A Window for U.S. Action on Climate Change

While the U.S. policy discussion on climate change has been subdued for the past two years, a confluence of several factors has opened a window on possible U.S. and international policy action in 2013. These factors have partially reoriented the politics behind climate change and have provided some pressures and opportunities for the U.S. to reexamine the issue this year.

First and most visibly, the political profile of climate change has been broadened and raised by recent weather events. Hurricane and subsequent Superstorm Sandy wrought visible and painful destruction in the U.S. Northeast coastal regions. The damage wrought by this storm, which was only a low-level hurricane, highlighted the vulnerability of much of our coastal built infrastructure to rising sea levels and extreme weather events. While the institutional preparations and response to Sandy were for the most part handled admirably, the obvious future risks to security prompted several prominent politicians—including Republicans Chris Christie and Michael Bloomberg—to call for aggressive domestic action on climate change. In addition, the unusual statistics on both global and U.S. weather anomalies continue to be surprising.

The recent release of the National Climate Assessment from the Federal Advisory Committee warned that the most recent decade was the nation’s hottest on record, and temperatures will continue to rise. The next few decades are projected to see another 3°C to 7°C of warming in most areas, and the chances of record-breaking temperature extremes continue to increase as the climate continues to change. Certain types of weather events have become more frequent and/or intense, including heat waves, heavy downpours, and, in some regions, floods, droughts, and larger and more frequent wildfires. There is strong evidence to indicate that human influence on the climate has already roughly doubled the probability of extreme heat events like the record-breaking summer of 2011 in Texas and Oklahoma. Climate change will also have a severe impact on human health in the United States, with new threats emerging from increasingly frequent and intense extreme heat, which causes heat-related illnesses and deaths and over time, worsens drought and wildfire risks, and intensifies air pollution; increasingly frequent extreme precipitation and associated flooding that can lead to injuries and increases in marine and freshwater-borne disease; and rising sea levels that intensify coastal flooding and storm surge.

In parallel to this visible evidence of climate vulnerability, several recent scientific studies underscore that the uncertainties in the science are, at this stage, relatively minor and that the primary catalyst to affect future climate risks is our policy response in the next decade. There is growing support for action on climate change by Congress and by the president. A large majority of Americans (77 percent) say global warming should be a “very high” (18 percent), “high” (25 percent), or “medium” priority (34 percent). One in four (23 percent) say it should be a low priority. A large majority of Americans (88 percent) say the U.S. should make an effort to reduce global warming, even if it has economic costs, and six in 10 Americans (61 percent) say the U.S. should reduce its own greenhouse gas emissions regardless of what other countries do.

Second, the cost of alternative energy supply has dropped substantially in the past five years. Prices for photovoltaic modules have dropped over 60 percent in the past three years, which is partially the result of a rapid technology transition from a niche manufacturing application to a global, high-volume manufactured commodity. The recent renewal of the U.S. Production Tax Credit will likely spur additional expansion of American wind energy, which is already competitive in some areas. Additionally, the relatively recent advent of large supplies of low-cost natural gas through hydraulic fracturing has provided the opportunity to start replacing aging, inefficient, and very polluting coal fired power plants. Finally, energy efficiency measures have become mainstream corporate strategy, as they often provide a very low-risk, high-return on invested capital.

Third, continuing budget battles have increased interest in finding new sources of tax reform and revenue, prompting some discussion of carbon taxes on both sides of the aisle. As long as we have a need to raise revenue, some economists will agree that taxing things we generally don’t want to encourage (such as smoking or pollution) is preferable to taxing things we do want to encourage (such as income). One thing is certain: the correct price for greenhouse gas emissions is greater than zero. Moreover, in a world where pollution is free, capital is misallocated toward inefficient uses – occasionally grossly so. Pricing these emissions, even with a small but increasing amount, is possibly very useful not only for climate protection but also for a healthy restructuring of our tax code and our excruciatingly complex set of suboptimal energy policies. Although targeted legislative action on carbon taxes is unlikely, it remains a potentially useful option if ever a “grand bargain” on tax reform becomes palatable. For example, Brookings analysis estimates that a U.S. carbon tax of $20 per ton, increasing at 4 percent per year, would raise an estimated $150 billion per year in federal revenues over the next decade.

President Obama has repeatedly voiced his interest in developing a plan for both energy and climate. In the 2008 election, both Obama and John McCain agreed on the need for action and disagreed only in the details of how rapidly to expand a carbon pricing system. After meeting substantial obstacles to several of his first term priorities, Obama pursued this climate agenda largely through executive actions, as both U.S. legislation and international negotiations stalled. In addition to supporting clean technologies through the Department of Energy and other programs, the first Obama administration enacted some new and significant regulations. These included new automobile fuel economy standards, which mandate an average fuel economy of 54.5 miles per gallon for the 2025 model year (up from the current Corporate Average Fuel Economy, or CAFE, standard of 29 miles per gallon, with gradual increases to 35.5 mpg by 2016). The new standard is expected to reduce American oil consumption by 12 billion barrels, saving Americans $1.7 trillion in fuel costs and resulting in an average savings of more than $8,000 per vehicle by 2025. It would also cut greenhouse gas emissions in half by 2025, eliminating 6 billion tons over the course of the program. For a second term, such executive actions on energy can and probably will be expanded in the near term. The Environmental Protection Agency will be considering carbon intensity regulations that would preclude new coal plant construction and will likely investigate options for reviewing existing sources. The Keystone XL oil pipeline discussion will be reopened. Energy technology research and development will also continue. Even in the 2012 election, both Obama and Mitt Romney agreed on continued funding for advanced, potentially high-impact energy technology investment through the relatively new Advanced Research Projects Agency–Energy (ARPA-E) technology innovation program.

In parallel, international discussions have begun to consider a possible 2015 negotiated agreement that would seek to keep the world on an emissions trajectory below a 2°C temperature increase and would allow verification of emissions reductions commitments in China and other advanced emerging economies, a key concern of the U.S. Conversely, U.S. domestic action could be a key element of a sufficiently ambitious international framework to enable the large emitters (the OECD as well as China and India) to start a phased and coordinated transition into a lower-emissions economy. Finally, the U.S. may be able to lead on a number of targeted international emissions reduction opportunities that focus on narrow, high-impact and low-cost technological agreements and that could lead to meaningful global reductions beyond carbon dioxide. Agreements on reducing soot, for example, or certain high-warming refrigerants, could draw substantial international cooperation and achieve high greenhouse benefits for low economic cost.

As the president and Congress look at their options for addressing climate change in 2013, the parameters have shifted considerably even since last October. Concern about climate and a bipartisan interest in a pragmatic approach to climate risk mitigation has risen. Simultaneously, the technological options are strong and the prospect of carbon pricing could even help with the bigger fiscal issues facing the country’s budget challenges. While legislation will likely wait until after immigration and gun control debates, the Obama administration can, in the near term, pursue a suite of executive and funding options to encourage targeted improvements in technology and international cooperation on the transition to a low-carbon economy.