Climate Change

The Politics and Economics of Obama's New Climate Program

          The Supreme Court's blockbuster decisions on voting rights and same-sex marriage attracted most of the attention, but President Obama also moved decisively last week, on climate change.  The facts that drove the President are scientifically undisputed.  Increasing concentrations of greenhouse gas emissions in the earth's atmosphere continue to raise global temperatures; and without serious action, the long-term effects on sea levels and climate could be catastrophic.   Yet, climate-change deniers on the far right have a tight hold on a majority of congressional Republicans, who now won't even acknowledge the threat.  With no hope of reaching a reasonable accommodation, the President put forward new regulations that don't need their approval -- and ultimately will be less effective and more costly for average Americans than the alternatives which Congress won't consider. 

            For a while now, most climate experts and economists have broadly agreed that the most efficient and effective way to reduce these carbon and other greenhouse gas (GHG) emissions is the direct approach:  Raise the price of fuels based on the GHG emissions they produce, and so raise the price of all goods and services based on the emissions created to produce them.  In principle, this approach could attract bipartisan support.  It rests on one of the bedrock tenets of conservatism, the power of prices in free markets, as well as the liberal disposition to create national programs to improve the general welfare.  Yes, the most straight-forward way to achieve such climate friendly fuel prices is apply a dreaded tax to all forms of energy based on their carbon dioxide (CO2) and other GHG emissions.  But even that, in more placid political times, could be a basis for attracting broad support, since the revenues from a climate tax could be dedicated to cutting payroll, corporate and other, more economically-distorting taxes.

            The truth is that every other serious approach to climate - from a cap-and-trade system to the President's new regulations - also would raise prices:  Directly or indirectly, they make it more expensive to use fuels that emit more than their share of greenhouse gases, relative to other fuels that damage the climate less.  Over time, those price differences should gradually move millions of businesses and tens of millions of households to favor the cheaper, more climate-friendly fuels and technologies, and the goods and services produced using them.

            The sobering news is, we don't have much time.  Scientists warn that however broadly we might adopt the current generation of cleaner fuels and technologies, the atmospheric concentrations of CO2 and other GHG will soon reach levels that will produce serious climate changes.  However, the economics of setting a clear and hefty price on carbon and other GHG would also create new incentives that could extend the frontiers of climate technology.  If energy companies, scientists and entrepreneurs can be certain about the price of carbon and other greenhouse gases, looking forward - if they know how much more it will cost people to use climate-damaging fuels, compared to climate-friendly ones - that would create strong incentives to develop and adopt the next generation of climate-friendly fuels and technologies. 

            The question is, how efficient and effective are each of these approaches, and which is most likely to spur new advances?   The question highlights the costs of the extreme right's current hold on congressional Republicans, which drives the political stalemate on climate policy and has left President Obama with few options apart from executive regulation.  His new regulatory agenda has three parts.  It includes, first, higher energy-efficiency standards for appliances and buildings, aimed at reducing energy use whether clean or otherwise.  There also are new loan guarantees for projects to reduce or isolate the greenhouse gases emitted by fossil fuels, and additional grants to develop more efficient biofuels.  These guarantees and grants are designed to promote greater use of more climate-friendly technologies and fuels by reducing the cost of capital to develop them.  While these measures provide a sense of the administration moving on many fronts, their combined impact on the climate crisis will be modest. 

There is one measure that could matter a great deal more:  The President has directed the EPA to develop new CO2 and other GHG emission standards for existing power plants.  This follows EPA regulations proposed last year that set similar standards for new power plants.  The logic is straight-forward:  Set standards that will force utilities to rapidly shift from coal to natural gas and renewable fuels.  This makes sense, since the use of cheap coal to generate electricity accounts for about half of worldwide carbon and other GHG.  Shifting to natural gas worldwide would cut life-cycle GHG emissions by 20 percent, and shifting to renewable fuels would reduce those emissions by as much as 40 percent.

            There is no doubt that sufficient regulation could move the United States to a path under which our GHG emissions would decline in a sustained way.  But using regulation in this way will cost Americans a great deal more than a carbon tax with the same result.  Under the new regulation, existing power plants will have to develop and adopt new investments that meet a new, uniform standard by reducing their emissions from fossil fuels or converting their plants to use cleaner fuels.  To begin, monitoring and enforcing such regulation will cost a lot more than collecting a tax.  More important, the program suffers from the inefficiencies of most regulation, because some utilities will be able to meet the regulation much more cheaply than others, based on the state of their current plants.  For example, plant A could reduce its emissions by a required unit by investing $1,000,000, while plant B could reduce its emissions by the same unit for $250,000, and by two units for $500,000.  So, reducing emissions by two units under the regulation will cost $1,250,000, while plant B could achieve the same result for the climate under a tax or a cap-and-trade system for $500,000.  Under all of these alternatives, most of the costs are passed along to the ratepayers and consumers.  But a tax with offsetting tax reductions could return much of those costs to everyone.  Based on a simulation from several years ago, those costs could average some $1,500 per-household, year after year. 

            Finally, while the new regulations should spur technological innovations to enable utilities to meet the standard more efficiently, the incentive to innovate will dissipate once the standard is met.  By contrast, the economic incentives to develop and adopt cleaner fuels and technologies never go away under an emissions tax, since every incremental advance would reduce the tax and, with it, the price of energy. 

            This past weekend, President Obama also devoted his weekly address to his new climate program.  He deserves credit for refusing to be cowed by his opponents' intransigence.  He could truly elevate his presidency, however, by taking the case for a carbon/GHG tax with offsetting tax cuts to the country, and beating his opponents on one of the most fateful challenges we face today. 

This post was originally published in Dr. Shapiro's blog


Attend, Watch - Tue Oct 6th: Insights into the Future of Clean Transportation

Electric cars, natural gas trucks, plug-in hybrids, fuel cell vehicles... As the global auto industry retools and re-emerges following the financial crisis, new technologies, players and business models are promising to reinvent not only how we drive but one of the key engines of global growth. Clean vehicles have the potential to provide energy security, help solve climate change and create new jobs and wealth. But just how the industry re-emerges, where it thrives and what technologies and companies will come out on top remain vital questions, the answers to which will impact not only America’s future but the world’s.

To understand the future of clean transportation, NDN will convene a panel of experts for discussion on clean vehicles and the future of the auto industry. Joining us will be Dave McCurdy, former Congressman and President and CEO of the Auto Alliance, Kim Hill of the Center for Automotive Research, who has recently completed a study on jobs and environmental benefits resulting from fleet conversion, using AT&T as a case study and Mike Granoff, Head of Oil Independence Policies for Better Place, the transformative, Palo Alto-based electric car infrastructure company. Moderating the forum will be NDN Green Project Director, Michael Moynihan.

Tuesday, October 6, 12:00 p.m.
NDN: 729 15th St. NW, 1st Floor
A live webcast will begin at 12:15 p.m. ET
RSVP  :  Watch Webcast

Our panel of experts will discuss new technologies on the horizon, how clean vehicles will create jobs and transform the economy, the connection between electric cars, renewable energy and the electricity network and how clean vehicles can provide energy security and address climate change.

The Auto Alliance is an organization of the leading global makers of cars and other vehicles. The Center for Automotive Research is the leading organization providing research on the global car industry and impact of cars on the economy. Better Place which is integrating electric transportation solutions in Israel, Australia, Denmark, the United States, Canada and Japan is the first service provider for electric cars, building infrastructure, software and the user interfaces to make electric cars available for mass adoption.

The NDN Green Project is working to facilitate the transition to a clean, low-carbon economy to advance the goals of solving climate change, improving energy security, and promoting economic growth.

The President's Earth Day Call to Action

New York City -- In perhaps the most significant energy speech he has given to date, President Obama declared his preference today for legislation, not regulation, to address climate change. In his speech, touching on the whole panoply of energy issues, he also highlighted elements of the Recovery Act aiding clean energy, such as money for the smart grid, and discussed new initiatives to harvest offshore wind, tap water currents for energy and encourage states and localities to purchase clean energy vehicles.

A speech on energy and the environment is not unusual on Earth Day. What I found most interesting about the speech, however, is that the President unequivocally stated he is squarely behind a "market based cap" or cap and trade approach to limiting emissions as outlined in legislation recently proposed by House Energy and Commerce Chariman Waxman and Subcommittee Chairman Ed Markey. Saying he supports "comprehensive energy legislation", the President signaled this will be a major priority this year.

The fact is, this is precisely the form of leadership needed to move forward on clean energy. Absent real presidential leadership, the power of incumbency enjoyed by our existing, heavily regulated energy infrastructure could easily stymie efforts to reform the industry.

But reform energy we must if we are to make good on the economic promise of clean energy, let alone the benefits for our climate and security. Today's speech significantly increases the likelihood that America will move toward a clean energy future as opposed to giving into the inertia of the status quo.

Celebrating the Earth

New York City -- Forty years have passed since John McConnell, a peace activist and plastics pioneer, proposed the first Earth Day at a Unesco conference in San Francisco as a way to focus attention on our role as stewards of the planet. In that period, environmentalism has grown into a worldwide passion so ingrained that we routinely recycle bottles, paper and plastics and on Earth Day, at least in my small New York town, walk instead of drive children to school. In that sense Earth Day and environmentalism have been astonishingly successful.

At the same time, however, when we look about the planet it is clear that for all the steps taken so far the climate has actually gotten worse. Environmentalism can celebrate major victories in the United States of cleaning up our air and our water. However, we have meanwhile developed millions of acres of land with almost no regard for the environment. And the rise of China, India and the other rapidly developing countries has virtually doubled sources of pollution. Moreover, science suggests that it has been precisely during the last decade or so of human history that the earth's climate has begun to experience dramatic stress from people as our greenhouse emissions have altered the earth's absorption of energy from the sun.

As an optimist, I belive the world will collectively meet these challenges which are fundamentally about managing growth. The key element, recognized by McConnell when he chose the Unesco conference to propose the idea of Earth Day is global cooperation. The last Administration retreated from working with other countries. The new Administration has redidicated itself to solving climate change but faces immense challenges, particularly, in the weak global economy.

Most major action is precipitated only by crisis. When the threat is is both distant and global rather than local in nature, acting in advance is that much more difficult. The foresight demonstrated at Rio, Kyoto and the other key international meetings on the environment are, therefore, remarkable in history. But science suggests that cooperation is not only remarkable, but also vital to our survival.

On this Earth Day, therefore, I believe we should honor the idea of preserving the planet. But we also honor the key element in achieving that goal, namely working together to solve the problem. Not so coincidentally, 40 years ago, man first landed on the moon and people first saw the famous picture of the earth from the moon. What they saw was a fragile planet, no bigger than a pea in Neil Armstrong's words, but for the first time, the whole earth as one, with one set of challenges, hopes and possibilities and a single destiny.

Boehner On CO2 Emissions Just Another Case of Long Road Back for GOP

We've written extensively on the utter bankruptcy of the Republican Party, and this morning on "This Week," House Minority Leader John Boehner was absolutely full of it on climate change. Courtesy of Politico:

"The idea that carbon dioxide is a carcinogen that is harmful to our environment, it is almost comical," Boehner said. "Every time we exhale, we exhale carbon dioxide. Every cow in the world, when they do what they do, you have more carbon dioxide."

Let's add this to the list of all the other things that resemble "what cows do" that the Boehner led Republican Party has tried to peddle to the American people this Congress, along with a bogus stimulus plan, an "alternative budget" without numbers, and a joke-of-a-budget that proposes an across the board spending freeze (at the worst possible time for the economy). Unfortunately for the Republicans, there does not seem to be a credible leader or policy idea, at least at the federal level (and the hopes for the future at the state level seem to shoot themselves in the foot every time they open their mouths).

As one smart Democratic communications operative said to me about Boehner's line on carbon dioxide emissions, the Republicans have already established how out of touch they are on economics (and established their complete lack of interest in working with the president to fix the economy). Energy policy is really one of the last few places where, perhaps, the two parties could work together. Boehner on the morning shows spewing such irresponsible, unscientific untruths shows yet another example of how long the road back is going to be.

Boehner leads a minority up against some of the hardest political times in the history of the party. One of its top strategists on Friday said that its insistence on religious tests risks long-term political viability, and the Republican Party continues to demonstrate just how ill suited they are for actual governing. (As if the last eight years weren't enough.) Unless something changes for the party quickly, it's leaders' days in those roles are likely numbered, and its relevance is likely to continue to diminish.

The Choice: Recovery vs. Drift and Decline

Each day you can feel the media and the public grow slightly more aware of the gravity of the economic problems facing America and the world.   We are all still getting our arms around this economic moment, and like Paul Krugman's column today, the emerging conventional wisdom is the recovery is going to be long and hard - longer and harder than any other recession since the Great Depression.  I feel, each day, that it is more and more apparent that we are living in no ordinary time - that the decisions made by our leaders in the days ahead here and across the world will be ones of great consequence.  Ones that will lead to a prosperous and peaceful 21st century; ones reinforcing the drift of the moment, the inability of our politics to face our challenges forthrightly; ones that could indeed make matters much much worse. 

Tuesday night the President will address the nation from the Capitol.  Once again the nation, and the world, wlll be watching.  It will be a critical opportunity for our new President to lay out the challenges we face and the solutions he envisions.  I hope he takes the opportunity to more clearly define the choice we face.  For I don't think the choice is between forward and backward any more, or between progress and failed old ideas.  I think it is a graver choice, a starker choice, a much more serious choice - one of recovery, global stability and national greatness versus continued drift, global chaos and national decline.  

As the saying goes times of crisis are also times of great opportunity.  It is increasingly clear the task of the Obama Presidency will be a great one - to prevent the world and the US from sliding into economic and political chaos, to chart a domestic and global path for recovery, and to update the successful but aging geopolitical architecture forged by FDR and Truman for a new day and a new century.  No small tasks these.  But these are the tasks that are in front of us now.  To put it simply - it is time to remake and renew the world, to offer a "new politics" on a global scale.  

If history is any guide creating this new global architecture that allows us to better manage the collective challenges in front of us won't be easy, or without pain.  Mistakes will be made, years and nations lost.  But it is now the great challenge facing our nation, whose role in the world is different from the rest.  And it will now be at the very center of our politics for perhaps decades to come.  I am anxious to see how the President talks about all this on Tuesday night, the most important night yet of his already historic Presidency.  

Making Sense of the McCain Narrative Coming from St. Paul

Staying true, never wavering. Rising above politics as usual. Taking on his own Party. He is his own man. Willing to do the hard stuff, like tackling climate change and immigration reform. A courageous maverick. The drumbeat from St. Paul is relentless.

But is it true?

While it may have been at one time, it can no longer be considered true. McCain fought the Bush economic strategy. He now embraces it. McCain opposed the Bush approach to use of torture. Today he supports it. He was a leader on the effort to fix our broken immigration system. Today he no longer supports his own bill. While he has been a leader on tackling elements of the climate change fight, as Jake writes below, it is no longer clear that he supports the positions he had a few months ago. He runs ads with wind turbines and solar panels but has helped kill the main government program supporting their growth. He fought the lobbyists and now his campaign is run by, and littered with, them. He says he is the experienced one, but is now on his 3rd campaign manager and his team wildly bungled the vetting of his VP, the most important decision he has made to date. He argues each day he will balance the budget but independent analysis all show that he will do the very opposite.

In order to win the nomination this year, John McCain embraced the very politics he fought so hard against for so many years. His story is not one of courage, of fortitude, of virtue but one of an old politician, seeing his last chance for the Presidency slip away, give in to a Party's and a President he had fought so long, sacrificing his integrity and his beliefs along the way. The McCain story is much more craven than courageous, more aging pol than heroic leader, more a man who has bragged repeatedly that he supported President Bush more than 90% of the time than an independent maverick.

It is not an inspiring story no matter how much they attempt to dress it up this week in Minnesota. Like so many, I admired the old McCain, but that man is not the man running for President of the United States this year. He disappeared forever sometime in 2007.

An Inconvenient Report

I would like to know (and if any readers know please email me) how it came to pass that the White House finally released a four year late report on the impact of climate change on the eve of Senate consideration next week of the Lieberman Warner Climate Change legislation.  The Bush Administration has fought release of the report for four years and from its contents it is clear just why.  Perhaps someone in the Office of Science and Technology Policy cared deeply enough about the climate change issue to release the report in time for next week's debate.  In any case, the picture of the future it paints is brutal.  Essentially, it predicts the end of the America we know today.

A few tidbits: By 2080, heat related deaths will soar particularly among the old and frail, streams will warm, sea levels will rise, wildfires will rage, droughts will afflict the Southwest, pests will threaten crops and billions will need to be spent both to combat flooding and air condition a hotter country.

The report only summarizes dozens of other studies but the overall effect, particularly, released on the eve of Senate debate of climate change legislation is stunning.   You can read it here

McCain to Skip Climate Vote

In the Washington Post, Julia Eilperin today covered John McCain's announcement that he will miss next week's key vote on Lieberman-Warner climate change legislation. This is the same John McCain who has been giving speeches and running ads for the last month about climate change and has been attempting to draw distinctions between himself and President Bush on this issue (since he is out of other issues - from immigration to Iraq).

From "The Trail," check out John McCain's reasons for missing the next week's vote:

In a press conference late Wednesday afternoon, McCain said he did not support the bill sponsored by two of his closest allies, Sens. Joseph I. Lieberman (I-Conn.) and John Warner (R-Va.) because it doesn't offer enough aid to the nuclear industry, and he would not come to the floor to vote on it.

"I have not been there for a number of votes. The same thing happened in the campaign of 2000," he said. "The people of Arizona understand I'm running for president."

Some problems with his reasons for opposing and failing to vote on the bill:

  1. The nuclear industry has received and continues to receive some of the most generous subsidies in the history of energy subsidies. Aside from that fact, additional legislation, similar in form to the energy bill passed last year, is a more than capable venue for further subsidizing nuclear energy. The point of this bill is to put a price on carbon emissions, which, by making fossil fuels relatively more expensive, would help nuclear. This objection to the legislation is manufactured and asinine.
  2. Lieberman and Warner are two of McCain's biggest supporters. Lieberman goes on the road with McCain quite a bit. Do they disagree on this vastly important issue that McCain has chosen to make a centerpiece of his campaign?
  3. McCain claims that the "people of Arizona understand" he is running for President. John McCain is running for President of the United States. His actions in the United States Senate, just over seven months before he would be President, should represent the best interests of every state, not just the 6 million people of Arizona. This attitude is un-Presidential, to say the least.

Time and time again, the wheels have fallen of the Straight Talk Express. This time, it is on the last issue McCain had to distinguish himself from an incredibly unpopular President. By failing to vote for this legislation, McCain should no longer have the latitude to claim confronting climate change as central piece of his platform, and the media's "maverick" tag for the Republican nominee should probably be put to rest.

Blair on US Climate Change Legislation

In advance of Senate consideration next week of the Lieberman Warner legislation on climate change, Tony Blair has penned a thoughtful and compelling op-ed in today's Washington Post that puts forth the case for a cap and trade system in the United States. 

Why is a former British PM writing editorials in a Washington paper?

As members of the Brown government in the UK told me in London recently, Europe views US leadership as critical to global action on climate change.  The US withdrawal from Kyoto was harmful to the world's climate.  By passing strong climate legislation now, the US can set the stage for a real global accord next December in Copenhagen when the UN will lay out a successor accord to Kyoto to take effect in 2012.

If the US fails to take action on climate change by next year, it will go into the Copenhagen meeting in a considerably weakened position.  The US would then be following, equivocating and reacting, rather than leading.  Alternatively, if the US passes climate change legislation before then, we will have the opportunity to shape the Copenhagen accord and resume our rightful leadership position on the issue as the world's largest economy.  Without meaningful US leadership, it is doubtful developing countries such as China and India can be brought in, further raising the stakes for legislation and the future.

President Bush has threatened to veto the Lieberman Warner legislation and the bill the Senate will debate next week faces clear obstacles.  However, the debate next week--even if the final vote falls short--will help set the stage for action next year.  Since all three remaining Presidential candidates support climate change action, the prospect of getting a bill done will increase dramatically on January 20th.  But so will the stakes.

The urgency Blair expresses is well considered.  The Senate should do its best to move the ball forward because, on this issue, there is a deadline.

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