As Bloomberg reported yesterday (reprinted below), a handful of key moderate Democratic Senators are calling to strip the cap-and-trade section of Waxman-Markey/ACES and focus more narrowly on key energy components this year.  

This is not a surprise.  Bundling energy and climate legislation together has been controversial from the start, but Waxman, Markey, and other House leaders chose to include everything in one bill rather than separate pieces of legislation.  Senate leaders on this issue (i.e. Senator Jeff Bingamen) began with a different approach, focusing on energy policies separately.

There has long been serious debate in DC about which approach is superior - mainly from a political standpoint, but also in term of environmental and economic efficiency.  Politically, splitting the two meant that cap-and-trade would likely be left behind.

The EPA endangerment finding (which I wrote about in GreenBiz.com - Endangerment and Dangerous Regulation) is moving along, but slowly.  The threat of EPA regulating greenhouse gases under the Clean Air Act is not yet a gun against Congress's head, despite Sen Boxer and others attempts to sound the alarm loudly.  It will take a more clear and present threat to move Congress.

So...barring a quick and definitive health care reform meltdown, which would clear the deck for climate, it looks like the Senate will ditch cap-and-trade this year.  I predict that the US will instead pass climate legislation (cap and trade, not a carbon tax) in the second half of 2011.

In the meantime, the EPA threat will get louder as they move forward, there will be more debate about the carbon tax option, and Congress will pass a new energy bill with a Renewable Electricity Standard (RES), which came within one-vote of passing the Senate in 2007. 

Efforts to re-ignite nuclear, accelerate energy efficiency across the economy, and ramp-up natural gas production will remain in the spotlight, along with electric vehicles, advanced biofuels, CCS, and many other useful carbon reduction efforts. 

Bloomberg article below:

Aug. 14 (Bloomberg) -- The U.S. Senate should abandon efforts to pass legislation curbing greenhouse-gas emissions this year and concentrate on a narrower bill to require use of renewable energy, four Democratic lawmakers say.

“The problem of doing both of them together is that it becomes too big of a lift,” Senator Blanche Lincoln of Arkansas said in an interview last week. “I see the cap-and-trade being a real problem.”

The resistance by Lincoln and her Senate colleagues undercuts President Barack Obama’s effort to win passage of legislation that would cap carbon dioxide emissions and establish a market for trading pollution allowances, said Peter Molinaro, the head of government affairs for Midland, Michigan- based Dow Chemical Co., which supports the measure.

“Doing these energy provisions by themselves might make it more difficult to move the cap-and-trade legislation,” said Molinaro, who is based in Washington. “In this town if you split two measures, usually the second thing never gets done.”

The House passed cap-and-trade legislation in June.

Leaders of the Democratic-controlled Senate say they are sticking with their plan to combine a version of that bill with a separate measure mandating energy efficiency and the use of renewable sources such as solar and wind power. The legislation also provides for an extension of offshore oil and gas drilling in certain areas, broadening its support.

Reid’s Comment

“I don’t think we are going to take to the Senate floor a bill stripped of climate provisions,” Senate Majority Leader Harry Reid, a Democrat from Nevada, told reporters in Las Vegas on Aug. 11.

The Senate Energy and Natural Resources Committee passed the renewable-energy legislation, 15-8, in June. Reid has set a deadline of Sept 28 for committees to complete work on climate- change provisions.

Ben Nelson of Nebraska and North Dakota Senators Kent Conrad and Byron Dorgan joined Lincoln in suggesting that the climate measure be put off.

“We should separate the energy bill from the climate bill,” Conrad told reporters this month. ‘It needs to be done as soon as we can get it done,” he said, referring to the energy legislation.

Climate legislation would require 60 votes in the Senate. Most Republicans have said they oppose the cap-and-trade measure, and at least 15 of the Senate’s 60-member Democratic majority have said the House-passed version would hurt the economy and needs to be revamped to win their support.

‘Wishful Thinking’

“At some point, they are going to take a hard vote count,” said Michael McKenna, president of MWR Strategies, a Washington consulting firm. “I think cap-and-trade has a one- in-three chance, but at some point they are going to want to pass something,” he said of the Senate leadership.

Some Democrats want to avoid voting on a measure that would force companies to get pollution permits, said Daniel Weiss, an energy and climate specialist for the Center for American Progress, a Washington public policy group that advises Democrats and supports a cap-and-trade system.

“There is a lot of wishful thinking on the part of some senators,” Weiss said in an interview. “They want to do what is easy, not what is needed.”

The Senate remains under pressure to pass a cap-and-trade bill because failure to act would leave regulation in the hands of the Environmental Protection Agency, which has asserted its right to do so under the Clean Air Act, said Kevin Book, a Washington analyst with Clearview Energy Partners, an energy consulting firm. Senate action to head off the EPA is the most likely outcome, he said.

“The second school of thought holds that Senate progress towards climate change legislation is already irretrievably mired in parochial conflicts,” Book said in an Aug. 12 memo to clients. That may lead the Senate to pass stand-alone energy legislation as a way to “achieve climate change objectives without a cap-and-trade program.

Rebecca Lutzy is the Content and Community Manager at The Energy Collective.  She also serves as a consultant for GreenOrder, a leading sustainability and management consulting firm, and is a Ph.D. student in Princeton University's Science, Technology, and Environmental Policy program.