A broad climate and energy package, as envisaged by US Senate Majority Leader Harry Reid and other climate bill co-sponsors like John Kerry and Joe Lieberman, will not make it to the Senate floor this session. Faced with united opposition from Republican senators, and tepid support in its own caucus, the Democrats decided to table an energy bill dealing only with the oil spill and efficiency measures. Any efforts to cap carbon, even from electric utilities, will have to wait.

Following Senator Reid’s announcement, Senator Kerry confirmed that he would not to try to tack on a scaled-down version of the American Power Act, which sought to reduce emissions from utilities by 17% over 2005 levels by 2020. Even if all Democrats were supportive of such legislation – which they are not – they would not have had enough votes to overcome a filibuster, and the legislation would have failed.

It is a significant setback in terms of capping carbon in the US through legislation rather than regulation. The creation of flexible mechanisms like a cap-and-trade system would help to exploit the lowest-cost reduction opportunities first, while regulations tend to be less discerning and are insensitive to variable emission reduction costs.

Failure of carbon legislation in the Senate means that broad carbon regulations promulgated by the US Environmental Protection Agency might be the (more expensive) direction the US is heading, or will at least be the regulatory “stick” that discourages further procrastination in the legislature.

Midterm elections are approaching and a reorganization of the House and Senate will likely see increased Republican representation, which bodes poorly for carbon caps. Stalled movement in the US will likely translate into similar delays in Canada, and could negatively impact the UN Climate Change Conference being held in Cancun, Mexico in November-December.

By Jeff Beyer, .(JavaScript must be enabled to view this email address)