October 18, 2018
U.S. Climate Policy at a Crossroads: A Conversation with Mary Nichols
EPIC Director Michael Greenstone sat down with Mary Nichols, chair of the California Air Resources Board, for a wide-ranging discussion on California's ambitious climate policies.
U.S. climate policy is in a state of significant uncertainty. Over the past year, federal policy has lurched backward through a series of regulatory rollbacks aimed at easing emissions limits on power plants, vehicles, and industry. Yet, in spite of this shift at the national level, policy in California—the world’s fifth largest economy—has grown more ambitious.
Over her 40 year career, California Air Resources Board Chair Mary Nichols has played a pivotal road in developing and implementing the state’s environmental and climate policy agenda. What have been the major successes and challenges for California’s climate policy? What lessons can California offer the nation and world? And how will the state move forward at a time of significant uncertainty at the federal level?
Nichols sat down with EPIC Director Michael Greenstone, the Milton Friedman Professor of Economics at the University of Chicago, to discuss these questions and more. The discussion, hosted by EPIC and the Chicago Council on Global Affairs, was moderated by Juliet Eilperin, senior national affairs correspondent for The Washington Post. It was part of a two-part series on the lessons national and global policymakers can glean from California’s climate policies.
Nichols entered the field in the 1970s on the heels of passage of the Clean Air Act, which set sweeping mandates to reduce air pollution across the United States. During her first stint at CARB, from 1979 to 1983, her work focused on addressing air pollution primarily in urban areas. Today she is tasked with tackling the broader, more complex and economy-wide issue of reducing greenhouse gas emissions, but while the scale of her mission has changed, the underlying problem has not.
“If you look at the problem of greenhouse gas emissions and the impacts that they are having around the globe, it’s integrally connected with the way we generate electricity and the way we move ourselves and our stuff around,” Nichols said in introductory remarks. “It’s all about energy and the way we use or misuse energy, but the impacts are on people in the communities in which they live. Dealing with greenhouse gases and global warming is the problem of dealing with urban air pollution blown up to a global level.”
How do they do it?
California uses an array of policies to meet its ambitious climate goals. The state’s cap-and-trade program now extends across all sectors of the economy. Its renewable portfolio standard was recently strengthened to target 100 percent clean electricity by 2045. And a series of technology standards now cover everything from electric vehicle sales to rooftop solar panels. These and other efforts aim to meet an overarching goal of reducing emissions to below 1990 levels by 2030.
While California is a leader in the field, however, it recognizes that there is no one-size-fits-all approach.
“We don’t advocate for everybody to do things the same way we did” because each state has its own resource mix, Nichols said. “The goal was to push particularly the Southern California utilities to phase out their dependence on coal and to add on a lot of renewables to the mix… this has been the result of a long-standing effort.”
For Greenstone, California’s ambition will serve the rest of the world well. He said California’s policies are “taking it up a couple of notches” to move from reducing emissions by about 1 percent a year to 3 percent per year, which will be harder and potentially more expensive.
“If the world is really going to do something about climate change, we can’t go from zero to 100 miles per hour — we need expertise,” he said. “I expect a lot of learning along the way, and we probably all owe some debt to California for being willing to do it. The first person to do something often has to do it in a costlier way than the next person. Ideally, the world learns from it.”
Electric vehicles, CAFE and the future of mobility
As Greenstone alluded to, more challenging emissions reductions lie ahead for California. The transportation sector accounts for 41 percent of the state’s emissions, the most of any sector—a trend that is also reflected at the national level.
California has both a mandate of 5 million electric vehicles (EVs) on the road by 2030 and incentives for consumers to buy them. In early October, Electrify America, an offshoot of Volkswagen, invested a record $200 million in expanding EV charging infrastructure in California. At the same time, a coalition of state officials, major automakers and power companies launched the non-profit Veloz, which aims to speed up EV adoption in the United States through a public awareness campaign.
But even with all that, there are only approximately 500,000 EVs on the road in California—“a drop in the bucket,” as Nichols put it, and the state’s transportation emissions continue to rise. The problem is two-fold, Nichols said: the relative high cost of EVs compared to internal combustion engine cars and the public’s perception that the costs are much higher than they actually are. Nichols estimated that at least half of people are not aware they could actually afford an EV today. She stressed that people need to see more EVs on the road to want them.
“There’s a tipping point in there somewhere, but we’re not quite there yet,” she said. “If you live in LA or San Francisco, you might see many different EVs. And you don’t see them advertised as much because even though the auto companies know that’s where their future is and are putting money where their mouth is, they still don’t make any money on them.”
The chief reason for the lack of profitably comes from the high cost of batteries and entry into the market, Nichols said. The point was echoed by Greenstone.
“Electric vehicles aren’t up to speed to solve the climate problem today, but it’s hard to imagine major progress on climate change without electric vehicle mass adoption,” Greenstone said. “We need policies that improve technologies that drive down costs. We owe a big thanks to California’s aggressive efforts, and not just in tech—also in some of the issues of cultural acceptance of electric cars, and charging infrastructure.”
California is also at the center of a battle over federal fuel economy standards. The Trump administration has proposed rolling back Obama-era emissions standards that the federal government designed in concert with California, which, under the Clean Air Act, has a waiver to set stricter standards than the federal government.
The Trump administration has threatened to revoke that waiver, setting the stage for a protracted legal battle that could splinter the nation’s auto market in two. Thirteen other states and the District of Columbia follow California’s standards.
“It’s not as if California is trying to force people into small cars or get into cars they don’t want to buy,” Nichols said. “We’re about having a diversity of technology but being as efficient as possible. We’re still fighting that fight. Based on what I’ve seen, we’re on the side of where most of the public is.”
Greenstone said the potential legal battle between the federal government and California a potential blessing in disguise because it represents an opportunity to set better policy. Fuel economy standards, a bedrock policy since the 1970s, are an inefficient and indirect tool for reducing emissions. Current standards, for example, set more lenient requirements for light trucks and SUVs than cars, undermining the policy’s primary goal. More importantly, they regulate efficiency rather than emissions, leaving unrealized emissions savings on the table.
“I would propose that while everyone’s talking about it, why not make it an opportunity to sweep away differential treatment of trucks and cars, in favor of a policy that regulates expected carbon emissions directly.” Greenstone said. “It’s very rare to re-visit policies that have been in place for a long time.”
Along with EPIC Executive Director Sam Ori and Harvard’s Cass Sunstein, Greenstone has advocated for that type of policy.
Nichols said she agreed that regulating emissions would be more effective than regulating fuel economy.
“CAFE came in at a time when we were concerned about limiting oil imports and being less dependent on foreign oil,” Nichols said. “It was not about reducing emissions. Focusing on the thing that matters—burning less emissions—would be a better goal.”
Eilperin asked Nichols and Greenstone what they see is that biggest disruptors in mobility and digital technology as it relates to energy and greenhouse gas emissions goals.
For Greenstone, it all comes back to batteries.
“The bright green future in the power sector and cars runs through advances in batteries,” he said. “I don’t think we can spend enough in trying to sort out what that looks like.”
Nichols was asked what the next electrification wave would be after transportation and if utilities are ready for it. She cited electrifying appliances like water heaters (replacing natural gas) as the next evolution, but added that technology – for all its promise and importance – might not be the biggest disruptor ahead.
“It’s as much as in attitudes that younger people don’t want to live in places where they have to drive at all,” Nichols said. “Everyone I know who has kids in their 20s and 30s say they want to live in places where they don’t have to have a car. They’re choosing another way to live…If Lyft and Uber are zero-emissions vehicles, then we can see great improvement in emissions.”