[BETA] Fortnightly

Now that the dust has settled on the 2012 elections, a natural question now arises: “What does this mean for us?”

It’s tempting to answer simply, “More of the same.” After all, notwithstanding a few shifting seats in Congress, the balance of power in Washington hasn’t moved at all. As such, the energy and environmental policy trends we’ve seen in the past couple of years likely will continue for at least the next two, until the 2014 mid-term elections.

But such a simple answer belies a couple of factsSince Obama won reelection, we must ask whether we’d rather have EPA cracking down on carbon emissions, or whether a legislated framework would be better for everyone..

First, the Obama administration is entering its second term, released from the burden of endless campaigning. In principle at least, this gives the president a freer hand to spend political capital pursuing the priorities that ostensibly got him re-elected.

Second, while the voters voiced no strong preference for a political shift to the left or the right, that doesn’t mean they want more gridlock. Indeed, some Republican leaders in particular see the election results not as a mandate for the status quo, but for bipartisan compromise—something that by all accounts has been sorely lacking in Washington.

When those facts are combined with the high-stakes debate over the federal budget, it seems at least possible lawmakers might strike a grand bargain—one that might combine tax reform with energy policy. Specifically, the idea of a carbon tax has emerged, with some chance of garnering bipartisan support.

Unlikely? Maybe, but not as unlikely as it might seem.

Fiscal Cliffhanger

The budget battle is set to preoccupy both the legislative and executive branches of the federal government for some time. How that battle shapes up could have important ramifications for power and utility companies.

Dividend-paying companies are keenly interested in seeing the Bush-era investment tax cuts extended. At this writing, the prospects for those tax cuts seem no more certain than they have for the past few months (See “ Dividend Double-Take ,” October 2012) . Investment taxes in particular might be relatively easy for lawmakers to consider raising before they eliminate other tax incentives, such as mortgage interest deductions or child tax credits. But at the same time, a deal to extend the Bush-era tax cuts might become part of a grand bargain that would include any number of compromise measures for both Republican and Democratic lawmakers.

The most noteworthy such measure, for our purposes, might be a carbon tax, which is receiving a surprising amount of attention in policy circles these days—surprising because until recently climate change seemed to be virtually a dead issue on Capitol Hill. By some accounts, however, a perfect storm seems to be rising—one that conceivably could make a carbon tax a viable part of a bipartisan budget compromise.

Like all major storms, this one includes multiple features that combine into a potent