Karen Frantz
GHG Monitor
2/28/2014
The energy industry needs to plan for a future when there will be a cost of carbon, said Senior Counselor to President Obama, John Podesta, at the ARPA-E Summit in Washington this week. “I think the energy industry has to plan for an eventuality where the externalities, the cost of CO2 pollution on environment and particularly on the economy, [are] going to be built into the policy environment,” Podesta said, speaking with Secretary of Energy Ernest Moniz. He added that as the world moves toward such a scenario, it is critical to accelerate clean energy innovation in tandem with the development of policies to reduce CO2 in the atmosphere. “The question is, when is it going to happen and whether we’re going to do it in a way that I think is efficient, cost-effective, and we can do it in a way that actually creates opportunities for the economy rather than burdening the economy,” he said.
He also said he believes that the transition to a clean energy future will ultimately be driven by technology rather than by policy, however. “I think we’ve got to have a policy framework, but ultimately the real future of a different whole technology base will be technology-driven,” he said. “But without the right policy framework, I don’t think we’ll get the right investments in that technology.” He added he did not expect that there would be movement on the legislative front until the next presidential election cycle. “We forget that in 2008, Sen. McCain and [then-]Sen. Obama didn’t really disagree on climate change and didn’t hardly disagree on the solution,” he said. “Both supported a cap-and-trade scheme; they were a little different in ambition. The intense pushback occurred sort of right after that campaign. But I think politics doesn’t change in our country without a presidential campaign.”
‘No One Has Told Them to Solve for Carbon’
In a separate panel at the ARPA-E Summit, NRG Energy President and CEO David Crane said the U.S. power industry doesn’t expect a price on carbon in the near-term. “As a human being and a father of five, I do believe that climate change is the single greatest issue that mankind faces,” he said. “But let’s not delude ourselves. The power industry in America today is not solving for carbon because no one has told them to solve for carbon and no one has put [out] a carbon price incentive, whether it be cap-and-trade or a carbon tax. No one has put that on the table, and no one I know believes it’s coming anytime soon.” He added that although NRG Energy started pricing carbon into its forward models in 2008 when President Obama came into office, it since took it out in the last few years, which he said “is really sad.”
Richard Lester, Head of the MIT Department of Nuclear Science and Engineering, said the prospects for pricing carbon anytime soon are “non-existent.” He said, “I think what we have to do here is to recognize that when we first started talking about climate we got it wrong. We started talking about it as a regulatory issue: We’ve got to mandate reductions in carbon. We have to have a new approach. We only have one chance to get it right this time, we don’t have time to get it wrong again. I think that new approach has to be about innovation. That addressing climate is not so much a regulatory issue as it is an innovation issue, a way to get costs down, more attractive services and so on. I think we have to shift the center of gravity in the debate about climate away from mandates, forcing things that people don’t want into the system, and towards innovation and systems and products and services that people do want.”
EPA’s Power Plant Rule
Podesta was also mostly mum on how the Environmental Protection Agency is planning on crafting a new rule that will set greenhouse gas emission standards for existing power plants when Moniz asked him what those regulations might look like, saying he wasn’t going to “jump the gun” because EPA Administrator Gina McCarthy is still out gathering information from stakeholders. But he did say that the rule will likely allow opportunities for states and regions to work together on energy platforms. “We had some discussion about that: the interest of the West Coast governors to come together and think about the West Coast as more of an integrated set of assets, [the Regional Greenhouse Gas Initiative] in the northeast, and other states that may want to combine their energy platforms to get those reductions in the most efficient way, to look outside the fence, if you will, to ensure that we can incorporate ways of reducing demand as well as increasing supply of clean energy,” Podesta said. “I think all those will be in the mix.” He said the rule will be previewed through the Office of Information and Regulatory Affairs sometime in the spring, and the draft rule is scheduled to be released for public comment in June.
The rule is an essential part of President Obama’s Climate Action Plan, which sets out ambitious goals across federal agencies to reduce greenhouse gas emissions. Podesta said that one aspect that was left out of the plan that he would have liked to have seen was a focus on energy finance. “Without a lot more private capital invested in building out this new cleaner energy infrastructure and investment going to particularly efficiency as well as to clean energy and climate, I don’t think we’re going to get far enough along,” he said. “We’ve got to find new tools that can incentivize, if you will, a working partnership, a public partnership with the private sector just to see more movement of private capital into this space, and so we’re developing some ideas for that.”
