Obama's Stealth Energy Policy

In early 2008, a week after his defeat in the New Hampshire primary, Barack Obama sat down with the editorial board of the San Francisco Chronicle. "The problem is," Obama said about global warming, "can you get the American people to say this is really important and force their representatives to do the right thing?" He went on,

Under my plan of a cap and trade system, electricity rates would necessarily skyrocket--even regardless of what I say about whether coal is good or bad, because I'm capping greenhouse gases, coal power plants, natural gas--you name it--whatever the plants were, whatever the industry was, they would have to retro-fit their operations.

In September, just before the election, Joe Biden went even further, telling an environmental activist that he and Obama were "not supporting clean coal." They were, Biden said, against all coal, clean or otherwise. "No coal plants here in America. Build them, if they're going to build them, over there."

A little more than a year later, you'd be hard pressed to find a Democrat willing to speak so candidly of the left's aspirational goals for America's energy policy. The preferred Democratic talking point on the cap and trade bill that passed the House this spring before stalling in the Senate is that we can save the planet for "the cost of about a postage stamp a day," in the words of Edward Markey, one of the House bill's authors.

So how did we go from skyrocketing energy prices to a postage stamp a day?

Well, Obama wasn't quite able to "get the American people to say this is really important and force their representatives to do the right thing." The House bill "funnels billions to the coal industry," said one Democratic Hill staffer. And as that bill is currently written, the allowances for carbon emissions that were supposed to be auctioned off--creating a market for carbon, putting a price on emissions, and opening a new revenue stream for the federal government--would be largely given away in the early years of the program according to a complicated formula that was carefully calibrated to win the votes of southern and rural Democratic lawmakers whose districts depend on coal for electric power. "They're not going to be bankrupted," the aide said, referring to the coal industry.

Nonetheless, Republican Shelley Moore Capito of West Virginia says that if anything resembling the House bill is signed by the president, West Virginia's economy will "be in the loser column in a big way." (West Virginia generates 98 percent of its electricity from coal.) Capito "doesn't buy" the promises coming from Democrats. "It's possible [coal-fired power plants] will have an exemption for a certain number of years, but then that goes and they're going to pass all their costs on to the rate payer." But she adds, "it wouldn't be a surprise if they stripped exemptions out in conference."

Indeed, the Kerry-Boxer cap and trade bill now moving through the Senate doesn't say anything about how they're going to allocate the allowances for carbon emissions. That was the most contentious piece of the Waxman-Markey bill in the House, and it will be handled in the Senate by Max Baucus's Finance Committee.

Another major piece of the cap and trade bill will have to go through the Agriculture Committee, now chaired by Senator Blanche Lincoln. Lincoln is facing a tough reelection campaign in 2010--a recent Rasmussen poll had her trailing potential Republican challengers, and Arkansas generates nearly half its electricity from coal. California, on the other hand, gets less than 2 percent of its electricity from coal. Cap and trade, by taxing coal and other carbon-intensive power sources, will impose a heavy burden on middle America, and that threatens the recent, majority-making revival of the Democratic party in those states.