The Political Challenges We Face to Preserve the Earth

It’s Earth Day as I write this, and the challenges to preserve the Earth as we know it are momentous ones. The biggest and most obvious one is climate change, since it involves the most serious threat. Getting Congress to pass a plan that can reduce greenhouse gas emissions sufficiently to be meaningful will be a very tall order. The biggest political hurdle is that meaningful action on the climate will raise an average American household’s energy costs by some $1,500 per-year (2005 $), including the higher prices they will pay for the oil, gas and electricity they use directly and the effects on the prices of everything else a family consumes. And that doesn’t include the costs of retrofitting the heating, cooling and lighting systems of offices, factories, and homes -- as the Obama administration is now doing with federal buildings, thanks to the stimulus – or converting to low-carbon fuels thousands of utility plants and the grids they use to distribute the electricity.

The political temptation is to reduce these costs by not imposing genuine limits on greenhouse gases. That’s the tacit strategy of the European cap-and-trade program, which has yet to reduce any emissions, and the unspoken appeal of the new Waxman-Markey bill, which has so many “carbon offsets” that excuse businesses from reducing their emissions, that environmental experts figure it won’t cut greenhouse gases at all between now and 2020. If the President wants to get this done and do it right, he needs to drive up those prices – that is, put a high price on carbon – while also giving people the means to absorb those increases. The best way to do that is not cap-and-trade at all, but a carbon-based tax that recycles its revenues in the form of tax relief, such as a payroll tax cut.

The higher price on the carbon content of our energy will move people and businesses towards less-carbon intensive fuels and technologies, but that also won’t be enough. We also will have to develop and deploy entirely new, climate-friendly technologies and fuels, because we probably have less time to contain climate change than we thought. In estimating how much time we have, most people focus on the threat from CO2 concentration: Those concentrations currently are about 370 parts- per-million, with the sustainable range for greenhouse gases falling somewhere between 450 and 550 parts-per-million. But there are other greenhouse gases besides CO2, including methane, nitrous oxide, ozone, and chlorofluorocarbons; and when we convert their atmospheric levels to what’s called, “CO2-equivalents,” we’re already at 415 parts per-million. So, the preserving the Earth is going to require technological breakthroughs on top of carbon-based taxes or cap and trade programs.

For that, we’ll need more support for basic R&D, which the Obama stimulus and budget got right. The challenge will be to sustain and probably increase this support when the goal of the budget turns with a vengeance from stimulus to deficit reduction. The new-technology requirements for climate change come with other strings as well, such as intellectual property rights. We will have to face down China, India, Brazil and a number of other developing nations, which argue that the only way they can afford to shift to less carbon-based and more energy-efficient ways of running their economies is to bring down the price of new technologies and fuels by providing them little or no patent protections. That might sound reasonable, but for the broad and certain economic finding that weakening those protections will mean producing fewer innovations – and without those innovations, we could well lose the better part of the fight to contain climate changes.

Since we also need to persuade those same developing countries to cut their emissions, and in some cases by even more than we will have to cut ours, the administration also will have to figure out how to help them pay for it. One way could be joint ventures to develop and sell these new technologies and fuels, by companies from the U.S. or EU on one side, and, on the other, enterprises in China, India, Brazil, Indonesian, Bangladesh, and other large developing nations. A more direct but also more costly approach would be a global fund set up by the advanced countries to defray some of the cost, for example, of China and India building and operating more nuclear, natural gas, and solar-based power plants, instead the cheaper, coal versions they’re now building. In principle, such a fund would be no different from the $125 billion in funds which we and other advanced economies committed to the IMF at the recent summit, to provide the means needed to stabilize developing economies whose currencies get caught in the riptide of the economic crisis. Selling Congress on that will take all of the President’s skills and a hefty piece of his political capital. Doing it again for climate change will be even harder.

These dynamics all point in the same political direction: Doing our part to contain climate changes will be very costly and consequently very difficult politically. That makes a strong, economic revival here and around the world perhaps the single most important thing the Obama administration can do right now to help preserve the Earth. On that front, as on climate change, the administration has a ways to go: Its programs to revive the financial sector and housing are part-way measures that are not likely to produce the results needed. Fortunately, President Obama appears to be that rare politician who learns from mistakes and is prepared to shift course. Doing just that – on carbon based taxes versus cap-and-trade, as well as these core economic strategies -- could become his most pressing challenge in protecting the Earth.