President Obama has already provided climate change and energy issues a prominent place in his second term rhetoric, giving climate change and the environment the most space of all issues in his inaugural address. He also vowed in December to make climate change and energy one of his top three priorities in his second term.
But we’ve been here before. It’s a little known fact – already lost in the sands of time for most people – that Obama’s first State of the Union speech stated: “It begins with energy.” Energy was in fact the most prominent issue in many of his talks and other communications for the first part of his second term. That is, until it became clear that dramatically lower energy prices, from the crash of 2008 until the middle of 2009, had weakened public support for tackling the sources of record high energy prices, and for tackling climate change issues in a struggling economy.
Energy and climate change issues slowly slid away from Obama rhetorically, even while he enacted some fairly far-reaching reforms in his first term that will do much to mitigate climate change and enhance energy independence. A few of Obama’s signature achievements on these issues in his first term:
What about Obama’s second act? How should he proceed on his recent promises to do something real about the threat of climate change? We are approaching $100 a barrel again for oil. 2012 was officially the most expensive year ever for gasoline in the US, as well as the hottest year on record for the contiguous US. It is highly likely, with the US and global economies recovering, that oil and gasoline prices will shoot far higher by the summer. The time is now for Obama to take substantial actions on these very important issues.
Here are my recommendations, discussed further below:
A National Carbon Tax
Economists of all stripes agree that a modest carbon tax (say, 10-15 cents/gallon of gasoline) would be a highly effective way to reduce emissions. Bernie Sanders recently proposed a carbon fee proposal in the Senate. Tom Friedman recently proposed that a carbon tax could be a highly effective “two-fer” – it could both reduce emissions and revenue could be used to offset the national deficit, an eminently sensible proposition. I’ve argued previously that the national focus on cap and trade is misplaced and a well-designed carbon tax would be much better.
Unfortunately, the White House has recently expressed opposition to a carbon tax. Let’s hope that changes.
Phase in Regulation of Greenhouse Gases from Existing Power Plants
Obama’s EPA hasn’t officially announced its intent to regulate GHGs from existing power plants – but it is legally obligated to eventually do so under the clear language of the Clean Air Act. This will surely be the mother of all regulatory battles if and when it does happen. It seems that any regulation of existing facilities will have to be phased in slowly, and that’s probably for the best since it may entail significant economic dis-location. In a struggling economy (and in any economy, for that matter), we’ve got to be sensitive to job issues as well as environmental and broader economic issues.
The modest carbon tax discussed above could, and probably should, include existing power plants, and it could be introduced at a very modest level and slowly increased over time. This doesn’t seem to be on EPA’s or Congress’ radar at this time, but public pressure can always help to change minds.
A National RES
I am not a big fan of coercive government measures. I’d prefer that markets did their job and provided for the common good in an appropriate time frame. But climate change is a classic example of how markets can fail to incorporate externalities – in this case the harm to our environment and to us from increased greenhouse gas emissions, or the risk of oil price spikes – and it is for this reason that I do support strong national and state measures when it comes to climate change and energy.
A national Renewable Energy Standard (RES) could provide a floor for states to achieve a certain level of renewable energy by a certain date. More than half of all states already have an RES in place, but many of the dirtiest polluting states don’t have an RES. An RES doesn’t say “achieve higher renewables at any cost.” Rather, every RES I’ve examined has a cost-effectiveness requirement or an economic safety valve of some sort. A national RES would surely include a cost-effectiveness requirement. And the good news is that many renewables are now cost-effective and are becoming increasingly cheaper over time.
PURPA was passed by Congress in 1978 under Pres. Carter’s direction. It was the first law that allowed private energy developers to sell power to utilities for a set fee – a type of “feed-in tariff.” PURPA was implemented in different ways by each state, with varying success. In California, PURPA was responsible for an “embarrassment of riches” in terms of new wind, biomass and solar projects, made competitive by the record high oil and gas prices during the 1980s. The majority of our renewables in California are still PURPA projects, though this is changing fast.
Unfortunately, PURPA was largely gutted in recent years and it’s faded as an effective tool for promoting renewables for a variety of reasons. It’s time for Congress to modify PURPA again and to require states to implement PURPA in a way that is effective in promoting renewables. In other words, it’s time for a real national “feed-in tariff” (also described in recent years as CLEAN programs, or Clean Energy Accessible Now).
RES and feed-in tariff policies are complementary in that an RES sets the goal and a feed-in tariff is a tool for reaching the goal.
Require Federal Agencies to Reach 50 Percent Electric Vehicles by 2020
On the transportation side of the energy equation, we face a much more difficult challenge. The electricity sector is already undergoing impressive transformation – just not fast enough, and that’s why I recommend the above measures. The transportation sector is a much tougher nut to crack because there are few truly viable alternatives to oil today. Electric vehicles, along with price-induced conservation (which will continue to happen naturally) and more efficient vehicles, present the best solutions for the transportation sector.
We’ve seen an impressive first two years of EV sales in the US and abroad – but it’s just a prelude to much bigger things. To accelerate this transition to EVs becoming mainstream, Obama should require that all federal agency fleets have 50% EVs by 2020. This would be a major spur to the market in the next few years and would help get the EV market to scale, allowing all consumers to realize significant savings in terms of lower EV costs.
It will be a tough slog to mitigate climate change and energy price issues in the coming years, but the recommendations above will be a good start.
Lead image: Alan Freed via Shutterstock
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