America 2021: What Next on Climate?
The effort to address climate change stumbled with the failure to pass cap-and-trade. What should happen now? Five experts discuss the future of U.S. climate and energy policy.
Roy: Here’s an obscure one. Under George Herbert Walker Bush, Bill Reilly, the administrator of the EPA, did an exercise called “Unfinished Business.” What it did was look across the range of programs at EPA and see if we were spending enough on them. It’s actually a very thoughtful report, but most Democrats and environmental groups attacked it because it said we were overinvesting in Superfund, the government’s cleanup program for hazardous waste sites, and underinvesting in climate change. This isn’t an attack on Superfund, but I wish we had taken the opportunity presented to us by a Republican Administration to deal with this issue. I think it’s unfortunate that the environmental movement, unconsciously sometimes, becomes overly partisan, and doesn’t accept the efforts to lead by some very sincere Republicans.
Aldy: Michael, you mentioned 1981, 1991, and 2001. There is a common theme across all three of those years: We had very high oil prices in 1981, in 1991 we had just fought a war after Iraq had invaded Kuwait, and in 2001 we had 9/11, after which people started to associate the potential risk of financing terrorism with our oil consumption. We’ve had all these opportunities to have a serious debate about the tough choices we have to make when it comes to energy, and we haven’t succeeded in doing that with the public.
We could even look more recently: Oil went up to $147 per barrel and we didn’t fully take advantage of that in 2008. We had a massive oil spill last year that seems to have already moved off of everybody’s radar. When it comes to nuclear we may have an opportunity in the context of Japan to talk about it. But it would be nice if we could actually have a very serious conversation about the opportunities but also the compromises we have to make as a nation when it comes to energy. We can’t have it all and have it on the cheap, which is too often what comes out of the political dialogue.
Shultz: You know what I wish we had done differently on climate change? I wish those campaign finance people had cut those deals in Congress!
Walsh: A progressive journal might not be the best place to ask this, but what happened to the Republican Party? Manik very astutely pointed out that most of our major environmental legislation has come with a Republican in charge. It seems that the party has almost completely decided to turn its back on climate science.
Roy: The dynamic has been that a Republican president runs into trouble on something. With Nixon it was on the Vietnam War, so Nixon decided to lead on the environment. Reagan was actually in trouble on the environment. Remember Anne Gorsuch, Reagan’s first EPA administrator, and James Watt, Reagan’s first secretary of the interior? They were openly hostile to environmental protection. Moderate Republicans and George H.W. Bush then tried to distance themselves from Reagan’s anti-environmental reputation, and as a result we got some very tough reauthorizations of our hazardous waste management and cleanup laws, and a toxic chemical right-to-know law, all enacted under Reagan, and a tough reauthorization of the Clean Air Act under the first George Bush.
Under the second George Bush, before 9/11, you were actually seeing his poll numbers go down, and we were winning climate votes on the floor of both houses. We had John McCain, Bush’s primary opponent, and Joe Lieberman, who had been the Democratic vice presidential candidate, saying they’re going to do a cap-and-trade bill, right on the eve of 9/11. Then 9/11 came along and Bush managed to make himself more or less invincible until the day after the 2004 election when things started going sour for him again.
It wasn’t necessarily that presidents said, “I love the environment.” It’s that having them there and creating the impression, sometimes deserved, sometimes not, that they were anti-environment gave an imperative and space to politicians like Rhode Island’s John Chafee, Vermont’s Robert Stafford, and McCain—who really was a tremendous leader on climate change.
Walsh: Of course, they were all moderate Republicans. Do you still find them out there?
Roy: They’re in the closet but they’re still there. It’s interesting to look at Representative Fred Upton. Before he decided to run for chairman of the House Energy and Commerce Committee, he was actually a very thoughtful moderate. But now the Republican members are more worried about their primaries than they are their general elections.
Elbert Ventura: Now that you’ve brought it back to the current political moment, I’m curious to hear your thoughts on the President’s proposal for a clean energy standard (CES), which calls for 80 percent of the nation’s electricity to come from clean energy sources—renewables like wind and solar, but also other sources like nuclear, natural gas, and “clean coal”—by 2035.
Arroyo: The moniker of “clean energy standard,” as opposed to renewable energy standard, allows for nuclear and coal with capture and sequestration (CCS), or “clean coal.” Nuclear just became a lot harder, given what’s happening in Japan, and should have been hard anyway in some respects, with regard to its waste-disposal issues. Having said that, nuclear provides 20 percent of U.S. electricity, and we’ve got to figure out what to do with the ones that we have, and whether or not the Japan disaster gets worse will have implications for whether that number can grow over time.
Natural gas has its own issues, obviously. Hydraulic fracking, the process increasingly used to extract it, is contaminating drinking water, and it’s starting to scare people. The best thing that the industry can do is get its own house in order, step up, be more transparent, and ask for some sensible regulation, because otherwise we might really lose the ability to use natural gas as an important transition fuel for a low-carbon future.
Shultz: I would say one of the key factors in a CES is: Does it actually increase the use of renewable energy? Or is it a way to more or less codify what we have now?
In terms of nuclear power, industry needs to get its house in order too, even to stay where we are at 20 percent of our energy mix. As for natural gas, in addition to some of the drinking water issues, there are upstream water issues. I agree it’s absolutely critical as a transition energy source. I guess the question is: Does it really need the government incentives? At some level, natural gas is doing pretty well and will probably continue to do pretty well in the near future, so it probably doesn’t need the incentives it would get in a CES.
Roy: Our early analysis is that Obama’s target is actually pretty ambitious, and that you can’t hit that target without pretty significant change from business as usual. Going back to what we were saying about narrative, Senator Richard Lugar had this really interesting statement the week before the State of the Union, in which he said of President Obama’s call for emissions reductions of 17 percent below 2005 levels by 2020, “It is hard to imagine a goal that is less inspiring or less tangible.” Lugar was saying that we need to think about framing the issue in positive ways, not negative ways—like promoting doubling our use of clean energy in 25 years, not just saying we need to cut back on our emissions. I think maybe that works with people.
Such an approach embraces in a very serious way some Republican priorities. Nuclear power is in every Republican candidate’s DNA. Now, we’ll see if this tragedy in Japan has affected that, but it’s a genuine olive branch by the Administration to support nuclear. Done properly, it can have real emission benefits.
Aldy: There are two things that a CES does that change the dynamic. One, we’re talking about a policy that can be technology-neutral. Whoever can compete, whether it’s coal with CCS or renewable, go at it. That plays to some who don’t like government picking winners with our very complicated tax code or various state policies. As a corollary to that, one thing that’s important is I don’t think long term—and by long term I mean more than two or three years in the future—we’re going to be able to provide tax credits for renewables like we do now. I just think fiscally it’s going to be very tough. That’s why they’ve had a lot of interest in something on the demand side to serve as a replacement for what we do now on the supply side through tax credits. The other thing that’s important about it is allowing natural gas to be a factor. Two of the biggest players in gas in America right now are Exxon Mobil and Chevron. They were clearly opposed to cap-and-trade legislation. By bringing in gas, you’re bringing in companies that are traditionally associated with Republicans. If they actually see that this is a potential opportunity to bring more of their gas to market, they may find this to be an appealing alternative, and it helps to change the political dynamic going forward.
There’s a way you could have a responsible regulatory framework that allows us to develop these resources. I would hope we wouldn’t make it so burdensome that we lose this opportunity. When we look at the risks associated with burning coal, whether it’s premature mortality or climate impacts or how we dispose of the coal ash, shale gas has a much better environmental impact. I’d like us to keep in mind the big picture when we think through how to develop these resources, because in the next decade, we’re not going to make the breakthroughs that can dramatically ramp up renewables. And even if we weren’t worried about safety on nuclear, we’re just not going to build many new plants in the next decade. When we start thinking about what we can really do to change our energy mix, gas looks like the only one where you have a lot of opportunity with the domestic resources, and, for that matter, the existing generating capacity. I’m more bullish on what this policy could do in terms of eliciting support and then driving demand for gas.
Shultz: Just one point on that. When you talk to the renewable industry, they want a renewable electricity standard that’s going to increase their role and supply a market, but the single thing that they need is tax incentives or some other financing mechanism to supply the needed upfront capital. And even with a renewable electricity standard, if they don’t have tax incentives, it’s really hard for them to continue to make it.
Laskey: We’ve got to find other ways of creating demand, because the subsidies for renewables aren’t going to exist. If we can go far enough along on the cost curve, they may not need it.
Shultz: I don’t want to be snarky or anything, but I’m fascinated that we can continue oil subsidies, which have been so much more costly.
Roy: There’s no disagreement in this room.
Laskey: They shouldn’t exist for either.
Aldy: The problem is that if we got rid of all our oil, coal, and gas subsidies that we appropriate every year, it wouldn’t pay for a one-year extension of the wind-production tax credit. We actually spend more dollars out of the federal budget now on renewable energy than we do on fossil fuels.
Laskey: On the CES, for a moment, it’s a renewable portfolio standard repackaged with a more positive spin, and gas is allowed in. I’d like to think that it will pass, though I’m not optimistic that it will.
Roy: Yeah, I don’t think it would pass in this Congress.
Laskey: The thing is we are still picking winners by not considering demand-side solutions to the problem and only considering supply-side solutions. We’re only considering electricity supply, and we’re considering a CES, which does not include energy efficiency as a core resource. It’s like trying to solve the budget problem by only looking at cutting spending or only looking at raising taxes. We need an energy policy that addresses both supply and demand.
Walsh: To get back to the 2021 line very briefly: Are you optimistic that in 2021 we’ll be in a better place in energy and climate policy than we are now?
Roy: Yes, but we won’t be anywhere near where we need to be.
Aldy: I am actually optimistic that things can be better. There’s clearly enough appetite in the general public, and on both sides of the political aisle, to make progress. The question we have to grapple with is: How can we actually find a way to unify interests enough to make it happen? To the extent that we failed to do so in legislation, or in the federal government, I’m actually optimistic that a lot of the states will continue to move forward. It’s fascinating that we were just talking about a CES, and we’re talking about support for renewables—and there are 30 states out there that have renewable standards. Blue states, red states: We see that there is clearly an appetite for trying to move forward on clean energy. If Washington’s not going to lead, a lot of the states will continue to push in that direction.
Arroyo: On that point, since I spend most of my time working with the states, California is ramping up its renewable standard to 33 percent by 2020. But the big caveat is, even in this atmosphere in which there isn’t a federal alternative, there are pending proposals that would pre-empt state activity, and I do worry that we might get a moderate federal clean energy standard that might preempt states from going further. Typically, the federal standards are floors that the states can go beyond. But if you look at some of the legislation that’s pending right now, it really will undercut some of the state leadership.
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