The tension between climate policy and electoral reality was on display at the Brookings Institution on June 11. Speakers on climate change and energy in the 2012 election suggested that pricing carbon emissions should be a priority for the next administration. But while pricing carbon could play an essential role in a progressive climate policy, it lacks support from a public that a new study finds is more willing to support regulations and mandates as a means of promoting clean energy alternatives. And global warming is thus far not even an issue in the presidential election.
“As the struggling economy and demand for jobs consume the American public’s attention, climate policy has become a second-tier political issue. Although most economists advocate for putting a price on greenhouse gases through a carbon tax or cap-and-trade program, there is little political appetite to do so. Will the next president be able to make climate and energy a national priority?”
So read the event description for a panel discussion at the Brookings Institution in Washington, DC, this Monday, June 11. Panelists included Moderator Darren Samuelsohn (POLITICO); Ted Gayer (Brookings Senior Fellow, Economic Studies); Katherine Sierra (Brookings Senior Fellow, Global Economy and Development); and Charles Ebinger (Brookings Senior Fellow, Energy Security).
Carbon pricing vs. electoral reality
The discussion was centered on Gayer’s recent paper in which he suggests the next administration elevate climate policy to a national priority by making it a component of fiscal reform. Specifically, he advocates for carbon pricing policies. “The economics is clear and convincing,” he said. Pricing carbon is the best way to make meaningful reductions in emissions.
Carbon pricing achieves the greatest emissions reductions at the lowest possible cost, he contended. “An economy-wide cap-and-trade program allows the market the flexibility to find the cheapest sources of pollution reduction in order to meet the capped level of emissions.” Under his scheme, a carbon pricing policy would double as part of a tax reform policy, where revenues could be used to fund deficit reduction and economically harmful marginal tax rates. Gayer estimates that pricing carbon could generate $100 billion over 25 years – a significant sum but “not the holy grail. It would have to be one among many taxes” to make any dent in the national deficit.
A price on carbon would also mean that regulations and mandates (like efficiency standards) could be abandoned, as they would, he believes, become redundant if a price on carbon were in place. “Republicans should embrace market-based environmental policies,” as they have in the past, as the best means of improving air quality at minimum economic cost, Gayer recommends. “The traditional approach taken by EPA, as prescribed by the environmental laws of the 1970s, attempts to achieve environmental improvements through inflexible and economically costly mandates that set uniform technology standards across firms. By demonizing cap-and-trade in the latest debate, Republicans risk a reversion of environmental policy away from market-based approaches toward these more costly options.”
A cap-and-trade policy therefore might garner bi-partisan support, he argued, if introduced into the right political climate. “It’s definitely a long shot in the short term,” Gayer conceded. And given GOP attitudes toward any sort of environmental protection, the push for this kind of policy “must come from the White House.”
Panelist Katherine Sienna largely agreed with Gayer’s conclusions. Pricing carbon would also allow the US “to regain some of its leadership role in the international arena of climate change,” she added. But she suggested a different allocation of the revenue from the pricing scheme – it should be used to “push funding of international climate finance under the Green Climate Fund,” she suggested, thereby funding the US obligation to provide some portion of the $100 billion global pledge. Since this will no doubt be resisted given our current economic woes, carbon pricing revenues “must be used in a precise way to leverage private finance,” she continued. This way, small amounts of public funds can be used to unleash private capital.
The US would gain improved international standing, and US action on climate change could also promote additional steps by China. Instead of the current stalemate, we could create climate policies from the world’s worst polluters, and we would no longer be inviting other countries demonize the US for inaction. But, she said, “I don’t see this happening in the next couple of years.”
Charles Ebinger added that given waning public attention to environmental issues, “the next president must reset the conversation to focus not on the economic benefits of ‘green jobs’ but on ensuring that the United States is on a clear path to a low-carbon future.” The next president will have to decide what to do with American’s civilian nuclear waste and encourage the shale gas “revolution,” which he contends, could reduce carbon emissions compared to coal in a staggering fashion. We must also shift US energy policy toward Asia, he said. “The next president will face a dramatic eastward shift in energy consumption…increasing efficiency and a rise in domestic and regional production means that the energy bond between the US and the Middle East may weaken, providing a power vacuum that may be filled by India and China.”
While we agree that carbon pricing is a key component of a progressive climate policy, we wonder if it's particularly relevant in the current electoral context. The heroic effort made to push cap-and-trade through Congress in 2009-2010 failed (detailed very well in this New Yorker article), taking with it any momentum to try again in the near future. Furthermore, we have seen nothing from Obama thus far to indicate that he will fight for climate policy in his second term. And the likelihood that Romney would endorse a pricing scheme is even more minuscule considering that much of the GOP is pretending climate change doesn’t exist in the first place.
Carbon pricing vs. regulations and mandates
Ultimately, Gayer’s admission that re-introducing this kind of policy in the near term would be unlikely is an understatement: A new research paper by Chris Borick (Muhlenberg College) and Barry Rabe (University of Michigan), based on a national opinion survey and issued by the Brookings Institution, concluded that “Americans tend to be opposed to those kinds of policies most commonly endorsed by economists, namely taxes and emission trading mechanisms that utilize market principles in attempting to achieve cost-effective reductions.” The study found that overall levels of support for a cap-and-trade scheme hovered around 35%, with 42% in opposition and 22% unsure. Not encouraging statistics.
Furthermore, cap-and-trade is problematic in that revenues may not be as high as expected, nor abatement as effective. In European markets the price of carbon has been too low to effectively regulate emissions. The system’s success hinges on many complex factors: Emissions need to be measured accurately across the board, for a start. Planners need to account for which firms are grandfathered in, which firms receive exemptions, and which loopholes will be exploited.
A carbon tax, while ensuring the price of carbon isn’t too low or too high, comes with its own problems. First and foremost, you can’t actually guarantee a certain level of emissions – carbon can be an inelastic commodity, where emitters might find it in their interest to pay the tax rather than reduce emissions. Sierra added a similar note of caution in her reaction to Gayer’s paper. “Many industries will seek tax exemptions,” she warned. Further, the public will be unwilling to support increases in the cost of energy if these increases are not offset in some way. Jim Hansen’s recent proposal for a carbon tax stipulates that the tax income be paid back to the public as a dividend. Imposing a carbon tax and using the revenue to reduce the national deficit as Gayer suggests makes sense in the context of national fiscal policy, but may be unpopular with the public as energy prices rise.
Although Gayer portrays mandates and regulations as costly options over market based approaches, Sienna points out that these elements “were included precisely because of the political imperative to address these costs, and this imperative will not go away.” Take efficiency standards, for example. Gayer posits that they are not only inefficient but “paternalistic” as well. But efficiency standards address the reality that individual emissions are contributions to the global commons. The EPA estimates that President Obama’s fuel efficiency standards “will reduce CO2 emissions by about 270 million metric tons and save about 530 million barrels of oil over the life of vehicles built for the 2014 to 2018 model years.”
Borick and Rabe’s Brookings study finds that Americans actually support regulatory measures to control climate change, despite the fact that these may be economically less efficient than pricing schemes. “Americans tend to support those kinds of policies least commonly endorsed by economists, including a range of regulatory programs related to energy development, industrial emission controls an vehicular fuel mandates,” they conclude. In an opinion poll on fuel economy increases, the researchers found that 73% supported the increase in vehicle efficiency to 54.5 mpg by 2025.
This isn’t the only issue on which survey respondents preferred regulations to pricing schemes: a clear majority also supported a national renewable portfolio standard for electricity, where a set portion of electricity would come from wind, solar, hydro, etc. While regulations and mandates are clearly not as far reaching, and perhaps not as economically efficient, as carbon pricing, these tools have been largely successful politically, where cap-and-trade on greenhouse emissions has not been.
Climate protection vs. political impasse
This tension between what is best for the climate and what is currently politically feasible was a recurring theme in the panel discussion. Indeed, combining carbon pricing with fiscal reform was suggested as a method of giving climate policy more feasibility in the current economy. While we see merit in Sienna’s suggestion to divert revenue from a carbon scheme toward funding for the Green Climate Fund, without the political will to push a pricing policy through Congress, the point becomes moot. Perhaps the panel’s, and our, time would have been better spent pondering the question of how Democrats can turn climate change into a political winner – an issue with the momentum and approval to get through the next administration, whether Republican or Democratic.
On this point I note an interesting recent post at Daily Kos. The article addresses climate change as a weapon for the upcoming election: “The public already is awake to the realities of climate change, and the Republicans deny and lie about those realities. By elevating the profile of climate change as a political issue, the Democrats can devastate the Republicans politically. And by politically devastating the greatest enemies of responsible action on climate change, the Democrats can thus make it not only politically possible but politically imminent for responsible action on climate change to happen.”
The Daily Kos post suggests that we “elevate the profile of climate change as a political issue.” Yet Obama has thus far avoided talking about climate change because he clearly doesn’t see it as a vote-winning opportunity – the criterion that now appears to be driving everything he does. The Obama re-election campign website doesn’t even mention climate change on its “The President’s Record on Energy and the Environment” page.
Even the thus-far successful grassroots effort to delay the approval of the Keystone XL tar sands pipeline is used as a GOP weapon against the President, without a significant response from the White House beyond Obama's 'all of the above' energy stance. It is true that the opposition to progressive climate policy, which has adherents in both parties, has thrown up obstacle after obstacle to effective policy action. But a large part of why so little has been accomplished is that Obama and the Democrats have failed to articulate communication on climate change in such a way as to make it a political winner. Unless a combination of pressure from the climate movement and high-level leadership can change that, climate change will not be a significant issue in this year’s election – or maybe even the next.
On the new Brookings survey, also see: Public Understanding Of Climate Science Rebounds, 72% of Independents Say There Is ‘Solid Evidence’ Of Global Warming