So what happens if we don't do anything?

The debate around climate change and clean energy has focused largely on the cost of taking action. The Environmental Protection Agency (EPA) recently released its analysis of a bill introduced by Sens. Kerry (D-MA) and Lieberman (I-CT). It found the cost to average consumers to be fairly negligible. But as the Economist points out, the analysis misses a critical element - the cost of inaction.

More and more we are seeing the real time impacts of climate change. Companies are already being encouraged to adopt relevant adaptation policies they will need in order to cope with an unpredictable and shifting climate in the coming decades. It's absolutely critical that while we debate various policy options moving forward we never lose sight of the fact that the cost of inaction will far outweigh the cost of action.

As many of you will know I'm a big fan of placing a price on carbon. Right now we get to emit greenhouse gases (GHGs) for free when we know their effect on the environment comes with a cost. Ezra Klein recently posted an excellent piece which focused on pricing externalities. In this case it was specific to oil but you only need to replace that term with CO2 or GHGs and you've got a strong argument for taking into account the full cost of carbon.

Without doing something now, we place ourselves at much greater risk to weather extremes. We're already committed to a certain amount of exposure, but why push the envelope further?

Climate legislation on the ropes or down for the count?

Yesterday's announcement from Sen. Lindsey Graham (R-SC) can only be described as a savage blow to the solar plexus. Everyone was all set for a big press conference unveiling the legislation tomorrow but now nothing, at least for the time being.

Is this the end of climate legislation in 2010? Too early to tell of course but the calendar is getting busy - financial reform, immigration (zero legislative text in either the House or the Senate), and a Supreme Court nomination. Senators John Kerry (D-MA) and Joe Lieberman (I-CT) have said they will continue to pursue the introduction and passage of a bill with or without Sen. Graham. My guess is they would be happier to have him on board.

Graham had, over the past several months, pushed hard for a comprehensive bill. Many in Washington thought he could bring a handful of other Republicans into the fold because of his pro-nuclear, pro-domestic oil and gas production, and pro-business point of view. To date, there's been no physical manifestation of that theory but a number of other Republican names have been included in the mix (e.g., Gregg (NH), Voinovich (OH), Corker (TN)). Without Graham, the likelihood of these Republicans jumping into the fray is slim to none.

So what now? It appears Kerry is hopeful that Graham will reconsider once the heat of the immigration announcement simmers down. I'm not in a position to judge whether that will happen but things are definitely looking dicey right now. Especially when you consider that Graham not only had the potential to bring Republicans on board but he also provided political cover for moderate Democrats wavering in their support of a comprehensive bill.

I'm not ready to label this latest development as apocalyptic. That said, Graham came close to walking the plank on a climate and energy bill and is obviously frustrated by the shift in policy priorities. If I were a betting man, I'd say the odds of him coming back to the tri-partisan fold are 5-1. But I'm not so don't take me up on it. Better to spend your time trying to figure out how we get climate legislation off the mat.