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Why the Carbon Rule Is a Bigger Deal than the Media Understands

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The headline in Tuesday's NYT gave the top-line evaluation of the Obama Administration's power plant carbon rule: "Hopes Modest for Carbon Rules."

Environmentalists had hoped that the Administration would measure reductions not from 2005, but from 2012, when power plant carbon emissions had already come down by 10%. Obama chose to go with a higher base-line (and a larger % cut), which helps the global optics - but the additional cut below business as usual is only 730 mmt in 2030, 20% below the 2012 level.

But the top-line appearance is not what matters in this case. The rule is far, far more important and consequential than these numbers suggest.

First, the Administration has front-loaded the cuts. While the 2030 cut is 30% below the 2005 base-line, 27% of that cut must be achieved by 2020. This is a six year, 11.5% reduction - almost precisely the 2%/year progress environmentalists were calling for in 2008 (economy wide) to achieve minimal mid-century climate goals.

And the Obama Administration's other big carbon reduction play - various vehicle emission and economy standards for both cars and trucks - are also going to bite deeply in the next few decades. New analysis by the Energy Information Agency suggests that if current cultural driving patterns are combined with the Obama vehicle standards, by 2030 total transportation climate emission will be down 20% from 2005. (In this case the big gains are 2020-2030 as new cars come to dominate the US fleet.)

Now neither 30% for utilities nor 20% for transportation are what the climate requires in 2030. In fact, continuing progress at this rate would, by 2050, cut 2005 emissions roughly in half - and they need to go down 80% or more. We need step changes, not incrementalism. And the third important component of US climate pollution - industry and buildings - still lacks any significant federal push. But these numbers are, relative to current expectations, and the behavior of other nations, huge progress.

2014-06-04-juneblog1.jpg

(Vertical axis is CO2 Million Tons)

More important, the new Obama power plant rules reveal a step change - not so much in the Administration's climate ambition, as in its understanding of the politics. Yes, meeting the 17%/2020 carbon goals Obama pledged in Copenhagen with domestic cuts in transportation and utilities is much more ambitious than the cap and trade bill that flamed out in the Senate in 2009. (Most of that bill's emission reductions would have come from offsets outside the US.) But more important, the Obama power plant rule, unlike the failed Congressional cap and trade proposal, is intentionally designed to accelerate clean energy and weaken the fossil fuel sector in a way that the earlier proposals were not.

Early and mid-Obama political strategy focused on assembling the largest possible - even if internally conflicted -- coalition of allies. Think about the health care bill, the concessions on the stimulus package, or the maneuvering to buy off the coal industry around cap and trade. This approach divided Obama's allies, and allowed his opponents to remain united. They could just ask for more, which left his allies, unavoidably, with less.

But this proposal reflects a very different perspective on politics and power. It's still just a regulatory proposal. Everyone in Washington expects the Congressional Republicans to try to block it with Congressional Review Act challenge. Insiders, if not the media, understand that Senate Democrats can filibuster, and the President can veto this challenge - so the regulation will go into effect.

Then there will be lawsuits. In a legal sense, the rule is ambitious. It takes a broad interpretation of the methods allowed by the Clean Air Act for power plants to comply with emission standards. But the Administration has offered states four options - from the most legally conservative to the most legally expansive. And the legally expansive, flexible options are the cheapest for the states and the utilities that must comply. And the Courts are given the options to throw out these economically attractive but legally assertive pathways, and leave only the narrowest pathways under the rule in place. Such a narrow, legally bullet-proof interpretation of the Clean Air Act, costs the most for any given increment of emission progress.

The coal industry and the Koch Brothers, along with the fundamentalist wing of the Republican Party are determined to prevent any government action. They hate flexible solutions precisely because they are low cost. They want this rule - any rule -- to hurt more than it needs to. So their litigation strategy is to trumpet their total opposition to the rule,, while filing legal briefs whose likely outcome is to leave the rule in place, but limit it so that compliance is more expensive and inflexible. This is not what the states or the coal dependent public utilities want - if the rule is going to survive, they want maximum low cost options.

So already the Administration has divided its enemies - an imperative it casually dismissed in its early days. But what happens while the lawsuits drag on? Well, at least half of the coal fired power plants we are arguing about face pre-2020 requirements that they invest big bucks to clean up conventional health pollutants like mercury, sulfur and particulates. If the utilities that own these plants do not know what carbon restrictions they may face - because the Chamber of Commerce or Koch lawyers have tied the rules up in lawsuits - they will almost certainly choose to retire, not modernize, them. So delay produced by coal industry lawsuits actually works against coal-fired power plants. Once again, the design of the rule splits Obama's opponents.

And even if the Courts deny Obama all but the narrowest of his legal pathways, that opens a clear pathway, post 2016, for the next Administration to reopen the issue and suggest that Congress replace a narrow, power plant specific carbon rule with a broader, at least utility sector wide flexible standard - and at that point, in exchange environmentalists can ask for more aggressive, if cheaper, action.

Finally the optics around the rule - particularly the bitter opposition from the coal industry and the Koch's - persuaded the rest of the world that on this one Obama is leading from ahead, not behind. Obama got a big supporting step today from an unlikely source. China -- which whom the Administration is otherwise engaged in a geopolitical wrangling - announced for the first time that it would set an absolute cap on carbon emissions by 2020. While it later hedged the promise - understandable since it would be a much broader commitment that Obama was able to make - it was still remarkable signal of global cooperative potential between two nations that appear headed otherwise for deadlock.

China, while the most surprising, was not alone. Christiana Figueres, head of the UN climate agency, praised the rule, while Connie Hedgaard, who heads climate negotiations for the EU, "strongest action ever taken by the US government to fight climate change."

And the biggest remaining argument Big Carbon has against action on cleaning up climate pollution is that the US will be alone - but by the strength of the signal he has sent with this rule, Obama has maximized his global support base and thereby weakened this remaining argument of his adversaries.

All in all, this strikes me as one of the single most skilled pieces of policy architecture yet crafted by this White House. Let's hope it is only the first.

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A veteran leader in the environmental movement, Carl Pope spent the last 18 years of his career at the Sierra Club as CEO and chairman. He's now the principal advisor at Inside Straight Strategies, looking for the underlying economics that link sustainability and economic development. Mr. Pope is co-author -- along with Paul Rauber --of Strategic Ignorance: Why the Bush Administration Is Recklessly Destroying a Century of Environmental Progress, which the New York Review of Books called "a splendidly fierce book."

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