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Obama's Climate Challenge

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There are signs that the White House is preparing to set up such a policy team. Pete Rouse, senior counselor to the president, has informally solicited recommendations of people best qualified to lead a new push on climate strategy. "It's clearly an idea the White House is taking seriously," one top environmentalist says. Among names being mentioned: Tom Steyer, a California hedge-fund manager with a long history of climate activism, and Kevin Knobloch, the president of the Union of Concerned Scientists, who spent years on Capitol Hill.

Climate Change and the End of Australia

At the same time, Obama needs to fill key vacancies in his administration with strong climate advocates. By far the most important post – and the one sure to be most controversial – is EPA administrator. Lisa Jackson, a tough inside player willing to stand up to Big Oil and Big Coal, announced in December that she was stepping down. "She was clearly exhausted by the endless political attacks on the agency," says one insider. Most of the significant environmental accomplishments of Obama's first term, including tougher vehicle­fuel standards and limits on mercury pollution from coal plants, were accomplished on her watch. But Jackson won congressional approval back in 2009, when Democrats still had control of the House. "The Republicans are on the warpath about the EPA," says Paul Bledsoe, a consultant who worked on climate issues during the Clinton administration. "Unless Obama chooses an industry-friendly guy that Republicans like, the confirmation hearing is going to be a witch hunt."

Another indicator of Obama's commitment on climate will be the "conversation" about global warming he wants to have with scientists, politicians and the American public. "He needs to educate the public about what is going on with the climate and what we can do about it," says Podesta. That means Obama must drop all the talk about "clean coal" and "energy independence" – code words for more mining and drilling – and articulate the hard truths about global warming: that we need to wean ourselves off fossil fuels as quickly as possible, that we'll have to prepare ourselves for life on a hotter, less hospitable planet, and that our suburban paradise of shopping malls, big backyards and SUVs is a relic of an earlier era. And he'll have to do it in a way that stresses the opportunities and upsides of what will amount to a sweeping change in the American way of life: the lives saved and environmental devastation avoided­ by getting off coal, and the economic rewards of becoming a leader in the global push for renewable energy.

In the coming months, Obama will have several hooks on which to hang such a climate conversation. One is the release in September of a new assessment by the Intergovernmental Panel on Climate Change, the United Nations panel that includes the world's top climate scientists. Another is this year's release of the National Climate Impact Assessment, a coordinated effort by the nation's top scientific agencies to lay out the risks of global warming at the regional and local levels. "He should direct everyone in his administration to get out and say, 'Look, this is what the future is going to look like if we don't address this problem,'" says one Senate staffer.

Obama can kick off the conversation by permanently halting the Keystone XL pipeline, which has been dubbed "a fuse to the biggest carbon bomb on the planet." In 2011, the administration put off a decision on the 1,200-mile-long pipeline – which would transport dirty oil from the tar sands of Canada to refineries on the Gulf Coast. But this year, the president is expected to make a call, and that puts him in a difficult position: The Obama who campaigned on an "all of the above" energy strategy argued that America needs jobs and oil, both of which the pipeline provides. But Obama the climate crusader will have a tough time justifying a $7 billion pipeline designed to transport some of the world's most carbon­intensive oil.

Keystone Moves North, Where Big Oil Is Losing

"It's not possible for him to approve the pipeline and say with a straight face that his administration is serious about stabilizing our climate," says Michael Brune, president of the Sierra Club. "For decades – as the planet heats up, and storms, droughts and wildfires intensify – this pipeline will suck up the dirtiest oil on the planet and bring it south. And Obama will have made it happen."

The single most effective thing Obama could do to avert a climate crisis would be to make the fossil-fuel industry pay for its planet-warming pollution. As Harvard economist Robert Stavins puts it, "The best way to stop people from doing what you don't want them to do – in his case, dumping carbon into the atmosphere – is to put a price on it."

During Obama's first term, the most politically palatable mechanism to regulate carbon was cap and trade, a system that would place overall limits on carbon emissions from major polluters but allow individual companies to "trade" their allotted caps within the system. The measure, originally championed by Sens. John McCain and Joe Lieberman, had a proven track record: During the 1990s, a similar plan had succeeded in controlling the pollution that causes acid rain. But this time around, the proposed legislation wound up so encumbered by complex accounting methods and phantom carbon "offsets" that even staunch advocates questioned its effectiveness. In the end, confronted by Tea Party attacks funded in large part by big carbon polluters, Obama abandoned cap and trade.

Since Obama's re-election, however, the idea of making Big Oil and Big Coal pay for their carbon pollution has re-emerged in another form: putting a direct tax on carbon emissions. House Republicans, naturally, have signaled their determination to fight such a plan, and White House spokesman Jay Carney has tamped down speculation on the matter, saying at a postelection press conference, "We would never propose a carbon tax."

But insiders think there's a chance the ground could shift. Were Republicans, citing deficit reduction, to produce a modest $20-a-ton carbon tax – an idea being pushed by right and left-wing D.C. think tanks – Obama would likely embrace it. "If it happens, it will be driven by budget, not environmental, concerns," says Jason Grumet, head of the Bipartisan Policy Center. But the cost of such a deal could be high: In exchange for a carbon tax, Republicans would likely demand an end to EPA oversight on carbon pollution from power plants.

As much as environmentalists and climate activists see carbon taxes as the holy grail of an effective policy to limit carbon emissions, they are wary of a desperate deal like this. Instead, they are urging for a more old-fashioned solution to carbon pollution – and one that doesn't require congressional approval: pushing the EPA to speed up the development of new rules to limit emissions from existing power plants. Such a move would force energy companies to spend millions retrofitting coal plants – or just shut them down.

In 2007, the Supreme Court ruled that carbon emissions are indeed a pollutant as defined by the Clean Air Act. Since the EPA has a legal obligation to limit pollution determined to be a threat to public health, this should hardly be a controversial policy. In December, the Natural Resources Defense Council issued a proposal that shows just how effective it would be for the EPA to crack down on pollution from coal plants. The plan, which tailors emission caps to the power-generation mix in each state, could slash total U.S. carbon pollution by 26 percent by the end of the decade. Besides slowing the buildup of carbon in the atmosphere, the pollution reductions would prevent more than 23,000 asthma attacks and thousands of premature deaths. And instead of costing money, it could save taxpayers and consumers as much as $60 billion. "Rather than slow the economy, the net effect of this proposal would be to stimulate the economy through lower power bills and better health," says David Doniger, policy director of the NRDC's climate program.

But cracking down on pollution from existing coal plants is likely to touch off an epic political battle – one that's difficult to imagine the White House winning without a tough administrator heading up the EPA. Big Coal will trot out all the old arguments about how new rules will raise the price of electricity, sending more manufacturing jobs overseas and forcing little old ladies to freeze to death in their homes because they can't afford to pay their electric bills. Fossil-fuel-era dinosaurs like Sen. James Inhofe, the powerful Oklahoma Republican who believes global warming is a hoax, will surely push back against any strong action by the EPA. Their chief weapon will be a Senate vote under the Congressional Review Act, a legacy of Newt Gingrich's Contract With America, which gives Congress the power to overrule federal regulations issued by agencies like the EPA.

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