April 24, 2017
Let’s Make a Deal: The Path Forward on Energy & Climate Policy
EPIC co-hosted a panel on the future of U.S. climate policies, featuring former Senior Advisor to President Obama on climate and energy Brian Deese, former Governor of Michigan Jennifer Granholm, former EPA Assistant Administrator Jeffrey Holmstead, and EPIC’s Michael Greenstone.
The battle over the future of President Obama’s climate policies is heating up. President Trump’s recent executive orders have targeted a wide array of Obama policies including regulation of carbon emissions and coal leasing on federal lands. On the international front, the future is still unknown as the Trump administration is reportedly still discussing the potential of withdrawing from the Paris Climate Agreement of 2015, however no action has been taken to date.
In light of the recent actions, what previous policies will remain and what will change? What role will energy markets play in determining policy? And, what is a politically viable U.S. climate policy in the long-term?
On April 18, EPIC, along with the Institute of Politics and the Program on the Global Environment hosted a panel discussion that took up these questions and more. The panel, moderated by UChicago Professor Sabina Shaikh, featured former Senior Advisor to President Obama on climate and energy Brian Deese, former Governor of Michigan and IOP Fellow Jennifer Granholm; former EPA Assistant Administrator for the Office of Air and Radiation under President Bush, Jeffrey Holmstead, and EPIC’s Director Michael Greenstone.
The Second-Best Approach
The conversation began with a comparison of the current landscape of climate and energy policy under President Donald Trump to the approach of the former administration.
Deese explained that the Obama administration knew the best climate policy would be a carbon price, but that instituting one would be politically unfeasible. As such, the administration pursued a second-best approach that relied on regulatory tools to encourage lower emissions sector by sector. For the power sector, that consisted of the Clean Power Plan, which put limits on emissions from existing plants. Additionally, fuel economy standards, efficiency standards, and rules governing fracking and methane emissions targeted the transportation, built environment and oil and gas industries, respectively.
“Our strategy was to use the regulatory tools that were in place to encourage emission reductions across the economy, with the understanding that we didn’t have the tools in our deck to do it the simple and easy way,” Deese explained.
As head of the EPA Office of Air and Radiation during the passage of the 1990 amendments of the Clean Air Act, Holmstead argued that a legislative approach is necessary, partly because administrative actions can easily be undone from administration to administration and this prevents industry from having the certainty they are looking for.
“To have an effective climate change policy, we’re going to need to have legislation,” said Holmstead.
Deese countered Holmstead’s argument, noting that there was detailed legislation that instituted a price on carbon early on in the administration, and that the White House was highly engaged in trying to move it forward. The issue, he said, was “bare knuckle politics where you had one party refusing to engage in the kind of back and forth that would have been needed.” With this challenge continuing today, Deese said that we must be clearheaded about the barrier to pursuing a legislative approach.
“It [climate change] is not a safe space for Republicans. That’s going to need to change if we want a legislative solution to climate change.” Deese said. But, he emphasized, “I’m less interested in whether you get to pricing carbon through regulation or legislation…at the end of the day what you care about is whether you have an efficient and effective carbon price in as much of the global economy as possible.”
Accounting for Climate Impacts
Meanwhile, as the Trump administration rolls back many of the regulations put into place by President Obama, Holmstead noted that legally they will need to have some way of evaluating climate impacts within regulations. In a recent executive order, Trump eliminated the tool currently used to evaluate these impacts, known as the Social Cost of Carbon.
Greenstone, who played a key role in estimating the Social Cost of Carbon metric in his role as chief economist for President Obama’s Council of Economic Advisors, emphasized the importance of the measurement, which puts a price on the damages associated with the release of carbon into the atmosphere.
Deese said that while we can have debates over defining the Social Cost of Carbon, we can’t allow the argument that the politics is too difficult and the issues are too big and challenging to solve get in the way of actually solving them. The risks are just too great, he said.
President Trump has also said he wants to take steps to remove the U.S. from the international Paris Agreement, though his decision and exact course of action is still unclear.
But, Deese said that what people don’t realize is that the Paris Agreement is actually conservative in that it doesn’t hold the U.S. or any country accountable to meeting certain targets. Instead, it gives countries the responsibility of creating their own plan and the mandatory levers have to do with ensuring that what countries like China are doing domestically matches what they said they would do under the agreement.
“So the great irony of Paris is that stepping away from that process doesn’t free the U.S. from the shackles of a global agreement because the agreement itself didn’t impose a hard domestic requirement on the United States,” Deese said. “Instead, it turns over the keys of a process that could actually hold other country’s accountable. And as a result, I think one of the implications if that were to happen is that it would be easier for China to claim the global mantel on this issue without constructive pressure to actually match its policies with that rhetoric.”
The Role of States
With the absence of climate action on the federal level, the questions remains: Will the states step up?
Granholm explained that for states to be motivated to take aggressive actions the emphasis must be placed on job creation. And, in the energy space, there is enormous potential given renewables’ trajectory of growth and the huge global demand.
“We should be strategizing as a nation about what our economic development strategy is in this clean energy space or we are going to lose out on creating millions and millions of jobs,” Granholm said.
In the past, such as in the cases of “Race to the Top” in the education sector and fuel economy standards, the federal government provided incentives for states to compete for federal money. Granholm believes that if the government doesn’t want to provide this type of competition, there are other actors who could band together to step in such as Michael Bloomberg, Bill Gates, or foundations. Deese added that mayors could also band together, as some have begun to do.
The Role of Markets
Greenstone noted that states could also be innovators by setting up carbon markets and linking them, as California and the East Coast have done. But, how far will markets take us without a national carbon price?
Holmstead believes market forces have already driven a lot of progress in the United States, such as through cheap natural gas and a reduction in the cost of renewables.
Internationally, “the problem we have today is that the things that people want and feel they are entitled to are most easily given to them with fossil fuels,” Holmstead said. “Ultimately, we need to be promoting the types of technology breakthroughs that will solve the problem because I don’t think we’re going to solve it through regulatory means.”
There again, Deese emphasized that a price on carbon is still needed.
“It feels to me that market forces could go an extraordinary way toward solving this problem if markets appropriately accounted for the costs associated with fossil fuels and it is a problem that most countries around the world don’t account for that currently,” Deese said. “But there’s an opportunity to solve that in ways that are efficient and effective and don’t rely on ineffective regulatory solutions and that’s why I think the characterization of this problem as markets versus regulation I think misses the core point, which I think we could harness the power of the market to drive solutions if we appropriately priced carbon.”
To do that in the U.S., Deese said we needed to solve the political problem mentioned earlier. But, he ended the conversation with a hint of optimism.
“We all have to take some optimism over the fact that over the last decade you’ve seen an extraordinary sea change over the political commitment and the economic penetration of cleaner energy and doing business,” Deese said, referring to the issue on a global context. “We don’t have this partisan political debate anywhere else in the world. That gives me some optimism that this debate’s days are numbered in the United States too.”