To get carbon legislation passed this year, the administration may want to think of the country as pieces of a whole.
A cap-and-trade system that lets the various regions in the U.S. keep the money that their businesses pay for carbon allowances could make a carbon system politically palatable, said KC Mares, president of Megawatt Consulting. Mares is an expert on energy efficiency and has been meeting with regulators and politicians in Washington and California for the last several weeks. Even politicians that are skeptical of carbon regulations are becoming open to the regional idea, he noted.
"Regional allowances might be politically doable," he said.
The administration and several politicians want the U.S. to make a carbon plan law before world leaders meet in Copenhagen at the end of the year to hammer out a succeeding agreement to the Kyoto Protocol. Leaders from industrial states along with many large corporations, though, are expected to push back against regulations. Australia, which gets 80 percent of its power from coal, recently postponed its carbon plans from 2010 to mid-2011.
The appeal of a regional scheme in part boils down to the fact that it would better tie the economic pain of a tax or cap-and-trade system to the benefits. As in Europe, companies in the U.S. will likely react to carbon regulations by devising energy efficiency strategies and investing in things like solar hot water systems, biomass boilers, and waste heat recovery systems. Because construction largely remains a local business, locals would get the contracts. In other words, Michigan wouldn't subsidize opportunities for California.
"A lot of the coal states do not have a lot of solar or wind resources," he said. "Energy efficiency is the only way they can get an economic benefit."
Carbon regulations in the U.S., in fact, are already regional: look at the Regional Greenhouse Gas Initiative (RGGI) on the eastern seaboard. RGGI Inc. has been auctioning carbon credits since last September. World Energy, which auctions carbon credits through a website and also works with RGGI Inc., says that the place where a carbon credit is generated (i.e., a factory in Ohio auctions off credits it obtained for switching paints or installing a next generation smokestack scrubber) is a key attribute buyers examine when buying credits. Interestingly, Lisa Jackson, who heads up the EPA, was a key player in implementing RGGI.
Like the Rocky Mountain Institute's Amory Lovins and Secretary of Energy Steve Chu, Mares is a strong advocate for energy efficiency.
"It is green for the wallet," he said. "If you save electricity, it has a payback. It is not about wearing a sweater in the White House. It is about 'I might have to spend a little more now but I will save in the long term.' "
"For the first time, energy efficiency is starting to become sexy," he added.
Besides, he added, conventional forms of electrical power can't grow fast enough to meet demand. Nuclear advocates admit that, even if everything goes perfectly, the U.S. may not see a new nuclear reactor until 2017 and only one to two power plants a year after that.
"It is kind of impossible to meet our needs with nuclear," he said. "We only have uranium reserves for 50 years anyway."
Coal companies claim they can build plants with carbon capture, but not until 2020.
Unfortunately, efficiency historically has been hobbled by transitory interest. The public gets interested when energy prices are high, and loses interests when they drop, or when economic growth returns. One of the first politicians to talk about the need to get off imported oil was Richard Nixon. But he didn't start talking about it during the first Middle East oil crisis in 1973. He spoke about it in 1965, in the run-up to his foiled bid to become governor of California.
So what is the solution? First, government programs. California has kept per capita electricity consumption relatively level since the mid-1970s when it enacted Title 24, the state's stringent efficiency codes. (Californians now use half the amount of energy per capita than the average of the rest of the country.) Utilities in the state are also compensated for conservation programs. It is hard to say why other states have not adopted these measures, but there is increasing talk in D.C. and other parts of the country of adopting them.
The second key is education. Businesses often don't know about the benefits. NetApp, the storage giant, and Yahoo both built energy efficient data centers in recent years. Utility rebates picked up 80 plus percent of the cost. In effect, they got free data centers.
Efficiency can also be better tied into health costs. An estimated 30,000 to 50,000 people a year in the U.S. die prematurely from fumes from coal burning. Another million people acquire asthma.
"The health care costs are borne by the rate payers," he said.