Climate Policy: Local Solutions to a Global Problem
It’s clear that climate change is one of the greatest existential threats humans have faced in their 200,000 years of existence on this planet. Since the late 18th century, anthropogenic greenhouse gas (GHG) emissions have disrupted Earth’s natural carbon cycle and injected billions of tons of carbon dioxide and carbon dioxide-equivalent into the atmosphere, with strong correlations to a sustained increase in average global temperature. At this point, convincing skeptics that climate change is in fact a man-made issue is an exercise in futility; we could better utilize that time formulating policies and creating technologies that can blunt or perhaps even reverse the enormous consequences of climate change. So while I won’t even bother to argue the existence of climate change as a phenomenon, I will argue how policies should be designed and implemented to effectively correct the unhinged negative externalities produced by modern industry, consumerism, and agriculture.
Global attempts to remedy climate change have been wholly insufficient. Countries that signed on to the Kyoto Protocol of 1997 made an honest effort to come together and seek collective solutions to climate change. However, most analysts agree that it suffered from a weak, myopic design, lacked enforcement mechanisms, and ignored the contributions of other potent GHGs such as nitrous oxide. The Paris Agreement of 2015 fared no better, as it lacked specificity and once again served only as a diplomatic tea-party where climate change policies were offered as mere suggestions. I don’t entirely blame the countries involved for the structural weaknesses of both treaties. Though climate change is a uniquely global phenomenon, it is incredibly hard to fathom a global agreement that could hold countries accountable. There is no global authority that can regularly monitor the progress of countries and impose penalties on those that fail to meet their targets; not only would this be incredibly impractical, it would disproportionately burden developing countries. While it’s true that developing countries don’t necessarily contribute to climate change to the same extent as most developed countries, they neither have the infrastructure nor technologies to make the transition towards climate friendly practices easy, therefore making them susceptible to greater sanctions (although many developing countries, such as India, have proven how climate policy and economic growth are not at odds). What the unsurprising failures of international climate change agreements should tell us is that climate change is highly unlikely to be resolved at the global level. Climate change policies must be administered at the regional level, by countries, and in the case of the United States, by states and geographical regions.
The United States is in a tough spot when it comes to climate change. Large segments of the bureaucracy are devoted to developing and funding cutting edge technologies that have the potential to provide scalable sources of clean, renewable energy. Yet, conservative politicians and their Big Oil funders, such as Chevron and ExxonMobil, impede even the most basic climate-related policies from being signed into law. Unlike more unified countries like China, which has both committed to lower CO2e emissions per unit of GDP by 60–65% of 2005 levels by 2030 and rolled out innovative projects such as a new financial system that funds and provides loans to ‘green’ projects, the United States is still trying to make up its mind as to whether climate change is even something Americans should be worrying about. I want to reiterate that agencies such as the Department of Energy and the Environmental Protection Agency are working as hard as ever to craft new methods to combat climate change, despite President Trump’s decision to gut these agencies of some of their most skilled bureaucrats — comprehensively detailed in Michael Lewis’s The Fifth Risk — and replace them with technical neophytes. The issue here is that without the passage of defined federal policies through Congress, the implementation of these federally-funded technologies will be unable to produce the desired emission reductions required to stay within the IPCC global average temperature limit of 1.5°C.
Because the federal government is unlikely to produce any sweeping legislative changes anytime soon, even if Democratic frontrunner Joe Biden is elected in the fall, policies must be implemented at the state level. The two most pervasive economic solutions to curtailing GHG emissions are the emissions trading scheme (ETS, also known as cap-and-trade) and the carbon tax.
ETSs work by imposing a ‘cap’ on total emissions over a regulated region and requiring firms to hold and trade permits that grant them the right to emit a ton of CO2. The cap is steadily reduced over time to impose increasing pressure on firms to adapt. These policies are appealing in that they provide greater certainty as to emission reductions by imposing strict, declining caps on gross emissions and allowing market forces to set a price on carbon. Even as ETSs are subject to a host of potential issues such as weak market activity and heavy costs of compliance, both the California Cap-and-Trade program and the Regional Greenhouse Gas Initiative (RGGI) on the East Coast have shown that carbon markets can be a large piece in addressing the climate puzzle. More than just demanding firms to emit less, these markets create direct incentives for heavy emitters to adopt the most cost-effective, climate-friendly solutions. Furthermore, many of the noted flaws of these markets can be improved upon through robust policy design and frequent analysis and revision. For instance, the problem of low market activity can be supplemented by a dynamic price floor on carbon which is written into legislation.
Carbon taxes attempt to force firms to internalize the social costs of emissions, just as ETSs but do so in broader strokes by levying a uniform tax on GHG emissions. Unlike ETSs, they guarantee far less certainty when it comes to quantifying emission reductions as they lack any hard upper limit. Yet carbon taxes are preferred to ETS since they require far less information from a central perspective, making them much less costly to administer. Furthermore, they give firms greater flexibility in how they approach emission management. Around 40 countries and more than 20 cities and provinces have rolled out carbon taxes in some form. As an example, British Columbia has shown how effective a carbon tax can be and how even in the midst of politically ideological conflict, climate change can still be an issue of practical concern. Among its highlights, British Columbia’s carbon tax has been directly associated with reduced gasoline consumption and reduced overall emissions without compromising economic stability in the form of jobs and income.
Though these two policy instruments are often pitted up against one another, it’s actually possible to use both in tandem. A hybrid policy that blends features of a carbon tax and of an ETS has the potential to reduce GHG emissions more effectively by being applied analytically to the industries it’s best suited for. For instance, a carbon tax on oil extraction may be widely unpopular, though I’d argue fairly inconsequential on the actual gasoline prices which are to a greater extent determined by global oil prices, due to the substantial over-reliance on oil in transportation fuels. To appease naysayers, an ETS could be implemented for oil extraction, while a carbon tax could be placed upon large investor-owned utilities which supply a more elastic service than oil firms that supply transportation fuels.
The broader point here is that states must take the lead on climate policy and do so in a way that promotes equity, economic growth, and real GHG emission reductions, as opposed to sleight-of-hand accounting trickery. Furthermore, preventing ‘leakage’, or the movement of economic activity away from regulated regions, should be at the core of such policies.
I want to briefly mention the issue of distributional justice. Conservatives often harp that climate change policies would be deleterious to consumer prices, incomes, and jobs. At face value, these concerns, though often parroted without much thought on the right, are valid. Heavy industrial polluters often operate in areas in which low-income residents reside. Low-income families are likely to bear the brunt of sudden price increases with more difficulty than middle and upper class families. Displaced workers from traditional fossil fuel industries will be frustrated and depressed to be put out of an occupation that’s become synonymous with identity. So yes, these issues are worthy of concern. However, policymakers who hide behind these claims often ignore that it is entirely possible to craft effective and comprehensive solutions that account for these externalities.
First and foremost, it’s important for climate-minded legislators to dispel low-hanging, populist claims and more closely examine the logical implications of climate change policies as well as suggest alternative measures that redress these concerns. Just as an example, a frequent argument against climate change policy is that millions of jobs in coal mining would be destroyed as a result. Fair, though this argument also fails to consider the millions of jobs that have been and are still waiting to be created in the renewable energy sector. Besides investing in job retraining programs, setting up pension plans for these displaced workers is a way we can soften the short-term blow of transitioning away from fossil fuels. What I hope this example shows is that progressive politicians must intentionally deconstruct and elaborate upon arguments that under further inspection reveal themselves to be thinly veiled pleas to leave markets free and untouched.
Equitable policy measures include the reinvestment of tax revenues into: clean-energy projects for low-income and minority communities, tax neutralization for low-income populations who may have trouble substituting away from carbon intensive products, and social safety nets for workers displaced from fossil fuel industries.
To be clear, none of this is easy. I’ve conveniently glossed over some of the most pressing challenges when it comes to implementing these policies — deep-vested interests, diverse regional needs and capabilities, quantification of the true social cost of carbon, modifying the assumptions of current emission projection models, and the vast technicalities that must be incorporated into policy and climate modeling. Some of the points I want to emphasize, however, are that climate change policies must be a focal point of local state policy in the United States, and of national policy outside of the United States. We must be deliberate in designing these programs but at the same time cannot wait for perfection. Policymakers must be economically minded in drafting policies that don’t stifle innovation, but rather create rich incentives for the research, development, and adoption of new technologies. This means eliminating or countering harmful oil and gas subsidies and redirecting regional funds towards long-term investments in energy and equitable outcomes. And while states and countries should continue to pursue interregional and global cooperation and policy integration, they shouldn’t wait for external bodies to forge climate protocol. A second point I want to make is that citizens and policymakers must never become complacent, even with reported reductions in emissions. Proof that policies and technologies are working in our favor is no excuse for relaxing pressures on consumers and firms alike for the simple reason that reduced efforts to maintain incentive and regulatory structures can easily backfire by sending economic signals falsely indicating that GHG reductions are no longer a priority. The third point I want to make is that climate policies must promote a multifaceted approach to addressing climate change. This means creating a rich, diverse portfolio that includes funding towards a swath of effective technologies and efforts to reduce emissions across the board in industries from livestock management to cement production. In other words, even as we prioritize the decarbonization of those industries that pose greater risks such as oil extraction and electricity production, no one is exempt from their responsibilities to reduce GHG emissions.
Technologies — hydrogen fuels, carbon capture and sequestration, and livestock methane capture, just to name a few — are quickly adapting to the needs of a more environmentally-minded generation . Yet technological advances must be complemented by the existence of strong regulatory policy and fresh incentives that excite markets to quickly and painlessly venture into a decarbonized world.
