Thanks to new drilling techniques, U.S. natural gas reserves may have doubled, Energy Secretary Steven Chu announced this week. “That’s a big deal because it will be a transition fuel as we go to renewables,” Chu said at a conference hosted by the U.S. Energy Information Administration.

Chu’s emphasis on natural gas as a bridge fuel, together with President Obama’s decisions to allow offshore drilling and expand loan guarantees for building nuclear power plants, attest to a new realism in U.S. energy policy. The Obama administration is trying to move the deadlocked energy debate beyond a false choice between fossil and renewable fuels. For now, America needs more of both.

This “no fuel left behind” approach also lays the groundwork for bipartisan cooperation on capping carbon emissions. If Republicans say “no” to things they’ve long demanded, namely more nuclear power and offshore drilling, as part of a comprehensive climate bill, it will be another sign that they are unwilling to help solve the country’s biggest problems.

Some environmentalists (including, apparently, Al Gore) are chagrined over Obama’s support for offshore drilling, which they see as a concession to the “drill, baby, drill” right.  So let’s be clear: offshore production in U.S. waters will not lead us to “energy independence,” nor will it lower prices at the pump. Our share of the world’s oil reserves — even if much more is aggressively produced — is still not large enough to move global oil prices. This would be the case even if there was a truly competitive and free global petroleum market. But the global oil market is not free and competitive — it is dominated by low-cost producers in the Persian Gulf, who are aligned in a cartel and could easily counteract any downward price influence from an increase in U.S. supply. The only way that U.S. oil could directly and dramatically lead to low U.S. gas prices would be for us to adopt the Venezuelan model: nationalize the industry, close the borders, and grossly subsidize the industry. Not gonna happen.

Nonetheless, modest expansions of domestically produced oil would yield modest benefits. Estimates range from a low of 39 billion barrels of recoverable oil to a high of 63 billion barrels. “If ramped up quickly enough, that could overcome the underlying decline rate of current U.S. output and add significant net production for a decade or two, at a time when competition for the oil we are currently importing is likely to be fiercest,” writes energy consultant Geoffrey Styles.

In addition to marginally reducing our reliance on foreign imports, offshore drilling would create U.S. jobs and lower our massive energy trade deficit. These benefits shouldn’t be exaggerated, but they certainly aren’t negligible. Further, to the extent that our offshore development leads to large and cost-effective finds of natural gas, that is almost certainly a good thing since unlike oil, gas is not as subject to global price pressures or oligopolistic manipulation as is oil. Moreover, to really reduce our greenhouse gas emissions, the United States will have to substitute baseload gas for baseload coal on a large scale and abundant gas developed in an environmentally acceptable fashion (more likely to apply to offshore development than to much of the contemplated onshore development of “unconventional” sources) is a key to that goal.

What about the environmental risks of drilling? Without question, the history of petroleum development and delivery is rife with calamities. The decades-old Santa Barbara spills are still seared into the minds of many and, of course, the Exxon Valdez has not – and should not – soon leave our collective memories. But the former was decades ago and the latter is a compelling argument for even stronger protections in the transportation of petroleum. The next Exxon Valdez could be carrying oil from onshore or offshore sources. But the technology and regulation of offshore production has greatly improved since Santa Barbara, and while one could compellingly argue for even more protections, the fact is that offshore development is much less risky than ever before.

Finally, Obama has deftly maneuvered his political opponents into a tight corner. The White House understands that the paramount goal of energy policy should be to price carbon. That goal is unlikely to be achieved in Congress as long as conservatives continue to fantasize over a supply-side panacea that will lead American to a golden age of “energy independence” and “lower prices at the pump.” This is an energy policy of abdication and isolationism. By taking a balanced approach, Obama has challenged conservatives to take “yes” for an answer — or show that they really don’t believe in their alleged “alternative” path to energy security.

Cars and trucks sold in the U.S. will have to be a little more efficient, according to new Corporate Average Fuel Economy (CAFE) standards released last week by the Environmental Protection Agency (EPA) and the Department of Transportation.

The new standards are largely a product of a compromise between states, the federal government and auto manufacturers last year. (Is it still a compromise if one party—the feds—owns a big chunk of another—the U.S. auto industry—and has Supremacy Clause powers over another—the states? Just asking.) They are also the end product of the Supreme Court’s Massachusetts v. EPA decision requiring the EPA to address impacts of greenhouse gases under the Clean Air Act. The requirements appear relatively modest: the existing requirement of 35 mpg fleet average fuel economy by 2020 is moved up to 2016 and increased by 0.5 mpg.

That apparently small change can have a big impact when you consider how many cars and trucks there are in the U.S. and how long those vehicles will remain on the road. The EPA claims that the standards will reduce greenhouse gas emissions by 960 million metric tons and cut U.S. auto emissions by 21 percent over business as usual by 2030. The EPA also estimates that increased up-front vehicle costs of about $1,000 will be offset over the course of each vehicle’s life by reduced fuel costs, resulting in a savings of about $3,000.

That’s good news for the environment, and good news for consumers, right? The auto industry is (at least for now) OK with the new standards, and the environmental community is generally happy as well. I think the positive spin is broadly correct — we’re better off with stricter CAFE standards than we would be without them.

That said, I’m skeptical about the size of the benefits estimated by the EPA. Performance standards, and in particular efficiency standards, are flawed policy tools — emissions benefits may be lower, and costs higher, than with the best alternative: a carbon price.

The largest problem with efficiency standards is that they encourage increased use of whatever is being made more efficient. If your car is more efficient, it’s cheaper to drive it, and you’ll probably do so more often (and for longer distances). You might even move farther away from work or make other choices that increase your fuel consumption (but not your cost — remember, you’re more efficient now). This is great for you since you get increased utility from driving more, but your vehicle emissions won’t go down as much. Even if you “save” more money over the life of the car, the added cost per unit of emissions reduction goes up. Other social costs, like traffic congestion and increased risk of accidents, go up as well. This is called the “rebound effect,” and estimating its size is the subject of significant research among economists.

The EPA is aware of this effect and, as you might expect from an 837-page rule (with a 475-page regulatory impact analysis and 215-page technical support document), accounted for it in its analysis. Both the EPA estimates of emissions reductions and of costs to consumers assume that owners of new, more efficient vehicles will drive more. Good job by the EPA, right? Maybe.

Digging deeper suggests that while the EPA is accounting for the rebound effect, it might be underestimating it. The EPA assumes the effect will be 10 percent — that is, increased driving will erase 10 percent of the emissions reductions that would otherwise be achieved. This estimate, the EPA admits, is lower than that suggested by most studies of the effect for vehicle efficiency standards in the U.S. These studies give estimates from seven percent to 75 percent, with the average around 22 percent — more than double the 10 percent the EPA chose. The EPA bases its choice on other studies that suggest that the effect declines over time and then projects that trend into the future. It’s possible the EPA is right here (they are relying in part on the most recent and well-regarded work on the subject), but it still seems like a relatively optimistic estimate. Because of this, I think it’s more likely that the EPA will have overestimated the benefits of the new standards than underestimated them.*

The EPA’s analysis has other limitations as well. For example, fuel prices are projected to increase in the future due to rising global demand and other factors. This will lead to demand for more fuel-efficient cars independent of any standards, possibly making CAFE requirements superfluous. Emissions would still go down, but CAFE standards might not deserve the credit.

For me, the worst part isn’t that the EPA might have overplayed an obscure (but important) assumption, or taken credit for something that might happen anyway. Even if they haven’t done either of these things, none of this is necessary. Pricing carbon, whether through an economy-wide cap-and-trade system, a transportation-sector only cap, or (hide the children) a higher gasoline tax, could achieve emissions gains without these perverse effects and estimation problems. These policies would increase the cost of gas — which is the point. If your reason for buying a more efficient car is a higher fuel price, there’s no incentive to drive more — there would be no rebound effect. In fact, there is a powerful incentive to drive less, reducing carbon emissions even further and giving other benefits: less congestion, fewer accidents, better air quality, etc. A gas tax or trading scheme would also be simpler, easier to administer and more transparent. It need not even hurt consumers: the revenues from permit auctions or taxes can be returned to households through lower taxes elsewhere, rebates or investments in public goods.

The reason CAFE standards, with all their problems, are and have long been our only policy option for controlling vehicle emissions has nothing to do with efficiency or good government — it’s politics. It’s not politically possible (or politicians think it’s not politically possible) to support a policy that increases prices at the pump. Instead, we hide costs in suboptimal and inefficient programs like CAFE. While it’s true that our cities and in some ways our society are built around driving, often long distances, that doesn’t mean we should hide the costs of those choices, or use second-rate policy tools because we can’t handle the truth. The politics behind CAFE are a shame, whatever benefits last week’s regulations will have.

* If you’re interested in the EPA’s decisionmaking process on the rebound effect, it’s candidly explained in Section 4.2.4 of the Technical Support Document.

Photo credit: https://www.flickr.com/photos/joelogon/ / CC BY-SA 2.0

On March 22, the Progressive Policy Institute’s E3 Initiative hosted an event in Boston, Massachusetts on New England’s best practices on stimulating and building a clean economy sector. At the event, Massachusetts Secretary of Energy and Environment Ian Bowles shared remarks on how state and federal governments and clean energy entrepreneurs can collaborate to build a vibrant clean economy.

Speakers:

The Honorable Ian Bowles
Massachusetts Secretary of Energy and Environmental Affairs

Will Marshall
President, Progressive Policy Institute

Mike Signer
E3 Initiative Chair and Senior Fellow, Progressive Policy Institute

PPI has long been a proponent of an economy-wide cap-and-trade system to confront the problem of climate change. But as the fortunes of cap-and-trade legislation in the Senate fade, we need to begin looking at other options before Congress. This post, on the Cantwell-Collins “cap-and-dividend” bill, is the first in a series of analyses of various alternatives to cap-and-trade.

You may not have noticed lately, but there are other major legislative initiatives, including climate and energy, on the Senate’s docket. One climate action bill that has received a lot of attention is the bill sponsored by Sens. Maria Cantwell (D-WA) and Susan Collins (R-ME). When the bill, officially called the Carbon Limits and Energy for America’s Renewal (CLEAR) Act, was first introduced in December, it caught the eye of some in the enviroblog world, but didn’t make much of an immediate splash in the Senate. Between the long build-up of the Kerry-Lieberman-Graham multi-partisan grab bag and the poorly understood Copenhagen outcome, however, it filled a vacuum with a poorly appreciated concept at the time: offsetting costs of climate legislation to consumers by cutting them a check.

The Basics

Also known as “cap-and-dividend,” the Cantwell-Collins bill is pretty simple: starting in 2012, it would mandate monthly auctions of pollution permits, called carbon shares, to the first seller (producer or importer) of fossil fuel carbon into the economy. The bill sets a floor price (shares can’t be sold for less) of $7 and a ceiling price (shares can’t be sold more) of $21 in the first auction in 2012, with the cap lowering — leading to rising prices — over time.

Most of the revenue from these auctions is distributed back to citizens in the form of a monthly check, while the rest is placed in a Clean Energy Refund Trust (CERT) fund established by the bill for use on a variety of different purposes: energy R&D, climate change adaptation, non-CO₂ greenhouse gas reductions, international forestry and agriculture offsets, carbon capture and storage projects. First sellers cannot trade carbon shares and carbon derivatives are prohibited. In addition, the legislation has economy-wide emissions reduction goals of 20 percent below 2005 levels in 2020, 42 percent in 2030, and 83 percent in 2050.

The Good

Advocates of Cantwell-Collins praise it for being simple and transparent. As has been noted by others, it is a mere 40 pages, certainly an easier read than Waxman-Markey, the behemoth, 1,400-page cap-and-trade bill passed by the House last June. It regulates fossil fuel-related CO₂ as far “upstream” in the economic supply chain as possible, meaning that whoever produces or imports a fossil fuel is on the hook for the CO₂ content. Under Cantwell-Collins, coal mines and oil producers are responsible for paying for carbon, which means that only about 3,000 facilities need to be regulated. This upstream approach is administratively more streamlined, affecting far fewer parties than Waxman-Markey, which regulates electricity producers, natural gas distributors and manufacturers (over 75,000 regulated facilities).

The CLEAR Act also rejects the convoluted system of free and auctioned allocations in Waxman-Markey for a straight-up auction of all carbon shares. All regulated parties must participate in open monthly auctions, the revenue from which is split 75-25 percent: 75 percent is redistributed per capita to every American citizen and 25 percent is placed in the CERT. Whether you agree with the approach or not, offering to cut a monthly check for every U.S. citizen is not a bad way to gain some political support. Also, from the perspective of regulated firms, the use of price floors and ceilings, also known as a price collar, would reduce future price uncertainty and help them better predict investment needs.

Finally, the bill is co-sponsored by a Republican and a Democrat. That bipartisan provenance could certainly help its chances for passage.

The Bad

So with a bill that’s easy to read, easy to monitor and easy on the wallet, is there anyone who won’t like it? Well, anyone who favors hard targets for emissions reductions and anyone who believes in markets, for two. First, while the bill establishes economy-wide reduction goals as strong as Waxman-Markey, the auction system alone will not reach them. National emissions are capped at 2012 (note that it only caps CO₂ emissions, unlike Waxman-Markey, which covered other greenhouse gases as well), and the cap doesn’t tighten until 2015, at which point it decreases by 0.25 percent that year, then by an additional 0.25 percent every corresponding year (so in 2016, the cap reduces by 0.5 percent, in 2017, 0.75 percent, etc).

This slow lowering of the cap will result in only five percent reductions below 2012 emissions by 2020, well short of the 20 percent reductions by 2020 goal. Even at that, the cap is not rock solid due to the price collar, which functions as a sort of safety valve. That is, if the auction price goes higher than the established ceiling price, then that essentially releases extra carbon shares for firms to bid on until the price falls back below the ceiling.

That means the remaining reductions to be met in 2020 will have to come from technology advances, land use offsets in forestry and agriculture, and reductions of non-CO₂ gases, all of which are paid for by the CERT (which will be administered by the Department of Treasury). If we assume an initial carbon price of $15 in 2012 (a middle-range price, based on analyses done by the EPA and EIA), and the projected cap of roughly 7.2 billion carbon shares, then the CERT will get about $27 billion in the first year of the program.

That’s $27 billion to be split among all the uses listed above to help reduce emissions, as well as adaptation projects, energy efficiency efforts, and support for trade-sensitive industries and low-income families. The problem with a bill that’s only 40 pages is that it doesn’t have a lot of room for details — indeed, the CLEAR Act provides no guidance on how to prioritize uses of CERT funds. Although CERT funds will increase as the price of carbon shares rise, it will likely not even be close to enough to compensate for the majority of necessary carbon reductions.

A carbon market could mobilize private capital to help address some of these issues efficiently, instead of leaving all the choices and funding responsibility to the federal government. While it’s understandable that the public and politicians might still distrust markets in the wake of the recent financial collapse, the fact is that when it comes to finding inefficiencies and catalyzing innovation, nothing works better. But the “market” in Cantwell-Collins is simply an auction system. Unlike in Waxman-Markey, regulated firms can’t trade their permits, and carbon derivatives are strictly prohibited. These restrictions are going to severely limit the efficacy of the program to find the cheapest emissions reductions.

Also, there is a huge amount of risk in carbon markets (both in terms of accurate compliance and extreme events), so while they should be tightly regulated, derivatives are a necessary component because they allow firms to hedge against the risk of non-compliance or shifting standards. You will be hard-pressed to find any industry player who will advocate for a market without any trading, and there will need to be at least some industry support for any viable future climate legislation. Moreover, the monthly auction system may generate more carbon share price volatility than a continuous market, making it even more unattractive to firms.

The Upshot

Cantwell-Collins injects some great ideas into the climate policy debate that had not been prominently discussed before. If a policymaker wants to reduce the burden of increased energy costs on consumers, a direct rebate is an efficient and effective way to do it. The bill overall, however, is a somewhat naïve approach that does not fully appreciate the ability of markets to generate efficient emissions reductions and does not limit carbon emissions effectively. Its merits (simplified approach, upstream regulation, price collar) are outweighed by its limitations (extremely slow cap reduction, heavy reliance on CERT-funded reduction programs, draconian market restrictions). The CLEAR Act will continue to play a role in the climate debate of the Hill, but in its current form, it is unlikely to be the last bill standing.

Photo credit: https://www.flickr.com/photos/haglundc/ / CC BY-NC 2.0

The highly touted Blue Ribbon Commission on America’s Nuclear Future that President Obama assembled last year will have its first public meeting today at the Willard Hotel in Washington, D.C. The panel, co-chaired by former Rep. Lee Hamilton (D-IN) and former National Security Advisor to President George H.W. Bush Brent Scowcroft, is tasked with reviewing policy options for managing the back end of the nuclear fuel cycle, including developing a safe, long-term solution to the nuclear waste problem.

What to think of the panel? The 15-person commission is comprised of a good mix of scientists, politicos and think tankers. Five of the members are science Ph.D.’s (including Per Peterson of Berkeley, who is considered by some to be the best in the field), which is pretty good as far as these things go. Too many Washington luminaries and it stops being serious; too many scientists and no one will listen. It might be easy to dismiss the participation of a perennial blue ribbonite like Lee Hamilton, but he’s reportedly been fairly proactive in staking out a broad mandate for the panel, urging the president to give the commission wide latitude on what to look into. His engagement is a good sign.

But the most significant thing about the panel is who organized it: Barack Obama. Throughout his first year-plus in office, he has proven to be serious about leading a comprehensive transformation of America’s archaic and damaging energy policies. While his support for nuclear energy has turned off some allies in the environmental community, it also shows that he knows that that U.S. can’t reduce its dependence on fossil fuels and meet rising energy demand without a significantly expanded role for nuclear. He’s lifting a three-decade old taboo on nuclear power and laying the groundwork for a revival of a domestic civilian nuclear power industry. And it’s not a moment too soon, as China rushes ahead with plans for as many as 400 nuclear plants.

Obama’s push for nuclear is also further evidence of the radical pragmatism that has marked his determination to tackle the nation’s biggest public problems. The question now is whether Republicans, many of whom have clamored loudly for a greater emphasis on nuclear energy, are willing to find common ground with Democrats, or continue their “flat earth” obstructionism on climate change and clean energy.

Obama’s blue ribbon panel has 18 months to conduct its work and issue its recommendations. Their work will be closely watched by those in the nuclear energy community. As the debate over nuclear power heats up, the problem of what to do about waste will need to be addressed. In the coming weeks, PPI will be issuing its own recommendations. Stay tuned.

Already reeling economically, California may soon be overtaken by Massachusetts as the greenest state in the union.

California ranked first in a 2009 survey of the most energy-efficient states, with Massachusetts second. In January, however, the Bay State announced the nation’s most ambitious energy efficiency standards for utilities.

Despite growing energy demand, Massachusetts aims to cut electricity use by 2.4 percent over the next three years. It will provide utility customers with $1.6 billion in incentives to conserve energy at home, including free energy audits and rebates to purchase more efficient appliances. That’s more on a per person basis than California spends on energy efficiency.

And it’s not just Massachusetts. Connecticut, Maine and Rhode Island also have passed mandates for utilities to invest in any energy-saving measures that cost less than traditional energy-supply options. In fact, New England seems to be emerging as the nation’s epicenter of energy efficiency, clean tech innovation and carbon emissions control.

While Congress struggles with a nationwide “cap and trade” system for carbon dioxide, 10 Northeast states launched a regional cap-and-trade program covering all major power plants. The Regional Greenhouse Gas Initiative (RGGI) caps emissions at projected 2009 levels through 2015, when the cap declines annually to reduce emissions 10 percent by 2019.

To examine why, and how, New England has catapulted itself into clean energy leadership, PPI is hosting a conversation in Boston today with Ian A. Bowles, Massachusetts’ secretary for energy and environmental affairs. Boston is also the base for the Clean Energy Council, a regional network of clean tech businesses, analysts and investors.

The event is part of PPI’s E3 Initiative, a coalition of energy and environmental businesses working to develop and drive new policy frameworks to build a clean economy.

Climate policy seems to be returning to the legislative agenda. The Cantwell-Collins “cap and dividend” bill is getting real (and bipartisan) interest. The Kerry-Graham-Lieberman “tripartisan” climate proposal is rumored to be nearly ready. As these proposals indicate, it is likely that the Senate will start its discussions on climate from first principles, despite the presence of a more-or-less complete bill (Waxman-Markey) from the House.

These are interesting times for climate politics, and in many ways similar to how the politics of health care reform played out last year, with likely shifts in the basic ideas and key details over the coming months. I firmly believe Congress will pass a comprehensive climate bill — it’s just a matter of time (though I do hope the endgame is not as protracted as it has been for health care). But what that bill will look like is anyone’s guess.

Major issues will be familiar: how to allocate allowances and revenues, whether to fund nuclear energy or expand drilling, whether and how to include offsets, maybe even whether to scrap cap-and-trade and tax carbon instead (I think there’s a nonzero chance). These debates are all worth having and paying attention to. But we — that is, anyone who cares about climate change, which should be everyone — cannot lose sight of the one element any climate bill must include: a price on carbon.

There is simply no other policy mechanism that can cut emissions, drive the necessary innovation and produce the necessary changes to the U.S. economy. It’s not just that nothing else is as efficient — nothing else will work. Other tools like technology standards, subsidies, and offsets may be useful, but they are secondary in importance. If a proposal does not include a carbon price, it either isn’t about climate or it isn’t serious. None of this is new or surprising: we have a tool, and we know it works.

A Carbon Price Consensus?

To return to the health care analogy, a price on carbon will in some ways play a similar role to that played by the “public option” — it is considered by many to be the necessary core of a meaningful policy, and opposed fiercely by others. I think the similarities end there, however. Pricing carbon is far more important — indeed, necessary — to climate policy than a public option ever was for health care. It is possible to make progress on the basic goals of health care reform (cutting costs, reaching the uninsured, promoting equitable access, etc.) without a public option. The same is not true of climate change mitigation and a carbon price.

Consequently, there is broader and, to some extent, more bipartisan support for pricing carbon than there was for a public option. Despite Sen. Lindsey Graham’s (R-S.C.) recent declaration that cap-and-trade is dead (not exactly what he said, it should be pointed out), a few Republicans and virtually all Democrats alike realize that a carbon price must be part of meaningful climate legislation. The only people who don’t believe this either don’t believe in anthropogenic global warming at all (and are therefore at least principled, if on the wrong side of the science) or are just playing politics with the most important issue of our time. Perhaps this is not surprising, but it is disappointing.

If you care about climate change, the first question you should ask of any proposal is, “Does it put a price on carbon?” Only if the answer is yes is it worth getting into details. As someone once said about soccer, “The ball is round. The game lasts 90 minutes. That is fact. Everything else is theory.”

This holds true for proposals that might be attractive for other reasons, like an “energy only” bill, even if it includes a renewable portfolio standard. This or other measures that don’t include a carbon price are not going to produce significant change in U.S. emissions, and aren’t going to spur the necessary innovation for long-term change in how we produce and use energy. The same goes for incentives and subsidies for “green technology” and creation of “green jobs.” These sound nice, but if you really want the jobs and technology, you need to implement a carbon price. We are likely to see a wide variety of proposals with a wide variety of policy mechanisms over the coming months. All of them will be characterized as pro-climate, pro-innovation, and pro-jobs. It is critical to look past this rhetoric, and even beyond many of the policies included in the proposals, and determine whether there is a carbon price at their core — regardless of how much “rebranding” of climate proposals goes on.

Demanding a price on carbon makes sense regardless of your politics: producing the greatest reduction in emissions at the lowest cost is attractive for everyone. The details of a climate bill do matter, and will surely drive wedges between political groups — but the time has come for a political consensus on pricing carbon. I think progressives should be open to ideas on climate policy from all directions. The proposals that are likely to be at the center of debates in the Senate, Cantwell-Collins and Kerry-Graham-Lieberman, are bipartisan from the start. There will undoubtedly be other proposals and much discussion of the details. But amid all of the political maneuvering, we shouldn’t lose sight of the indispensable core of climate policy. Everyone serious about climate change should be banging the same drum: price carbon.

Here at PPI, we’ve long argued that for the U.S. to meet its carbon reduction targets, we need to assume a “Leave No Fuel Behind” outlook. Currently, coal — the most polluting and the cheapest of sources — accounts for half of all power produced in the U.S. There’s no doubt that we need to scale back our use of coal. But replacing that base-load capacity will be a tall order.

Ramping up renewable sources like wind and solar should, of course, be a priority, but they simply won’t be reliable energy sources for decades to come. We’ve also argued for an expansion of nuclear power and more research into carbon capture and storage, and we applaud the administration’s recent efforts to jumpstart our nuclear industry. But let’s not forget the quickest interim source we can use to begin cutting back on coal emissions: natural gas.

In a column last Friday, the Washington Post‘s Steven Pearlstein makes a compelling case for scaling up natural gas:

The silver bullet: Decommission about two-thirds of the electric-generating capacity fueled by cheap and plentiful coal, and replace it with power generated from cheap and plentiful natural gas, which emits half as much carbon for each megawatt of electricity.

Pearlstein points out that a confluence of events — the overbuilding of gas-fired plants in the ’90s and an increase in supply thanks to new drilling techniques — has made natural gas a feasible substitute for base-load electricity generation. A Congressional Research Service study found that if our currently underutilized gas plants were to double their production, about a third of coal-fired power would be displaced — a major step toward meeting our emissions reduction targets.

In trying to wean ourselves off coal, the most effective method would still be to put a price on carbon. This week, the Senate is back from recess and will make a “last-ditch attempt” to put together a compromise cap-and-trade bill. But as legislators try to break the gridlock over cap-and-trade, they should keep their eye on alternatives that can begin to ease the grip of coal on our economy. Nudging utilities toward natural gas seems like a good start.