Prospects for Utility-Only Cap and Trade Bill Remain Unclear

Although Senate Majority Leader Harry Reid (D-NV) plans to introduce energy legislation by the end of July, it is uncertain if, and to what extent, the bill will include a cap and trade provision. Reid continues to state that he will bring a four-part energy and climate package to the Senate floor in the next two weeks, but prospects for any cap and trade component have seemingly dimmed among the most vocal supporters. Reid has expressed his preference for a bill containing four key elements: a response to the Gulf of Mexico oil spill, promotion of energy efficiency, stimulus for clean energy production, and a cap on carbon emissions from power plants. However, Reid has warned he will not include any provisions that are not certain to gain 60 votes.

In an attempt to win support from electric utilities, Senator John Kerry (D-MA) has floated the idea of concessions on non-greenhouse gas emissions such as particulate matter and mercury. Not surprisingly, environmental groups have fiercely opposed any potential weakening of existing federal pollution rules. Further complicating a utility-only emission cap is the response from the manufacturing sector. Representatives from steel and chemical trade associations have recently announced their opposition to such a plan, arguing that it will increase their electricity prices and leave them at a competitive disadvantage compared with foreign manufacturers.

Despite the long odds, Democratic Senators have learned not to underestimate Reid’s ability to get his way. “He’s pulled a lot of rabbits out of the hat this year,” said Senator Carl Levin (D-MI). Is there one more rabbit left?