Let’s compare the public option of health care reform with a carbon cap in the clean energy/climate change/cap-and-trade debate.

Public option Carbon cap
Policy / goals
Top priority for the Left yes yes
Important to policy goals of the President yes? yes
Policy can work without it, although less effectively from the Left’s perspective yes yes
Initially pushed by outside left President
House
Passed the House yes yes
Moderate/nervous House Ds hated voting for it yes yes
Speaker and House liberals insist on it yes
(for a while)		 yes
Senate
Has majority support in the Senate maybe maybe
Has 60 votes in the Senate no no
Can pass the Senate no no
Republicans
Republicans oppose the policy all almost all
Republican base hates it yes yes
Republicans see political gain if Democrats continue to push it yes yes
President Obama
Supports it when asked yes yes
Pushes for it when speaking publicly no no
Will insist on it in legislation no no

Fleshing out the comparison

I believe there is an extremely high likelihood a carbon cap, like the public option, will not become law any time in the near future. Today I would give 100:1 odds against it becoming law in 2010, and 50:1 odds against it becoming law during this Presidential term. Cap advocates have some limited leverage through EPA’s regulatory authority, which I will explain below.

The key to this conclusion is the President’s posture toward both policies. The President rarely mentioned the public option in his speeches and almost never initiated a discussion about it. Yet when asked, he always said something like “It’s good policy, I support it, it should be in a bill. I am focused on the policy goal of _____, and it’s a good way to reach that goal.” He never (slipping once) said it must be in a bill to merit his signature. This posture allowed him to insulate himself somewhat from left-side attacks, while allowing himself the flexibility to sign a bill that excluded the public option if one made it to his desk.

The President appears to take the same posture on a carbon cap. When asked, he says he supports it and that it’s good policy. Yet he rarely mentions it in speeches, never aggressively, and he always focuses instead on policy goals: clean energy through technology development and so-called green jobs. He occasionally says that pricing carbon is a good way to achieve these goals and that he supports it. In doing so he sounds exactly like he did when he spoke about the public option. The President rarely talks about “climate change,” “greenhouse gases,” or “cap-and-trade.” He much more frequently talks about “clean energy technology” and “green jobs.”

There are some differences, but they don’t affect my conclusion:

  • I agree with a friend who guesses that the President believes more in a carbon cap than he does in the public option, which arose as a relatively late legislative addition resulting from outside pressure. If this is true, then the President’s goal is to price carbon, but he is making a language/messaging choice that he should instead talk about clean energy and green jobs. I think the President is also making a tactical calculation that he cannot get a carbon cap through the Senate. As a result, the political investment he appears willing to make in a carbon cap appears comparably small to that which he made in the public option.
  • A handful of Congressional Republicans support pricing carbon and even a carbon cap. I don’t think this will have a big effect on the legislative dynamics of the two issues.

The President sets up a potential deal without a carbon cap

A few weeks ago in his State of the Union Address, the President signaled support for nuclear power, clean coal, and expanded access to oil and gas drilling. I read this high-profile signal as an offer of compromise, throwing the door open to a bipartisan energy/climate bill which I will guess might include:

  • a flexible Renewable Portfolio Standard for electricity, (possibly) mandating that each State generate a fraction of its power from renewable/clean/low greenhouse gas sources;
  • more financial support for nuclear power (the President mentioned expanded loan guarantees; dealing with nuclear waste is key but lags behind);
  • more financial support for clean coal;
  • something unspecified on oil and gas drilling (onshore? offshore? both?);
  • even more subsidies for technology R&D.

Such a bill could, I think, garner broad bipartisan support in the Senate because it would not include a carbon cap. I think Team Obama is trying to set up such a deal without getting blamed for being the one to stick the knife into the carbon cap.

Now the President has not said that he would support the above package without a carbon cap, and if asked I’ll guess he would say a bill should include all of the above and a carbon cap. This is what he did with health care and the public option until he approached the endgame. The more important question is what the President would do if it becomes clear that this package can pass the Senate without a carbon cap, and cannot pass with one. In the current environment, I think he would grab the compromise, declare victory, and tell unbelieving carbon pricing advocates that he’ll try again in the future.

Hurdles to a clean energy law without a carbon cap

The biggest hurdle to a signing ceremony is whether the most aggressive advocates for a carbon cap (who tend to concentrate on the left side of the Democratic party) would block such a bill. They could do so in at least three ways:

  1. Liberals could continue to pressure Senate Majority Leader Reid into not bringing up the bill in a procedural manner that allows such a vote. Leader Reid has so far deferred to Senator Boxer’s Environment and Public Works Committee on this issue. As long as he maintains this jurisdictional view, a non-cap compromise deal is highly unlikely. To allow for the possibility of such a deal, Reid would need to either introduce his own bill, or shift jurisdiction to Senator Bingaman’s Energy Committee. Each move would require Reid to make an explicit decision to split his conference.
  2. Even if Leader Reid were to bring such a compromise bill to the Senate floor, liberals might be able to kill the above compromise in the Senate because it’s not good enough from their perspective.
  3. Speaker Pelosi and House Democrats could refuse to accept a bill that excludes a carbon cap in a conference with a hypothetical Senate-passed bill like the one above.

Like the public option debate, this one centers on the question “Is half a loaf better than nothing?” I think the President has decided that it is. I’m not sure how the fiercest advocates of climate change legislation might feel. Their strategic challenge is that if a bill like the one described above becomes law, the chance of future enactment of a carbon cap drops from near-zero to zero. The subsidies are the dessert that accompanies the political pain of voting for a carbon cap. Once that dessert has been eaten, there is little to encourage members to vote for a later bill capping carbon.

At the same time, those advocates have to know that their chances of enacting a carbon cap this year are near zero, and there is little to suggest that those chances will improve over the next few years. So how much of a sacrifice is it to give up something now that has only a very small chance of becoming law if you wait?

I think the President can, if he pushes hard enough, get his left to yield and send him a clean energy bill excluding a carbon cap before Election Day 2010. I don’t know, however, whether he will push hard enough. I think he made a strategic mistake on health care by allowing the process to drag on (and I’m glad that he did). By not stepping up and knifing the public option early, he shifted the blame for killing it to the Senate, but at the cost of tremendous delay and ultimately of the health care bill’s failure. The same tactical calculation may present itself on a carbon cap. Would declaring a carbon cap dead increase the prospects for a clean energy law in 2010, and if so is the President willing to take the heat for being the one to say this?

A wildcard is the Environmental Protection Agency’s ability to regulate greenhouse gas emissions under current law, thanks to a 2007 Supreme Court decision Massachusetts v. Environmental Protection Agency, and a subsequent endangerment finding by the EPA. Advocates and opponents of capping carbon agree that EPA’s regulatory authority is clunky, bureaucratic, and more economically damaging than a carbon cap might be. But carbon cap advocates want EPA to move forward to pressure cap opponents into a legislative trade: we’ll stop EPA if you give us a law capping carbon.

This is the awakening climate change issue for 2010: will EPA be allowed to use their authority? Will the threat to use this authority resuscitate a carbon cap, or will it backfire and cause Congress to stop EPA from acting? The fiercest carbon cap advocates are willing to allow EPA to do some economic damage if it generates pressure for a future legislative solution. Yet there is growing center-right support, including from some Congressional Democrats, that this threat is too damaging and that EPA’s wings should be clipped. It’s easy to imagine this issue being injected into a legislative debate, and a stalemate blocking a signed law. It’s also easy to imagine a Tea Party-like tidal wave focusing on a rogue EPA as their next target, and sweeping nervous in-cycle Democrats along with them.

Conclusions

  1. Carbon cap = public option.
  2. The President is willing to sign a clean energy bill this year that excludes a carbon cap.
  3. He almost certainly won’t admit that until late in the legislative debate.
  4. In the State of the Union he created the framework for such a deal.
  5. That means such a legislative deal could happen, not that it will happen.
  6. If the President signs a clean energy bill that excludes a carbon cap, the prospects for a legislated carbon cap drop from near zero to zero.
  7. The public option dynamics could replicate themselves for the carbon cap. I would expect teeth gnashing on the left as the President hedges and ultimately dumps it overboard.
  8. While the carbon capping left wants to use EPA’s regulatory authority as legislative leverage, it’s possible this will backfire. A bipartisan center-right-Tea Party coalition to clip EPA’s wings could soon pick up steam.
  9. The effects on a clean energy bill of such a fight over EPA’s regulatory authority are unpredictable.
(photo credit: Bruno D Rodrigues)