Bloomberg News

Obama Relying on Consensus Builder to Steer Carbon Plan

June 04, 2014

U.S. President Barack Obama

U.S. President Barack Obama tours a solar project in Boulder City, Nevada. The EPA gave each state an individual reduction target that they can meet through a variety of measures, including closing coal plants, installing energy efficiency technology, adopting wind or solar power, or joining regional cap-and-trade programs. Photgrapher: Mandel Ngan/AFP via Getty Images

As an Obama administration team was crafting its plan to fight climate change, one nightmare haunted it: The troubled rollout of Obamacare.

Both plans are major parts of President Barack Obama’s legacy, being fought vigorously by Republicans. And both would succeed only with the help of an unlikely -- and often unwilling -- set of governors and industry groups.

There is a difference. Obama’s health care plan was delivered to the states after a bitter years-long fight in Congress. Environmental Protection Agency chief Gina McCarthy and other administration officials tried to bring the states in from the beginning of the climate effort, much as McCarthy brought in even climate skeptics when she worked for Republican governors in Massachusetts and Connecticut almost a decade ago.

“Instead of doing this high level analysis we just went right in and looked at each individual state,” said McCarthy, at a Bloomberg News breakfast yesterday. “I don’t think there was an energy meeting that went on in any state in the United States that somebody from EPA wasn’t sitting at.”

McCarthy, White House adviser John Podesta and their aides spent much of the past year holding meetings with hundreds of business groups, environmental organizations, labor unions, and state regulators, and local politicians.

Listening Sessions

It’s too early to tell if these “listening sessions” and other outreach will pay off. And McCarthy’s efforts at consensus building only goes so far. She said she expects to make significant revisions in the plan when states react.

Some governors, such as West Virginia’s Earl Ray Tomblin, a Democrat, already say they’re prepared to fight. Reaction from some energy trade groups has been more muted, and several executives said they appreciated the contact from McCarthy.

“One thing we have noticed with Gina is that she is willing to listen,” said John McManus, vice president for environmental sciences at American Electric Power Co. (AEP:US), a utility that relies heavily on coal. Under her leadership, EPA officials “don’t always agree with you, but they will listen.”

McCarthy, a Boston resident with the accent to prove it, has been in the environmental agency’s top job for just 11 months. Much of that time has been consumed with crafting the power-plant regulation, the boldest step yet by the U.S. to curb the emissions blamed for global warming. The rules would cut emissions from power plants by 30 percent from 2005 levels.

McCarthy, 60, said she is guided in the mission by experiences in Connecticut and Massachusetts, where she is credited with successfully engaging conflicting groups.

Early Outreach

“The lesson I learned was the early outreach,” McCarthy told Bloomberg. She said she spoke with everyone from governors to corporate CEOs before unveiling on June 2 the plan to regulate for the first time greenhouse-gas emissions from existing power plants.

Executives of companies like Entergy Corp. (ETR:US) of New Orleans and Atlanta-based Southern Co. (SO:US) have praised her willingness to hear their concerns, even as they continue to study the impact of a plan that sets state-by-state targets that would by 2030 reduce emissions by an average 17 percent from current levels.

One pitfall the EPA sought to avoid was the scramble their health-care colleagues faced in building a bigger federal website to accommodate dozens of states that refused to create their own, according to aides who requested anonymity because they weren’t authorized to comment publicly on the process.

EPA’s climate outreach tour prompted their team to craft a proposal that makes participation easier. Each state has an individual reduction target that they can meet through a variety of measures, including closing coal plants, installing energy efficiency technology, adopting wind or solar power, or joining regional cap-and-trade programs.

“We designed a proposal that meets the objective of getting those reductions overall but doing it in a way that states have very broad flexibility,” Podesta said.

Jobs Killer

Still, Republicans are casting the plan as a jobs killer -- an attack also leveled against the Affordable Care Act.

“These regulations will continue to raise the cost of living for every Kansan,” said Republican Governor Sam Brownback in a statement yesterday. “This is more of the Obama administration’s war against middle America, more cost and more regulation.”

McCarthy has heard similar criticisms before.

From 2004 to 2009, she was commissioner of Connecticut’s Department of Environmental Protection under Republican Governor Jodi Rell, and she earlier worked in Massachusetts in roles including undersecretary for policy at the Executive Office for Environmental Affairs where she advised Republican Governor Mitt Romney on environmental policy.

In both states, she helped shape a cap-and-trade program in northeastern states, the Regional Greenhouse Gas Initiative. That program and other state clean-energy policies have helped the jurisdictions reduce carbon-dioxide emissions by about 40 percent since it was created in 2005, according to RGGI.

‘Very Tough’

“She is a master at bringing people together,” said Jack Clarke, the director of public policy and government relations at Mass Audubon in Boston, who earlier worked alongside McCarthy as an assistant secretary of environmental affairs.

Robert Rio, a senior vice president at the Associated Industries of Massachusetts, an employer group, said McCarthy had an open ear for industry concerns.

“She’s a thoughtful person,” Rio said. “At the same time, she’s very, very tough and she knows what she wants. She’s a good mediator and ultimately people will come along for the ride because they know how passionate she is and that she’s not trying to railroad anyone.”

Her work on the initiative had rough moments. After she left Massachusetts and went to Connecticut, Romney, in advance of his presidential bid, pulled Massachusetts out of the pact when other states signed on in 2005. Massachusetts joined after Romney left office.

Connecticut’s Decision

McCarthy’s biggest contribution was to persuade Rell, who was under political pressure to follow Romney and stay out of RGGI, to stick with the program, said Franz Litz, a consultant who earlier led a multistate working group that established the regional plan.

“She was instrumental in keeping Connecticut in the group,” he said.

Peter Iwanowicz, who was head of New York’s office of climate change when the RGGI states were getting ready for the first auction of emission allowances in 2008, said McCarthy was central to getting states to work together.

“All the things we are hearing now, that energy prices are going to go through the roof and blackouts will result, we heard then,” Iwanowicz said in an interview. “She was artful in being a tactician.”

Red Sox

McCarthy, who celebrated Earth Day in April this year by throwing out the first pitch at a Boston Red Sox game at Fenway Park, has a masters degree in environmental health from Tufts University. She came to the EPA as assistant administrator for Clean Air Act implementation in 2009.

As the EPA was developing its rule to cut mercury and heavy metal pollution from power plants in 2011, utilities such as AEP and Southern argued that the agency was underestimating the millions of dollars needed to comply.

For AEP, the plan meant the company would need to install a second set of equipment on plants that already had an electrostatic filter, said McManus, the utility vice president.

It would have been “very marginal benefits at a very high cost,” McManus said. McManus and his staff met with with McCarthy to discuss those technical issues, and in the final rule, EPA adjusted the requirements enough so that the financial cost for AEP fell 10 percent from $7 billion, he said.

Others say McCarthy hasn’t been so compromising. Nancy Gravatt, a spokeswoman for the National Mining Association, said the EPA “did nothing to bring the industry to the table.”

“As far as negotiating, I don’t think that’s a word that could be applied to the process leading up to the rule,” she said.

McCarthy said yesterday that her outreach continues. Next week, she’ll attend a meeting of the board of the Edison Electric Institute, a trade association of investor-owned utilities.

“I put out a proposal that I believe will allow everybody to get at a table and roll their sleeves up,” McCarthy said. The agency now anticipates “a lot of give and take with the states.”

To contact the reporters on this story: Lisa Lerer in Washington at llerer@bloomberg.net; Laura Litvan in Washington at llitvan@bloomberg.net

To contact the editors responsible for this story: Craig Gordon at cgordon39@bloomberg.net Jon Morgan, Steven Komarow


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