That’s a lot of news….what’s it all mean? The Waring blender

The Senate did not find a way to pass a comprehensive climate bill last week, the effort had been leaking air for some time and the failure to pass it now leaves the administration’s ambitious energy agenda in legislative limbo.

Anyone who might not follow this on a daily basis would have a right to ask, ‘what’s a comprehensive climate bill, what would it contain?” Given our perspective, another good question would be, “what’s it mean to the transportation economy?”

As to the broad meaning, the bill – at the top end of an environmental activist’s wish list – would have included ‘cap and trade’ protocol across the entirety of the country. (Cap and trade allows for the selling and buying of carbon credits between companies and industries, with a slowly but steadily declining allowed total across the whole shooting match.)

It would include a national renewable portfolio standard, which would mandate that a certain level of energy be generated by renewable sources in preference over coal, natural gas or petroleum, and that that percentage grow at a certain rate. Such RPSs are in place in some states, but there is a wide variety of implementation, and certain states – say those blessed with significant hydropower resources – are pleased to set the standard high, knowing that they will have no trouble beating it. A national RPS would have stretched across every kind of geography and every kind of weather condition. It would have been very difficult to comply with.

It would include mandates for emission reductions along the transportation economy – which is responsible for 29% of greenhouse gas emissions, mostly from our automobiles, but also from the other people-moving and goods moving modes. (this doesn’t include our transportation manufacturing sites.)

It would have probably have put in place accelerated goals for gas mileage, energy tax incentives, oil drilling and the like, but these would have been junior varsity conditions. The real action was cap and trade across the economy and the RPS.

It became clear, it seems, that cap and trade was an exceedingly unpopular measure to enact in the middle of a recession. No one would think that this wouldn’t cost anything – it will cost a lot – and no one is naïve enough to not understand that those costs would be passed along ultimately to the consumer. So that card got dropped.

The fallback position on cap and trade was to give in on covering the entire economy, but retain the mandates on the power generation industry, but that position eventually gave way as well.

As the weeks of the legislative session wound down, the gap between what legislators (and the people they represented) wanted in a global sense and what they were willing to sacrifice at a state, district, or personal level became clear, and past a point there was no motive power behind getting the legislation done, either in its whole form or partial form. This being an election year had a very meaningful impact on the discussions, and while a small bill tied to the Gulf Oil spill and other minor matters will likely pass, I doubt there will be much meat to it.

This difficulty in passing the bill has a lot to say to us. I don’t think it’s too lofty a point to make that one part of the legislative process, even if it’s not measurable or tabulated, is how these pieces of legislation seem to be playing back home. It would seem in this case that the good senators sensed exactly how well it was going to play and thereby backed off.

Is this a good or a bad thing? The most aggressive of the mandates ended up having few friends at the end, the next Congress will be peopled by elected officials who may well have less sympathy for the cause, and a lot of political capital has been spent and is now gone. For those who hated the idea of cap and trade, this seems like vindication, for those who don’t it seems like defeat. For parties who agree on little else, there is frustration at not having finally put this issue to bed.

Uncertainty looms large in the economy these days, companies are famously unwilling to cut loose the purse strings in the face of unknown or unknowable obligations that might – or might not – be coming their way.

In the case of cap and trade the possibility, likelihood even, that something at some time will be passed is part of the future. What and when and how intense and how broad….these remain unknowable and thereby are much harder to manage.

On the transportation side, coal, which fuels about 50% of the electricity generated in the country, is powerful, efficient, plentiful……and dirty. Coal plants would have come under increasing pressure – either through cap and trade or straightforward mandated reductions in GHG emissions – under either the full plan or the backup plan.

Coal is big, heavy, ordinarily far from its final destination, and the largest single cargo of freight rail, accounting for 45% by volume and 23% by value. The other fuels that would be considered as substitutes – natural gas, nuclear, wind, solar -- don’t have nearly the transportation intensity to them as coal…natural gas is mostly by pipeline, wind requres only the transport of the turbine blades, solar not at all, and the conveyance of uranium fuel is hardly a transportation event at all. (I believe a fair amount of coal moves by barge as well.)

So any reduction to the amount of coal consumed will have an oversized impact on our friends in freight rail, and this at a time when a certain number of coal plants (up to 15% of existing capacity) are slotted to shut down over the next five years in the face of ordinary life cycle and regulatory decisions.

Out of space, but this failure of passage is a measure of the difficulty – perhaps impossibility – of getting these economy-wide mega-type legislations passed.

Which raises a whole new set of questions. – Larry McGurn