Politics & Policy

Connaughton’s Constellation

Energy policy isn't as black and white, or Right and Left, as it can be portrayed.

James L. Connaughton, who was chair of the White House Council on Environmental Quality during the George W. Bush administration, has been demonized by the likes of Rolling Stone. But in an interview with National Review Online, the current executive vice president on public and environmental policy at Constellation Energy proves more complex than the caricature: supportive of nuclear, yes, while having complimentary things to say about both cap-and-trade (for fear of the EPA run wild) and the Obama administration. He also proves to have a very WFB taste in music.

KATHRYN JEAN LOPEZ: How will the Bush administration’s energy record hold up long term?

JAMES CONNAUGHTON: The Bush-administration energy plan is holding up extremely well and will only continue to do so as it advances the nation’s energy-security, air-pollution, and climate-change objectives. Most of the comprehensive plan announced in the Spring of 2001 has now been adopted in bipartisan federal legislation, federal and state budgets, and administrative actions. For example, in 2005, Congress passed an energy bill that significantly expanded and refocused our energy research and development programs, and dramatically cut needless oil and gas subsidies. In 2007, we worked with the Democratic-led Congress to pass a series of mandates on vehicle fuel efficiency, renewable fuels, efficiency of appliances, lighting, and federal-government operations.

LOPEZ: During this time, both Republican and Democrat-led Congresses put in place more than $40 billion in incentives called for by President Bush to transform our energy system to cleaner, more secure sources of energy.

CONNAUGHTON: The Bush administration adopted the most stringent requirements in history to reduce harmful air pollution from power plants and diesel engines, and significantly improved the processes for exploring and siting new energy sources of all kinds.

Finally, misguided taboos on new nuclear energy, offshore energy, and new on-shore natural gas development were finally broken, opening up major new opportunities for the nation.

LOPEZ: What are we watching unfold in the Obama administration on energy policy?

CONNAUGHTON: Overall, I am encouraged by the Obama administration’s approach to energy policy.

The administration is implementing the new mandates of the 2007 energy bill, and they have added $70 billion to advance new clean energy initiatives. Additionally, they are working to advance a smart energy grid and expand transmission. I look forward to ongoing efforts in these areas.

President Obama and Secretary of Energy Chu’s comments supporting the advancement of new nuclear energy are very important. It is vital that the United States seizes the opportunity to advance nuclear energy.

On the issue of climate change and controls on greenhouse-gas emissions, the president and his EPA administrator have publicly stated that federal legislation is far preferable to EPA regulation under the Clean Air Act — which has serious shortcomings when it comes to addressing greenhouse gases. As part of a broader energy package, President Obama wants a market-based approach to reducing greenhouse-gas emissions modeled on the highly successful acid-rain cap-and-trade program that has enjoyed strong bipartisan support in the past. In my experience, cap-and-trade is the most flexible and cost-effective policy tool we can use to tackle emissions from the major economic sectors. And I believe that the president’s stated goals are a reasonably ambitious place to start the discussion.

LOPEZ: What’s wrong with cap-and-trade?

CONNAUGHTON: Nothing per se. Cap-and-trade, done the right way, has long proven to be a very effective way and low-cost way to achieve environmental goals. Cap-and-trade, done the wrong way, can be a major problem. We need to remember that cap-and-trade as a policy tool was first conceived and developed by conservative economists and legal scholars as a more effective alternative to command-and-control regulation that is costly, inflexible, and stifles innovation, or a tax that would be horribly regressive, unlikely to meet goals, and enrich government coffers for inevitably inefficient redistribution.

Cap-and-trade, done right, has worked nearly flawlessly in dramatically reducing sulfur dioxide emissions associated with acid rain and the nitrogen-oxide emissions that cause smog. These are examples of competitive market environmentalism at its best.

What is distressing is that cap-and-trade has recently been confused with aspects of legislative proposals that represent significant departures from a classic, well-designed cap-and-trade program, such as government auctioning of allowances which essentially amounts to a tax.

LOPEZ: What would you do instead?

CONNAUGHTON: With EPA regulation looming, it’s important to act. So, I would go back to basics.

First, I’d begin with a reasonably ambitious, commercially attainable near-term goal, followed by a much more stringent long-term goal.

Second, emission allowances should be allocated fairly and simply. The allowance allocation under cap-and-trade is supposed to work like musical chairs. Everybody starts the game with a chair and then over time the chairs are taken away. You keep doing this until you have removed the needed number of chairs — i.e. the “cap.” When a cap-and-trade program starts, the sectors that produce emissions are supposed to get enough allowances — or chairs — to cover what they’re currently emitting, no more, no less.

The sectors should figure out for themselves how to balance the initial allocation. For example, the electric-power industry spent two years reaching consensus on the initial allocation of allowances that would promise investment and hold down costs to consumers.

Third, to prevent the cost of compliance from escalating out of control, Congress should establish a “price collar” that sets both a floor and rising ceiling on how high the price can go.

Finally, now that the Obama administration has already significantly expanded the amount of incentives we provide to lower-emission technologies, we should combine all of them into one pot and make them available on a technology-neutral, carbon- and energy-weighted basis, and let the competition begin.

LOPEZ: You differ pretty significantly with many on the right here, don’t you?

CONNAUGHTON: I don’t think the situation is as cut-and-dry as your question suggests. Sure, some on the Right don’t want any further government action on climate change, a view shared by a smaller though still consequential group on the Left. So my views would clearly depart from them.

However, the justification for legislation also relates to more rationally achieving substantial quantifiable health benefits that would clearly pass a rigorous, conservative benefit-cost analysis, which many on the right would — or should — support, if they share benefit-cost as a core policy principle. Equally significant are the harder-to-quantify energy-security benefits of further action, which a very large portion of the Right, and the Left for that matter, would strongly agree we need to do more about.

Furthermore, even those opposed to any action have to confront a big complicating factor: the inevitable and imminent prospect of EPA regulation under the Clean Air Act. Some would still want to take their chances with litigation. However, a growing number of pragmatists are coming to recognize that carefully crafted legislation, in lieu of EPA regulation, would be a far preferable outcome.

So for those on the right either willingly or grudgingly at the table to work out legislation, a thoughtful mix of views are under consideration on the best way to proceed, with approaches falling into three categories: 1) more technology programs and incentives; 2) economy-wide or power-sector-only cap-and-trade; and 3) a gradually increasing, revenue-neutral carbon tax with corresponding decreases in other taxes, such as the payroll tax. Push comes to shove, I believe most will come to the conclusion that a combination of 1 and 2 makes the most sense both practically and politically.

With respect to the basic principles that any legislation must respect, whether or not it involves cap-and-trade, my views would align with those held by many on the right, but these views are also shared by a wide swath of the Left. These include guarding against significant harm to the economy; energy price shocks; dramatic loss and/or off-shoring of U.S. jobs; revenue-raising taxation; and giving unfair advantage to international competitors whose governments are unwilling to take comparable action. They also include ensuring that goals are realistic and consistent with advances in and availability of technology; regulatory burden is fairly divided; compliance costs are controlled; and obstacles are removed to proven solutions like nuclear power, domestic natural gas, and efficiency, while giving ourselves the time to scale up renewable energy and see if we can capture and store CO2 emissions from coal. If we do this, we can meet ambitious goals in a way that reliably keeps the lights on and cars running for our growing population for decades to come.

LOPEZ: Is there really any hope that anyone will buy into nuclear power at this point?

CONNAUGHTON: Absolutely. We are at a generational “tipping point” in favor new nuclear energy in America. Recent polling points to a significant increase in public support for new nuclear. One international-environmental-group leader recently said that the environmental community itself bears a measure of responsibility for the rise of greenhouse-gas emissions as a result of opposition to nuclear energy — if we had kept going on nuclear in the U.S., a lot of high-emitting coal and natural-gas plants would not have been built.

Everyone from President Obama to Sen. Barbara Boxer to the founder of Greenpeace has now recognized that new nuclear energy is essential if we want to meet ambitious goals on climate change, air quality and public health, reliability of supply, and even energy security.

LOPEZ: What gives you substantive hope of that?

CONNAUGHTON: The history and facts about nuclear energy speak for themselves. The more than 100 facilities currently operating in America have done so safely for more than 30 years. Nuclear energy is already the largest source of carbon-free energy generation in the U.S. — providing 20 percent of our electricity and 70 percent of the carbon-free electricity generated. The Energy Department says that to maintain that percentage, we would need to build 56 new reactors by 2035. What’s more, the EPA estimates that to achieve the carbon-reduction goals now being contemplated, we would need to build 180 new nuclear facilities by 2050. People are also coming to understand that the “waste” from burning fossils fuels has been far more damaging to human health and the environment than — what has now proven to be safe — storage of used nuclear fuel.

New nuclear energy is not only a practical necessity, but also a political one: The path to 60 votes in the Senate on climate legislation depends on a significant number of both Democrats and Republicans who share the view that you are not serious about confronting energy security and climate change unless you are serious about a major expansion of new nuclear energy.

LOPEZ: Who in Congress is most sensible on these issues? Is there a leader out there?

CONNAUGHTON: I am encouraged by the leadership we’re seeing in Congress on both sides of the aisle. Both the House and Senate have taken up the issue, and there is a increasing support — across party lines — for energy and climate-change legislation. Members in both parties are raising good and important questions to ensure that the approach does not amount to a major new tax on the American people, impose excessive costs to comply, shifts jobs out of the United States, or spark a global trade war on clean energy. I think the combination of voices on this will produce sensible legislation that achieves the goal of reducing carbon emissions while ensuring that America’s economy can continue to grow.

LOPEZ: How did the Whiffenpoofs prepare you for life? (NR has a rich connection with the Whiffenpoofs!)

CONNAUGHTON: I’m smiling broadly at your question, especially in recalling the privilege of singing for Pres. Ronald Reagan at the opening of NR’s Washington office in the early ’80s. The Whiffenpoofs are about the art of perfect close-harmony singing that is pleasing and fun for audiences of all types the world over. Each of the 14 members had his own distinctive voice, divided into as many as eight voice parts. Some songs are sung as a chorus. On a few you get a solo. And most often you support a soloist singing background. The whole is truly greater than the sum of its parts. Of course, the experience translates perfectly into many complex endeavors that require teamwork and matching varied interests and capabilities to a common cause and a well blended product. Like energy and climate legislation!

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