will be determined not only by fiscal considerations but also by ideological judgments about which industries should win and lose, and by sky’s-the-limit speculation about the ‘social cost of carbon.’
• Finally, revenue neutrality is a pipe dream, not only because of the way Washington works, but also because many proponents want a carbon tax precisely to increase federal revenue. For example, digital analysis traces the AEI meeting agenda to James Handley, a principal at CarbonTax.Org. Although the Web site talks about ‘softening’ the impacts by distributing revenues to households as carbon ‘dividends’ and about ‘reducing other taxes,’ a key selling point is “generate revenue to help close our looming budget gaps.”

* * *
Price Carbon Campaign / Lame Duck Initiative:
A Carbon Pollution Tax in Fiscal and Tax Reform

Meeting V, Wednesday, July 11, 2012
American Enterprise Institute, 1150 17th Street, N.W.

12:45 – Lunch

1:30 – Background and orientation
1) Welcome from AEI (Kevin Hassett [Director of Economic Policy Studies, AEI])
2) Brief introductions from participants
3) Overview of agenda and facilitation format (Alden Meyer [D.C. Office Director, Union of Concerned Scientist])
4) Background and context for meeting (Tom Stokes[Climate Crisis Coalition Coordinator and Pricing Carbon Campaign])

Session I: Update on posture of key constituencies

1:45 – Congressional Republicans, Romney and Business Leaders
Detoxifying climate policy for conservatives.
Discussants: Kevin Hassett [Director of Economic Policy Studies, AEI], Dave Jenkins [Vice President of Government and Political Affairs, Republicans for Environmental Protection], Eli Lehrer [Research Fellow, Independent Institute and President of the R Street Institute, former Senior Fellow at the Competitive Enterprise Institute, and Vice President at the Heartland Institute], Bill Newman [Legislative Consultant, Clean Air Cool Planet]

2:15 – Progressive/Social justice groups
Discussants: Danielle Deane [Director of Energy and Environment Program, Joint Center for Political and Economic Studies], Tyson Slocum [Director of Energy Program, Public Citizen], Chad Stone [Chief Economist, Center of Budget and Policy Priorities]

2:45 – Economists and deficit hawks
Discussants: Autumn Hannah [Senior Program Director, Taxpayers for Common Sense], Aparna Mathur [resident scholar, AEI], Diane Lim Rogers [chief economist, Concord Coalition], Rob Shapiro [ex- U.S. Under Secretary of Commerce for Economic Affairs under President Bill Clinton, currently Senior Policy Scholar at the Georgetown University School of Business, Senior Fellow of the Progressive Policy Institute, advisor to the International Monetary Fund, director of the Globalization Center at NDN, chairman of the U.S. Climate Task Force, co-chair of America Task Force Argentina]

3:15 – Break

Session II: Framing and selling a carbon pollution tax

3:30 – Initial thoughts on a post-election public opinion and education campaign
Discussant: Kevin Curtis [Program Director Al Gore’s Climate Reality Project; Board of Directors, Climate Action Network]

4:00 – Building bipartisan support and navigating Ways & Means
Discussant: Tom Downey [former Democrat Representative]

4:30 – Honing the case for a carbon pollution tax
Ian Parry [Technical Assistance Advisor in the IMF’s Fiscal Affairs Department] : IMF book on carbon tax in fiscal context
Rob Williams [Senior Fellow and Director, Academic Programs, Resources for the Future]: RFF FAQ
Adele Morris [Policy director for the Climate and Energy Economics Project, Brookings Institute] : November 13th AEI/Brooking/IMF event & July 12th RFF discussion

5:00 – Next steps and Wrap-up
5:15 – 6:00:  Gather for informal conversation and light refreshments

A surprising development from a country not known for backing down from a fight:

In a sign that Paris has little stomach for a fight over global warming, Francois Fillon, the Prime Minister, urged the European Union to retreat over plans to tax airlines for emitting greenhouse gases.

His letter to Jose Manuel Barroso, the European Commission President, undermined the EU’s claims to be united in its drive to impose ecological virtue on the aviation industry. The plan to force airlines to buy pollution permits when flying in European airspace has been denounced as illegal by other capitals, notably Beijing, Delhi and Washington.

The so-called coalition of the unwilling is pledging to retaliate unless Europe backtracks. Chinese and Indian airlines have been told by their governments to boycott the scheme.

Their American counterparts filed a lawsuit before withdrawing it last month and calling on the Obama Administration to take the lead in pressuring Europe to drop its aviation pollution package.

In France, concern has been fuelled by Airbus, the European aircraft maker, which said that China had shelved orders worth $US14 billion ($13.5 billion) because of the dispute.

The company said that officials in China, which represents 20 per cent of Airbus sales, were withholding their signature on contracts for 35 long-haul A330s and 10 A380 superjumbo planes.

Air France, British Airways, Virgin Atlantic, Lufthansa, Air Berlin and Iberia joined MTU Aero Engines and Safran, the enginemakers, and Airbus in writing to European governments last month to warn of the consequences of a trade war. They said that thousands of jobs and billons of dollars of sales were at risk.

In his letter, written last month but made public yesterday, Mr Fillon said that 2000 jobs were under threat at Airbus and its suppliers because of the Chinese boycott.

Globalwarming.org has not blogged extensively about the ongoing airline emissions saga, though it has been covered in our weekly newsletter, which you can sign up for on our home page. The E.U. wants to require foreign airlines which land in the E.U. to purchase carbon credits for a cap-and-trade program the E.U. recently implemented. The airlines, naturally, are opposed. As is the rest of the world, with major countries such as China, the U.S., Russia, and many more signalling opposition.

Up until now, the E.U. spoke as a unified force, stating confidently that they will not back down. In response, China raised the stakes by cancelling orders for aviation equipment which are worth billions of dollars. Numerous other countries are still in the process of planning a response. It seems now that not all of the E.U. agrees with their official stance, which will likely strenghten the resolve of the opposition groups. If the E.U. stays course, expect more punitive retaliatory measures.

The EPA gives millions to the environmental groups that sue it.  “When the EPA settles or loses those suits, it then awards the groups millions more in attorneys’ fees,” notes legal commentator Walter Olson.  “‘The EPA isn’t harmed by these suits,’ said Jeffrey Holmstead, who was an EPA official during the Bush administration. ‘Often the suits involve things the EPA wants to do anyway. By inviting a lawsuit and then signing a consent decree, the agency gets legal cover from political heat.’ Holmstead called this kind of litigation ‘sweetheart suits.’”

The EPA gave millions to groups that sued it to get it to regulate greenhouse gases, like the Environmental Defense Fund and Natural Resources Defense Council.  Those groups brought a lawsuit that led to the Supreme Court’s 5-to-4 decision in Massachusetts v. EPA (2007), which vastly expanded the EPA’s jurisdiction.  More recently, they sued to compel the EPA to issue greenhouse gas “performance standards” for power plants and refineries. In a recent settlement, the EPA agreed to do just that.  Critics “said the costly settlement was ‘concocted in secret’” and that other lawsuits by EPA grantees resulted in collusive settlements that cost the economy billions, increased the EPA’s powers, and gave environmental groups things that they were unlikely to win in any court ruling.

Government funding is one of many reasons that these environmental groups have a huge financial advantage in the political process.  For example, an American University study found that supporters of the cap-and-trade bill aimed at global warming had a massive financial edge over their critics.  American University’s Professor Nisbet notes that “the effort by environmentalists to pass cap and trade may have been the best financed political cause in history.”  It nonetheless has failed thus far, perhaps because of the enormous cost and waste associated with the bill.  (In 2008, Obama said that “electricity rates would necessarily skyrocket” under the cap-and-trade plan he favored, and that it would “bankrupt” coal-fired power plants.  The cap-and-trade bill is chock full of costly corporate welfare, and would have a “trivially small” effect on greenhouse gas emissions while imposing an enormous cost, according to a former Obama Advisor.  It is supported by the same special-interests and corporate rent-seekers who supported the stimulus package’s green-jobs provisions, which used tax dollars to outsource American jobs, subsidizing foreign “green jobs” that replaced thousands of American jobs.  Recent EPA rules will wipe out at least 800,000 jobs.  Two economists say the stimulus destroyed 550,000 jobs.)

As Walter Olson notes, collusive lawsuits are not unique to the EPA, nor are incestuous relationships between agencies and liberal lobbying groups.  In his book, Schools for Misrule, he chronicles how “other government agencies, much like the EPA, use settlements of pressure-group lawsuits as a way to go along with desired expansions of power.”  For example, “corrections and foster-care systems commit to step up program offerings and . . . seek higher funding to accomplish their missions; union-allied public-sector managers give away the store on employee benefits disputes, and so forth (scroll to “Consent of the Governors”). From New York to Alabama, state education departments have covertly or even openly assisted lawsuits against themselves intended to force spending expansion. And once sweetheart negotiations result in an adverse consent decree . . . the locked-in big-government policies can be nearly impossible to unlock later on, should voters’ moods change.”

Nor is the EPA’s willingness to fork over millions in fees in collusive settlements unusual for agencies in the Obama Administration.  Other agencies in the Obama Administration frequently settle lawsuits brought by liberal groups by giving them everything they ask for, even when the liberal group was virtually certain to lose its lawsuit against the government.  The Obama Administration frequently agrees to pay attorneys fees to trial lawyers even when such fees are barred by provisions in the Equal Access to Justice Act.  That law, which governs the award of attorneys fees in many lawsuits against the EPA, protects the government from having to pay fees even when it loses a lawsuit, as long as its position was not frivolous but rather was “substantially justified.”

The Competitive Enterprise Institute announced today that it is acting as co-counsel in a recently filed lawsuit in the state of New York against the state’s participation in the Regional Greenhouse Gas Initiative (a state cap and trade program). The lawsuit has been filed on behalf of small business owners in New York State who have faced increased electricity costs, and can be read here (.pdf). The American Spectator has a short write up here. The basis for the suit relies on the fact that elected officials in New York enrolled in the RGGI without approval by the state legislature. New York is the only state involved with RGGI who entered the initiative without approval from its legislature. As RGGI has forced electricity generators to purchase annual carbon allowances, it has raised the price of electricity for New York residents, effectively acting as a tax on electricity producers (those who produce more than 25 megawatts annually) in New York.

As far as its success or failure, the RGGI has faced many of the same problems similar programs have faced around the world. A very low allowance price for carbon will result in very little actual emissions reductions. Much of the ‘on paper’ emissions reductions will be made up by increased emissions in bordering states, as energy intensive industries relocate and electricity producers import energy from out of state. State legislators have raided the funds raised by RGGI and used them for unrelated purposes (the stated goals of RGGI are to use the funds to spur development in energy efficiency measures and increased production of non carbon emitting energy sources). In New York alone,$90 million of the ~$320 million raised by RGGI has been redirected towards budget shortfalls.

New Jersey recently signaled its intention to end its participation. Similar efforts are underway in New Hampshire (though they face a threatened veto by the Governor).

President Barack Obama this week nominated John Bryson to be Secretary of Commerce.  Senator James M. Inhofe (R-Okla.) immediately announced that he would try to defeat Bryson’s confirmation by the Senate. It’s easy to see why Inhofe didn’t have to spend much time weighing Bryson’s qualifications.  Bryson is a model crony capitalist, lifelong professional environmentalist, and leading promoter of cap-and-trade legislation to raise energy prices.

Here is what Bryson said at a symposium at the University of California, Berkeley, in 2009: “Greenhouse gas legislation – either with a tax or with a cap and trade, which is a more complicated way of getting at it, but it has the advantage politically of sort of hiding the fact that you have a tax, but at the same – you know that’s what you’re trying to do, trying to raise price of carbon….”  He went on to say that the Waxman-Markey and other cap-and-trade bills in Congress would not raise energy prices enough to reduce greenhouse gas emissions by the required amount, so that he also favored federal regulations, such as renewable requirements for electric utilities, on top of cap-and-trade.  Later, Bryson referred to Waxman-Markey as a “moderate but acceptable bill.”

As a new graduate of Yale Law School in 1970, Bryson was one of the founders of the Natural Resources Defense Council and served as legal counsel in the group’s early years.  From 1976 to 1979, he was chairman of the California State Water Resources Control Board.  And from 1979 to 1982, he was chairman of the California Public Utilities Commission.  He was appointed to both positions by then-Governor Jerry Brown.  After practicing law, he then spent 18 years at Edison International, the parent company of Southern California Edison.  He retired as chairman and CEO in 2008.  In recent years, Bryson has served as an official adviser on energy and environmental issues to the Secretary General of the United Nations.

Driving is an American pastime on Memorial Day weekend. Indeed, today’s holiday is THE road trip occasion in American culture. This acute association explains why American politicians choose the lead up to Memorial Day to trot out plans to address high gasoline prices.

This year, it was dueling votes in the Senate. Roughly speaking, the Republicans tried to increase the supply of oil by ending the Obama administration’s de facto moratorium on domestic drilling, wrought by bureaucratic foot-dragging. The legislation already had been passed by the Republican-controlled House. On the other hand, the Democrats wanted to raise taxes on “Big Oil” companies, by eliminating tax breaks enjoyed by many—and in some cases, all—businesses. Neither party wooed enough votes to survive a filibuster, so they both failed. Of the two, the Republicans’ ideas were better this time, but there have been instances in the past when both parties were equally bad in the run up to Memorial Day weekend.

In May 2001, for example, President George W. Bush unveiled his administration’s much-hyped “Task Force Report on Energy.” To be sure, there were some great ideas in the unwieldy report, but there were also many awful ideas, foremost among them being the President’s proposal to waste taxpayer dollars on the FreedomCar initiative, a dead-end hydrogen fuel technology. The Task Force Report on Energy also called for a scientific report on the need for more stringent Corporate Average Fuel Economy Standards. This was the first step to the President ultimately signing into law increased fuel efficiency standards in late 2007. As has been covered extensively by my colleague Sam Kazman, CAFE standards are unwarranted violations of consumer choice that have the unfortunate side-effect of killing motorists.

The last Republican President’s transportation policies were losers, but Congressional Democrats are the league leaders in stupid energy policies issued near Memorial Day. Consider their run since 2006:

2006: Senate Democrats scuttled legislation to open ANWR with a promised filibuster.

2007: House Democrats passed the cleverly titled NOPEC (No Oil Producing and Exporting Cartels Act) bill, legislation that would somehow alter the resource acquisition decisions made by sovereign countries, among them allies. That is, the NOPEC bill was pure, unadulterated grandstanding.

2008: Senate Democrats tried to drum up drama over nefarious oil “speculators.” Like the 2007 NOPEC Act, targeting “speculators” sounds furious, but signifies nothing.

2009: House Democrats proposed a novel solution for high gas prices: higher gas prices. With the support of House leadership, Rep. Henry Waxman (D-Beverly Hills) pushed the American Clean Energy and Security Act, a cap-and-trade energy rationing scheme designed to raise the price of hydrocarbon energy like gasoline.

2010: BP’s Deepwater Horizon disaster dominated the energy policy debate for the entire summer. Funny how we don’t talk about that anymore.

The American Northeast has attained metaphysical balance on energy rationing, thanks to New Jersey Governor Chris Christie’s (R)  announcement yesterday that he would withdraw the Garden State from the Regional Greenhouse Gas Initiative, a multi-state cap-and-trade scheme. After New Jersey leaves, the remaining nine participants will be: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Vermont.

Christie’s unexpected decision serves as the yin to New Hampshire’s yang. In late February, the New Hampshire House of Representatives  passed HB 519, legislation that would withdraw the Granite State from RGGI, by a 246 to 104 vote. At the time, it was widely thought that the Senate would quickly follow suit, as Republicans control the upper chamber. HB 519’s ultimate enactment appeared so certain, in fact, that Governor John Lynch (D) issued a pre-emptive veto. It should have been a futile gesture, because Republicans hold a veto-proof majority in both chambers of the legislature. Then the environmentalist lobby mobilized and frightened many members of the Senate. The bill was delayed. And in early May, the full Senate, where Republicans enjoy a 2 to 1 majority, voted to remain in the the regional energy rationing scheme. New Hampshire Republicans had snatched defeat from the jaws of victory.

Gov. Christie has had a somewhat tortuous history with RGGI. During the press conference yesterday, he went to great lengths to state his belief that mankind is causing dangerous global warming, which is unfortunate. He justified his decision to withdraw from RGGI based on the fact that the regional cap-and-trade scheme was an energy tax that had no impact on the global climate, which is true.

Only a year ago, however, he was a climate skeptic. Back then, he expressed reservations about RGGI, but he nonetheless stayed in the program. The most likely reason that he waited so long to withdraw was because the cap-and-trade revenues were too good to pass up. Under state law (the 2008 Global Warming Solutions Fund Act), he was supposed to spend RGGI revenues, which are generated from quarterly sales of energy rationing coupons, on green energy. But Gov. Christie redirected those funds to deficit reduction.

Environmentalists have promised to litigate, but that looks like a dead end. From what I understand, the authorizing legislation explicitly gives the Governor the authority to join and withdraw from the regional pact. Unless the New Jersey Legislature enacts legislation to keep the state in RGGI, the greens’ hands are tied. Or so it appears to me, a non-lawyer.

Lastly, I’ll note that overall, Gov. Christie’s ideas on energy are awful, as is suggested by the title of yesterday’s address, “New Jersey’s Future Is Green.” The Governor is committed to wasting taxpayer money on expensive, unreliable green energy, and he also announced a moratorium on coal power. Read all about his crummy energy policies here.