Keystone for climate: Could Obama craft a horse trade?

President Barack Obama’s pledge to combat climate change — even as his administration weighs a verdict on the controversial Keystone XL oil pipeline — has some analysts buzzing about a possible horse trade.

The possible deal could go down like this:

  • First, Obama’s EPA proposes greenhouse gas emission standards for existing power plants, to the delight of environmentalists who note that the largest single stationary source of pollution is from coal-fired facilities already in use.
  • Then, the administration approves the Keystone XL pipeline, over the objections of environmentalists who say the $7 billion project would expand the marketplace for bitumen harvested from Canada’s oil sands using especially energy-intensive techniques.

ClearView Energy Partners has described such a theoretical arrangement with more subtlety, casting it as a “give a little, take a little” approach to energy policy:

“The president might determine that emission reductions from EPA fuel economy standards could affect even the dirtiest projections of greenhouse gas emissions associated with Keystone XL,” ClearView said in a research note to clients. “Alternatively, the EPA could propose new source performance standards for greenhouse gas emissions from existing power plants ahead of Keystone XL approval, pointing to substantial offsetting reductions from coal-to-gas fuel switching and plant efficiency gains.”

Columnist Terence Corcoran suggests in Toronto’s National Post that the idea is gaining steam, and some kind of carbon cost or tax could provide cover for a Keystone XL approval.

No matter what you call it, the deal is a non-starter with folks on both sides of the debate over Keystone XL.

Bill McKibben, the founder of 350.org, which is organizing a massive anti-pipeline rally in Washington, D.C. this Sunday, said the approach would be tantamount to playing “games around the edges” despite a very serious climate change threat.

“There’s just no time for half measures and doing a little bit of this and a little bit of that,” he said. “If we’re serious about climate change, we have to start leaving carbon in the ground, and this is clearly the place to start.”

Read more: Pipeline protesters arrested at White House

Margie Alt, executive director of Environment America, said Obama needs to move aggressively on all fronts — not take one step forward and another back.

“We absolutely need the president to move forward on regulating carbon pollution from power plants, both new and existing,” she said. A vow to combat climate change also “requires the rejection of the Keystone pipeline. Tapping into the tar sands is not a way to solve climate.”

“He needs to do both things,” she added.

Oil industry advocates who have lobbied for the pipeline’s approval, suggest it does not make sense to pair it with other, unrelated regulations.

Jack Gerard, president of the American Petroleum Institute, said he’d heard of no such deal, in which newly proposed environmental regulations could smooth the way for a Keystone XL approval.

Nevertheless, it appears the Obama administration is on track to expand greenhouse gas emission limits — proposed for new power plants last year — to include existing facilities. The rule proposed by the Environmental Protection Agency last year would limit power plants to producing 1,000 pounds of carbon dioxide or fewer per megawatt hour.

Although the proposed rule is agnostic as to the source of electricity and would apply to all new plants, regardless of what they burn to generate power, it effectively rules out the creation of new coal-fired facilities that don’t have nascent carbon-capturing technology.

Environmentalists say that Keystone XL could contribute to climate change by expanding the marketplace for Canada’s oil sands crude. Because the bitumen in Canada’s oil sands is harvested through mining and energy-intensive steam-assisted techniques, it may have a higher carbon footprint than conventional crude.

Pipeline advocates reject opponents’ assertions that diluted bitumen from Canada is significantly dirtier than the crudes from Venezuela and other nations that it would likely displace in Gulf Coast refineries.

Supporters of the project also say the pipeline would give the U.S. greater access to crude from a North American ally and provide a new transportation option for surging oil harvested in Montana and North Dakota — all while creating jobs and economic activity.