GRAY: Obama’s climate policy undermines the U.S.


As described in advance by the media, President Obama’s bold new climate policy initiative seems peculiarly designed to undermine U.S. competitiveness and energy security while doing little or nothing to introduce serious competition where it is needed to produce real innovation.

The centerpiece appears to be a new offensive in the war against coal, supplemented by special favors on public lands for pure renewable-generated electricity which evidently cannot compete (yet) on a level playing field.

But coal has done more than its fair share of the burden of environmental cleanup. On Monday, the Supreme Court announced that it will review EPA’s “cross-state air pollution rule” that, together with EPA’s air toxics rule for utilities, will reduce carbon dioxide by massive amounts and take sulfur down to around 2 million tons from the roughly 18 million emitted in 1990.

Missing in action is any responsibility for oil, which contributes more carbon dioxide (CO2) in the U.S. than coal and for which we still pay billions to foreigners to import — though, if the environmentalists will allow it, we will be increasing our own oil production at a fast clip over the next few years.

The White House might answer that its latest auto emissions rule has taken care of the transportation sector by significantly increasing car efficiency. The trouble with this policy is that it puts the entire burden on the automobile industry, which would be much better able financially and technically to reduce CO2 if allowed to seek assistance from the fuel suppliers.

Look at the electricity generation sector for comparison. Utilities have a big choice of fuels of widely differing pollution intensity — from wind, solar and nuclear and biomass at the low end to natural gas in the middle and coal (and coal-to-liquids) at the high end. All of these fuels compete for the utilities’ favor, and the consumer is the beneficiary.

Cars and their drivers, however, have no similar choice. They have gasoline, and that is about all. (Diesel has only about 4 percent of the market.) All the alternatives mentioned above are, like their analogues on the stationary source side, lower in CO2 and traditional pollutants as well — and more important, are all home-grown. In fact, we are drowning in them — from natural gas and coal (both of which produce cheap methanol) to biofuels to electricity itself.

The monkey wrench in opening up fuel competition on the transport side is the regulatory subsidy that EPA grants gasoline by ignoring the air toxic requirements applicable to oil. EPA has enforced the air toxic requirements on coal to more than 80 percent removal, where the costs can exceed $50,000 per ton.

But EPA has done virtually nothing to enforce the parallel and much less expensive provisions against transport fuels, which amounts to a huge regulatory subsidy. This subsidy is a major barrier to entry for all of the cleaner fuels which have no way of exploiting their air quality benefits.

A rule at EPA which could help solve this subsidy/level playing field problem is pending. But besides that, there is one paramount point the White House and EPA must keep in mind: Ramping up utility costs in the absence of an international treaty that equally binds our competition in the Pacific is a misguided and regressive policy for reversing the return of manufacturing that we have been enjoying as a result of cheap gas from the shale revolution. The key problem is called “leakage” — the manufacturing move to cheaper environmental locales which cancels out all of the hoped-for CO2 reductions, resulting in nothing but costs and no benefits.

Given the absence of an international treaty and level playing field, the White House should abandon its fruitless and damaging war on coal. It should instead use existing fuel rule-making to promote competition in transportation fuels to enhance national security, to lower both fuel and traditional pollution control costs for consumers, and to produce ample CO2 reduction co-benefits at the same time.

C. Boyden Gray has served as White House counsel, U.S. ambassador to the European Union, special envoy for Eurasian energy and special envoy for European Union affairs. “Arbitrary and Capricious” runs monthly.

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