The uphill push toward a federal US cap and trade scheme and emissions regulation met a steeper incline this week as new political obstacles in Congress put a federal emissions trading scheme in further doubt. As a result, attention is already turning back to the states and regional approaches to climate action.

Already facing a difficult task in the Senate to secure the required votes, Democrat cap and trade proponents have lost a vital seat to the Republicans. Murmurings among some Democrats that pursuing an energy bill, without contentious climate measures, might be the more sensible way to go also threatens to undermine cap and trade legislation. The White House, meanwhile, faces a further challenge from the upper house over the Environmental Protection Agency’s powers to enforce greenhouse emissions controls.

The result of the Massachusetts election for the Senate seat vacated by the late Edward Kennedy, a solid victory for the Republicans in what was a Democrat stronghold, suggests the window for President Obama to get cap and trade legislation through may have closed. The chances of securing the required 60-seat super majority in the Senate has receded with the loss of Kennedy’s seat, which reduced the Democrats to 59. He and the Democrats go into a Congressional election year unpopular in the polls. If this were reflected in November results the Democrat numbers may well lowered further – cutting the chances for federal climate laws further in the last two years of Obama’s term. And trying to get such contentious legislation through beforehand under such poll pressure appears too tall an order. Of course the polls can change but it appears at this stage the US economy would have to pick up significantly over the next nine months to stop further loss of Democrat seats.

Environmental groups remain hopeful that with a Presidential push, Congress can still pass a climate bill this year. But it may not be enough. Democrat Senator Byron Dorgan has already publicly stated that after one big partisan battle in Congress, the appetite for another one on climate legislation will be lower in 2010. "In the aftermath of a very, very heavy lift on health care, I think it is unlikely that the Senate will turn next to a very complicated and very controversial subject of cap-and-trade climate legislation," Dorgan said. "I think it is more compelling to turn to an energy bill that is bipartisan." Republican Senator Mitch McConnell said there was little support left in the Senate for a bill. "I would say there is minimal enthusiasm, and that's putting it mildly, for cap and trade," McConnell said.

Alaskan Republican Senator Lisa Murkowski, meanwhile, is considering options for a Congressional attack on the powers of the EPA to regulate greenhouse gases. After floating the idea of an amendment to debt legislation that would specifically disallow the EPA from regulating greenhouse gases, Murkowski now says she is leaning towards an alternative - a disapproval motion – requiring only a 51 per cent majority. This could force the White House to withdraw the EPA’s December endangerment finding that carbon dioxide poses a threat to the public health. That finding paves the way for the agency to regulate. And it plans as soon as March to implement new fuel standards for cars and clean-technology requirements for industry. Crucially, the EPA is also the fall-back position for the Obama administration in implementing a federal emissions controls, should cap and trade efforts in Congress fail. Blocking this avenue is Murkowski’s ultimate goal, some observers say.

Already, attention has begun to refocus on state and regional attempts to institute cap and trade schemes and other emissions controls. California and states in the north-east had established a lead on emissions trading before Obama’s election. They have continued their efforts despite the prospect they would be subsumed in any federal scheme that emerged.

Existing or planned schemes cover a large chunk of the US economy and emissions. Ten north-east and Atlantic states have already run cap and trade on power sector emissions for a year under their Regional Greenhouse Gas Initiative (RGGI). The scheme has modest reduction goals, with very low prices around $2 a tonne of CO2. But it is a start, and the member states are already looking to tighten emission caps by 2012. The RGGI states are also planning to complement their existing scheme, along with Pennsylvania, in a similar move on transport emissions - a trading regime rewarding low carbon fuel use.

California is set to introduce an emissions trading scheme in 2012, long with eleven surrounding states and four Canadian provinces in the Western Climate Initiative. The power sector would be the first regulated under cap and trade with other sectors including transport coming in by 2015. Florida is considering its own cap and trade scheme while six mid-western industrial and agricultural states, plus Canada’s Manitoba, are considering recommendations for their own regional cap and trade scheme covering power generation, transport and heavy-emitting industry.

All these regional groupings look keenly on the idea of linking their schemes with the others, even to the EU ETS. If they all eventuate, combined they would place more than half the US population and economy under cap and trade. The prospect of a federal US cap and trade scheme emerging this year hasn’t gone, but it may turn out to have been 2009 or not at all for the Obama administration. If so, it may be left up to the pro-active states to lead on climate action after all.

Reuters, Bloomberg 20/1/10, Dow Jones 19/1/10