Copenhagen Deal Comes With Cost

A partial deal in Copenhagen helps pave the way for a cost for carbon emissions in the U.S.

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The incomplete climate agreement hammered out in Copenhagen by President Barack Obama likely means U.S. businesses will soon pay a price to emit carbon dioxide and other greenhouse gases.

That’s true, despite the lack of set goals to reduce emissions in the agreement and the rather muddled question of just how binding the Copenhagen deal really is. It’s true because Obama spent immense international political capital dragging China, India, and others into a deal at all, when the various nations looked as if they were going to leave Copenhagen empty-handed.

By one account, Obama and Secretary of State Hillary Clinton burst in on a meeting between the Chinese, Brazilians, and others to force negotiations with those nations.

Having spent that political capital, and with further international climate negotiations coming down the road, Obama will need to shore up his international credibility by encouraging emissions cuts at home. He has the power to do just that. And he pledged to do it during the campaign, promising 80 percent cuts in carbon emissions within the next 50 years.

“This can be a catalyzing moment,” Senator John Kerry, the Massachusetts Democrat who has co-sponsored climate legislation in the Senate, told the New York Times. “President Obama’s hands-on engagement broke through the bickering and sets the stage for a final deal and for Senate passage this spring of major legislation at home."

Such legislation has already passed the House and is likely to come up in the Senate after a healthcare bill is settled.

But with or without Congressional action, there will be a price for carbon emissions. That’s because the administration set the stage for such a price before the Copenhagen talks ever started.

That happened early this month, when the Environmental Protection Agency found that greenhouse gases endanger the public’s health and welfare, the EPA has the authority to issue regulations that would cap carbon emissions, regardless of whether Congress passes its long-delayed cap-and-trade bill.

“These long-overdue findings cement 2009’s place in history as the year when the United States government began addressing the challenge of greenhouse-gas pollution and seizing the opportunity of clean-energy reform,” said EPA administrator Lisa P. Jackson.

Another way of putting it is as a message to Congress: Pass legislation you like, or the administration will impose regulations you may not like. The EPA can do that because the Supreme Court in 2007 ruled greenhouse gas qualifies as a pollutant under the Clean Air Act, and is subject to such regulation. The Bush administration left it to its successor to act on the Supreme Court ruling. Obama has said he prefers Congressional to regulatory action, but now that he’s staked a big chunk of his international reputation on a climate-change deal, bet on an emissions cap in the U.S., with or without Congress. That means a cost for carbon—either as a tax or fee or as part of a trading scheme like those proposed in Congress now.

What that could also mean is a big boost to companies that produce energy from sunlight, the wind, or biofuels. It’s likely to mean further investment in smart-grid technology that can drive down electricity use and wring more efficiency out of the nation’s current power grid. Research and development of batteries that can do anything from run cars to store wind or solar power for times when it is needed could also be a big winner if a price on carbon is instituted. You can also expect a renewed effort to research such technologies as carbon sequestration, in which greenhouse gases produced by burning coal, for instance, are buried deep in the earth.

Granted, that message could have been clearer coming out of Copenhagen, as some business leaders complained.

"If we'd had bankable emissions-reduction targets for 2020, it would have given a stronger price signal for carbon," Joan McNaughton, senior vice president, Power and Environment Policies, at Alstom Power SA, an engineering company which is a leader in clean coal, told the Wall Street Journal. "That would have kick-started a lot of the needed investment in clean technology."

But businesses have already been acting as if they expect a carbon cost. Such a cost could also reward companies like Wal-Mart that have already taken steps to reduce their carbon footprint. Wal-Mart has not just taken its own steps, but pushed for lower carbon use by its suppliers as well.

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