Will politics scuttle regional efforts to meet EPA CO2 targets? 

Source: Scott Detrow, E&E reporter • Posted: Saturday, December 6, 2014

U.S. EPA is practically begging states to coordinate with each other when it comes to implementing the agency’s Clean Power Plan (CPP). States that join a regional collaboration will have an extra year to submit their plan.

More importantly, EPA’s models show that regional approaches would be far less expensive, on everything from regulatory costs to customers’ monthly electricity rates. Several studies have shown that a patchwork state-by-state approach would lead to artificial price increases, as many electricity markets cross state lines.

But at this week’s public comments show, there is a deep partisan divide over the wisdom — indeed, the legality — of requiring states to reduce their power sectors’ greenhouse gas emissions by 30 percent.

And if Republican governors refuse to cooperate with the rule, the end result may look a lot like the implementation of the Affordable Care Act. In that scenario, the vast majority of Democratic-controlled states expanded Medicaid and created state-level health care exchanges, while most Republican states did nothing.

CPP’s supporters hope that practicality trumps partisanship when it comes to cross-state collaboration. But the early indications aren’t promising. To get a sense of how Republicans view the program, just take a look at the comments provided by the states where Republican governors are considering a run for president.

From Bobby Jindal’s Louisiana: The rule “attempts to supplant the sovereign authority of Louisiana.” Ohio Gov. John Kasich’s administration wrote, “the proposal itself is fundamentally flawed in its design and construction.” Wisconsin Gov. Scott Walker submitted a letter warning that CPP will “increase energy bills” and have “severely negative impacts on Wisconsin.”

And in Texas, where outgoing Gov. Rick Perry is eyeing a second run at the White House, regulators slammed EPA for not providing enough credit for the state’s surging alternative energy market, among other broader criticisms. “The EPA should withdraw the proposed rule due to the numerous flaws with the proposal,” the comment stated.

New Jersey Gov. Chris Christie is the highest-profile presidential contender among sitting state executives. His administration called the draft rules “incomplete, needlessly complex and impossible to implement.”

Cap and trade remains ‘a toxic word’ for GOP

Christie illustrates just how wary Republican governors may be about the collaboration option that would create multi-state cap-and-trade markets like the Northeast’s Regional Greenhouse Gas Initiative (RGGI).

Christie made headlines in 2011, when he pulled New Jersey out of RGGI. While Christie acknowledged climate change as a serious threat and, among other things, vowed to bar new coal-fired power plants from being built in New Jersey, he dismissed the multi-state effort as “gimmicky” (ClimateWire, May 27, 2011). “RGGI does nothing more than tax electricity, tax our citizens, tax our business, with no discernible or measurable impact upon our environment,” he said at the time.

Many observers viewed the withdrawal as a partisan move, aimed primarily at establishing the sometimes-moderate governor’s conservative credentials before a possible 2016 run. “This is one of those issues where Christie decided he’s going to take a firm position that resonates with the GOP. and stick with it,” Monmouth University Polling Institute Director Patrick Murray told The New York Times earlier this year.

Polls show an increasing partisan divide when it comes to how Republicans and Democrats view the climate change threat. While more than 6 in 10 respondents told the Pew Research Center this year that they believe there is “solid evidence” of global warming, more than 70 percent of people the organization characterized as “business conservatives” or “steadfast conservatives” disputed the claim.

Christopher Borick is the director of Muhlenberg College’s Institute of Public Opinion. He has taken a close look at public opinion on cap and trade and other environmental issues, and said he would “be surprised” if any Republican governors embrace a regional cap-and-trade market under CPP.

While the market-based idea was initially proposed by conservative think tanks, “once it entered the realm of D.C. politics, back in 2008 and 2009, it became a toxic word for Republicans,” Borick said. It was “cap and tax, rather than the cap and trade.” That’s the time frame when a high-profile national cap-and-trade plan passed the House, only to stall in the Senate.

Borick drew a comparison to the Affordable Care Act, more commonly known as “Obamacare.” While a handful of Republican governors created state-run health care exchanges — and more opted to expand Medicaid — there was a stark partisan breakdown when it came to state-level compliance. The vast majority of Democratic-run states opted in, while the vast majority of Republicans said no. Going back to those Republican governors eyeing a presidential run, not a single one of their states has created its own health care exchange.

Behind the rhetoric, states ponder collaborations

So with Republicans poised to control 31 governor’s offices next year, does that scuttle the hopes of high-level regional partnerships? After all, as of right now, there’s no federally run market for states to fall back upon, like there is for Obamacare.

Not necessarily. CPP advocates are hopeful that once the comment window and legal challenges fade, even hostile states will begin planning to make it work. “There’s all these different calculations about how much this is going to cost,” said Diane Munns, the Environmental Defense Fund’s senior director of clean energy collaboration. “But it’s fairly consistent: If we can do it on broader regional [level], it costs less to do. Why wouldn’t people start looking at those solutions?”

In fact, regulators from states of all political stripes have begun meeting behind closed doors to begin discussing collaboration. Illinois Commerce Commission Chairman Doug Scott has helped organize a group of Midwest states. “You’ve got states that take wildly varying positions on the need for a rule, or how the proposed rule actually looks,” he told a Washington, D.C., audience earlier this week.

“But those of us who — if this rule survives the court challenges — are actually going to be changed with putting together plans, we’ve got to assemble the best information that we can so that we can put together the best plan that we can or make the best recommendations we can to our governors and our legislatures” (EnergyWire, Dec. 3).

Western states — both Republican- and Democratic-controlled — met with each other to discuss regional cooperation earlier this year, too, Bloomberg reported.

And Massachusetts Department of Environmental Protection Commissioner David Cash said he’s been involved in talks about ways to create carbon markets for states that are stifled by uninterested neighbors. Cash characterized the idea as “a plug-and-play emissions market, in which a state doesn’t have to join RGGI or California, doesn’t have to negotiate a multi-state agreement, but can participate in trading allowances, and therefore take advantage of the cost benefits” of a larger economic market.

Common standards may be a first step

And even if cap and trade remains a political no-go for Republican governors, Munns said there are many other ways states can work together to make CPP cheaper and smoother. “Getting together with regional groups and saying we’re going to be consistent on how we measure energy savings” is one example she offered.

Meredith Fowlie, an associate professor at the University of California, Berkeley, said another critical step toward cross-state collaboration could be the technical decision of whether a state chooses to be measured by the total amount of carbon dioxide its plants produce, or a rate dividing that amount by megawatt-hour.

“If all states convert to a mass-based standard, linkage or collaboration becomes easier. You can imagine some sort of emissions trading,” she said. “If different states adopt different rate-based standards, that’s going to complicate things.”

That’s because, in very simple terms, the latter approach evaluates power plants based on a set standard. Plants emitting carbon levels above that line need to purchase credits; plants below it can sell them. And standards would be different from state to state.

Rate-based levels “just complicate the trading,” said Fowlie. “Within a state, permits are related to the standard. And standards are different in different states.” Take two neighboring states with very different energy portfolios: New Jersey and Pennsylvania. Coal-heavy Pennsylvania would likely have a much higher rate than its eastern neighbor, which gets a sizable chunk of its energy from nuclear power plants. “You could have two similar power plants facing different incentives, depending on what states they’re in,” Fowlie said.

Despite this week’s sometimes inflammatory comments, Munns said she’s staying optimistic that most states will try to make CPP work. “I hope people will look at this and say, ‘We want to do this in the best way for our customers.’ I don’t think this should be a partisan issue,” she said.