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A New Start for the Climate Bill

Obama considers nuclear power and offshore drilling, backs off from cap and trade.
January 29, 2010

In his State of the Union address on Wednesday, President Obama tried to drum up support from Republicans and conservative Democrats for comprehensive energy legislation that has been languishing in the Senate since September. In his speech, Obama stressed the need to create clean energy jobs and compete with China in the development of new energy technologies, and backed off from his prior emphasis on capping carbon dioxide emissions and setting up a market-based approach for controlling such pollution.

Energy and climate legislation seemed to have momentum last year, after the federal stimulus was enacted in February and designated billions of dollars to support clean energy. Indeed, the House passed an energy bill in June that, among other things, would set renewable energy requirements and establish a cap and trade program to limit carbon emissions in an effort to drive investment in cleaner sources of electricity. But the Senate version of the bill stalled as legislators turned their focus to health-care legislation. And this month, prospects for energy legislation dimmed further with the election of Scott Brown, a Republican from Massachusetts who spoke out against a cap on carbon emissions during his campaign.

In recent weeks, the energy bill’s supporters have been scrambling to revise the bill to attract wider bipartisan support. And in his address, the president emphasized policies that have strong Republican support, including “building a new generation of safe, clean nuclear power plants.” He also raised the possibility of “opening new offshore areas for oil and gas development,” something many Democrats have strongly opposed.

Obama did not mention a cap and trade program to limit carbon dioxide emissions–like the one included in the House bill–that would establish a system to “trade” pollution allowances, even though he’s previously cited the need for such a market-based program. Instead of pushing for cap and trade, he spoke more generally about a “comprehensive energy and climate bill with incentives that will finally make clean energy the profitable kind of energy in America.”

If Congress does revive its debate around energy legislation, it will likely focus on the best methods to reduce carbon-dioxide emissions. Incentives could include government mandates for the use of renewable energy, tax breaks and subsidies to promote certain technologies (such as plug-in hybrid electric vehicles). But economists warn that some of these incentives will prove far more expensive than the market-based cap and trade system. Under such a system, major carbon-dioxide emitters such as utilities could meet emissions caps in the cheapest way possible, including buying emissions permits from others or adopting new technologies. A renewable energy requirement, however, could be more expensive because it could dictate the use of a particular type of technology.

Although a version of the Senate energy bill, called the Clean Energy Jobs and American Power Act, passed a Senate committee in November, most experts say it’s being taken back to the drawing board to draw wider support.

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