Watch out for simplistic reporting on a new study on the impact of climate change legislation on the Midwest.

So far, reports on the study are highlighting claims that cap-and-trade, an idea that would monetize the cost of emitting carbon, would cause huge increases in electricity rates. The Milwaukee Journal-Sentinel claimed rates in Wisconsin “could rise as much as 63 percent from 2012 to 2030.”

Here’s how Platts, an energy industry publication, summarized it.

Midwestern states could see their electricity rates increase by $33 billion in 2030 to pay for greenhouse gas reductions, according to a report from a utility released Wednesday.

What everyone has failed to report is that the study was prepared by Bruce Edelston, a utility company veteran and John McCain supporter who spent the last seven years advising the Washington lobbyists of Southern Company, which owns the three highest carbon emitting power plants in North America. Edelston’s background doesn’t necessarily discredit his findings but it should make reporters cautious about his conclusions, but his method raises some questions about its reliability.

Edelston’s general finding is indisputable. Consumers will pay higher rates under the kind of cap-and-trade schemes proposed by President Obama and Senator McCain (R-Ariz).

What is misleading is that the utility rate figures are based on Edelston’s extrapolation of the effects of a cap- and-trade bill proposed last year by Sen. Barbara Boxer (D-Calif.) in which none of the revenues from the auctioning of emission permits is returned to consumers, as is the case under Obama’s plan.

Obama’s plan, as outlined in his budget here (PDF p. 21), calls for returning most of the auction revenues to consumers via a tax credit. The leading cap and trade proposal on Capitol Hill, a draft bill from Rep. Henry Waxman (D-Calif.), leaves open the possibility of allocating emission permits to utilities for free. In other words, the Obama and Waxman plans would not result in such dramatic results for consumers.

I’ll be reporting in more detail on Edelston’s report in the future. It needs careful analysis, not careless or manipulative reporting.

Editor’s note: The original version of this post incorrectly stated the coal industry group, American Coalition for Clean Coal Electricity authored the cap-and-trade study cited. The group is not affiliated with the study or its findings. We regret the error.

The prospects for congressional approval of climate change legislation this year have dimmed but not disappeared. Yesterday the Senate voted against using the filibuster-proof reconciliation process to consider climate change legislation by a 67-31 vote and the House-approved budget did not include cap-and-trade in its budget reconciliation provisions.

That makes it more likely that cap-and-trade legislation, now being drafted by Rep. Henry Waxman (D-Calif.), will have to win 60 votes in the Senate to become law. With Democratic qualms mounting (see Aaron’s post yesterday on Majority Leader Harry Reid’s meeting with coal state senators) and potential Republican supporters hanging back, 60 votes seems to be a tall order.

But cap-and-trade advocates are not deterred, notes The Washington Post today, with this significant aside: “Administration officials support leaving the door open in the budget blueprint when it emerges from conference committee for a final vote this month.”

President Obama might still ask congressional leaders to take the more partisan route to get climate change legislation passed this year. Keeping the threat of reconciliation on the table has its uses. It was only after Office of Management and Budget director Peter Orszag’s threat of reconciliation that GOP Sens. John McCain (R-Ariz.) and Lindsey Graham (R-S.C.) reiterated their support for cap and trade. Sen. Benjamin Cardin (D-Md.) told the Post “a lot of us don’t want to give up without a fight.” Reconciliation remains a weapon in that fight.

Perhaps it is not coincidence that the two Republicans spoke out after Democrats began floating the idea that Obama would stop negotiating with Senate Republicans and use the filibuster-proof budget reconciliation process to pass health and energy reforms with 51 votes in the Senate. Just yesterday, Office of Management and Budget Director Peter Orszag pointedly declined to renounce the budget reconciliation strategy, saying “we’re not taking it off the table at this point.”

The two Republicans, Grim notes, “insisted that any effort to sidestep a filibuster by using the budget reconciliation process would erode the bipartisan support.” As I argued here Tuesday, using the budget reconciliation strategy is tempting but probably premature for Obama — and Graham and McCain’s statements show why. By endorsing the concept of cap-and-trade and signaling their willingness to negotiate, the GOP duo has boosted  the administration’s chances of getting climate change action with Republican support — and their own chances of shaping legislation.

Grim again:

Graham and McCain both said their support of bipartisan legislation had several conditions, citing the need for investment in so-called “clean coal” as well as nuclear power.

Those are not likely to be deal breakers for Obama. His 2010 budget proposal allocates billions in cap-and-trade revenues to “clean energy technologies” which, despite the objections of environmentalists, can be defined to include coal and nuclear.

There’s no way to prove that the threat of being excluded from cap-and-trade negotiations prompted McCain and Graham to act today. But the fact remains, they didn’t speak up until the threat was made.

Leave aside that Obama seems temperamentally loathe to shed the bipartisan, “let us reason together” approach that got him elected. The Democratic barons of the Senate, Max Baucus (D-Mont.) and Kent Conrad (D-N.D) are largely opposed to the budget reconciliation route which would bypass the Senate rules that require 60 votes to end debate and send a bill to a floor vote. And the political landscape on both health and energy issues still favors Obama.

While liberals fret and conservatives threaten to filibuster, Obama’s notion of comprehensive health care reform still has broad support among the American public, business, and even the insurance industry. Most of the tough decisions about health care reform have yet to be made, but a Capitol Hill consensus around a big expansion in coverage is not implausible. You can be sure the leaders of the post-AIG insurance industry will be striving for at least the appearance of of civic responsibility, which could give reformers more leverage.

Obama’s plans for energy reform to deal with global warming are more detailed and admittedly more problematic. As TWI’s Aaron Wiener points out in his story today, climate change is receding as a concern among economically stressed Americans, but Obama has little choice but to lead on the issue at some point. His budget’s plan for a cap and trade program to limit greenhouse gases is the most serious new idea on the table. True, it was ignored  or worse, by John McCain, Judd Gregg and other Senate Republicans who professed to want to lead on the issue only last year. Sen. Lamar Alexander (R-Tenn.) told The Times that he expects “massive defections” from moderate Democrats on the cap and trade bill.

But Democratic defections depend on the specifics of the legislation, now being written by Rep. Henry Waxman’s (D-Calif.) House Energy Committee. Waxman’s bill is still weeks away, and Obama has not yet deployed his persuasive powers on the issue.

Democrats want to pressure the GOP into negotiation while Obama wants to keep the hand of bipartisanship open to the few and the brave among Republicans who actually want to cooperate in governing. As with the stimulus program, Obama only needs the support of a few Senate Republicans to prevail in the end, and he still has a fair shot of getting it on health care and climate change. Until the Republicans or nervous Democrats slam the door — which they haven’t done yet on these two issues — Obama seems unlikely to change his strategy.

Ten northeastern states are capping their industrial CO2 emissions at 188 million tons and holding auctions for power plants to trade pollution allowances.

This is a historic event because it associates emitting CO2 with a price. The ten states are hoping that once the Northeastern, Midwestern and Western initiatives all take off, greenhouse emissions will start looking like acid rain pollutants, which were successfully regulated through their own cap-and-trade system, the Acid Rain Program.

Under the initiative, plants have started bidding on allowances to emit greenhouse gases. 90 percent of allowances will be auctioned quarterly by the Northeast Regional Greenhouse Gas Initiative, which is responsible for this effort. The expected price on carbon is expected to be set below $5 a ton.

Two other regional cap-and-trade systems are well on their way to following suit — one in the Midwest and one in the West. It’s basically the states’ way of telling Congress and the White House, we really don’t need you telling us what to do about our regional pollution.