President Obama followed up in June of this year on the promise of his second inaugural address by announcing the President’s Climate Action Plan. Obama’s June address received much well-deserved attention, particularly since it was the first major presidential speech devoted entirely to the issue of climate change. Obama is to be applauded for finally using his bully pulpit to bring attention to this crucial issue in a major way.
That said, it’s important to consider what Obama has proposed and to assess whether these measures will be effective, and whether they are up to the magnitude of the problems we face.
I’ve noticed over my years following energy issues that there is often an unholy congruence between regulated industries and politicians when it comes to setting goals. Goals, such as mandates for renewable energy or a specified reduction in greenhouse gas emissions, often turn out on close inspection to be set at a level at or below where the market is headed even without such goals. In such cases, the goals become not only ineffective but in some cases are actually counter-productive due to the costs incurred in creating and enforcing them.
A couple of examples will help explain what I’m getting at. Obama set the Corporate Average Fuel Economy (CAFÉ) standards for 2012-2016 vehicle models at 34.1 mpg fleet-wide for each manufacturer (up from 27.6 mpg). However, the EPA’s own economic analysis of this goal concluded that the market was already set to achieve this goal without any government intervention.
Similarly, Obama’s EPA has previously proposed requiring that all new thermal power plants built in the US be at least as efficient as an advanced natural gas power plant. (Obama’s Climate Action Plan states: “To build on this progress, the Obama Administration is putting in place tough new rules to cut carbon pollution.”)
However, the EPA’s own economic analysis for regulating greenhouse gas emissions from new power plants found that this goal will have no effect on the market because the market is already expected to avoid new coal power plants, primarily due to the low price of natural gas and other air pollution regulations already in place. The EPA’s analysis found that “energy market data and projections support the conclusion that, even in the absence of this rule, existing and anticipated economic conditions in the marketplace will lead electricity generators to choose technologies that meet the proposed standards.”
We can still support this proposed rule for new thermal power plants, as I do, because it will at least act as a backstop in case economics or other factors change in a way that again favors coal, as has been the case in the past. That said, it’s clear that the goal should have been set in a way that it is likely to have an actual impact.
Here’s how the “unholy congruence” works: The regulated industry generally works hard against regulation, or at least works to dilute regulations. It is in some ways ideal for regulated industries to appear to be subject to onerous regulations when in fact the regulations aren’t onerous at all. That way, they can play the victim but not actually have to do anything, or not very much, to comply with the “onerous” regulations.
Similarly, the politicians at issue, and the agencies themselves, can claim to be “doing something” about the issue at hand, even if the regulations aren’t actually going to do anything. Rather than push back against industry pressure, politicians and their agencies all too often concede key points. The end result is too often a milquetoast goal, or a goal that the market is already going to achieve.
Turning to Obama’s recent package of climate change solutions, let’s look at which goals are likely to be “real” goals, rather than just “doing something” goals. Obama’s June 24 speech and Climate Action Plan covered the following major goals and programs for reducing emissions (there are a number of other small goals and programs, but these are the key ones):
- Reducing U.S. GHG emissions “around” 17 percent below 2005 levels by 2020, but only if all other major economies agreed to reduce their emissions also. This goal was originally announced by Obama in 2009.
- Create standards for GHG emissions from new and existing power plants
- Doubling renewable energy production by 2020
I discussed above the fact that EPA’s own economic analysis of the proposed regulations for new power plants found that the regulations wouldn’t actually have any impact on the market. The new Climate Action Plan doesn’t suggest a numerical goal for reducing emissions on existing power plants, so we can’t make any judgment about the degree to which this announced goal will become a “just doing something” goal. We’ll have to wait and see what the EPA proposes in terms of cutting emissions from existing plants. This is an extremely important part of mitigating climate change because emissions from coal power plants are now the single biggest source of emissions in the U.S.
When it comes to Obama’s “ambitious” new goal of doubling renewable energy production by 2020, the conclusion is more clear: this is very likely just a “doing something” goal because the market is on track to far more than double renewable energy production by 2020, based on existing market forces and existing government policies. Obama certainly deserves major credit for the recent expansion in renewables. Obama’s 2009 ARRA bill directed about $80 billion toward energy efficiency and renewable energy, and this money has had a large impact through tax credits and other programs.
However, Obama’s new goal of doubling renewable energy production by 2020 seems to miss the fact that wind and solar, by far the fastest-growing renewables, have been doubling in the U.S. every four years or so over the last decade, driven primarily by wind. Solar, though still small as a total, is growing far faster than wind and is likely to surpass wind in less than a decade. So if this recent rate of growth merely continues, we’re likely to see about two doublings by 2020 – not just one doubling, as Obama’s new goal suggests.
Figure 1. US growth in non-hydro renewables (source: EIA)
What about Obama’s over-arching goal of reducing emissions 17 percent below 2005 levels by 2020? The first thing to keep in mind is that this goal has a big caveat – it’s explicitly contingent upon “all other major economies” also agreeing to reduce their emissions. Obama’s recent announcements do suggest, however, that he and his agencies are willing to work on this goal even without other economies setting their own goals.
We can take a similar approach to the over-arching 17 percent goal as we have to the smaller goals above. Resources for the Future (RFF), a Washington-based think tank, issued a report in late 2012 that did just this, finding that the U.S. is already on track to largely meet this goal, based on existing or already-planned policies and market forces. The report concluded that we’re on track to achieve a 16.3 percent reduction by 2020.
Regulation under the Clean Air Act, which will include emissions reductions from new and existing power plants, accounts for the lion’s share of RFF’s projected reductions. As discussed above, these regulations have been underway at the EPA for some time now. Rules for new power plants are expected to be completed soon, but rules for existing power plants are still very early in the process and probably won’t be completed for at least another couple of years.
Figure 2. RFF projection of US GHG reductions by 2020.
It’s also important to note that recent EIA projections of U.S. GHGs have fallen every year since at least 2009. This trend may well continue as, for example, people are increasingly driving less (“peak driving” occurred in 2005, as did U.S. total GHG emissions) despite the economic recovery. If this “secular trend” continues, we’ll see U.S. emissions fall even further, without any additional government intervention.
Figure 3. US GHG emissions projections (source:EIA)
In sum, Obama certainly deserves credit for what he has already done, and what is already under way, when it comes to reducing GHG emissions. It is far less clear if what he announced in his Climate Action Plan deserved the attention it received. And some of his goals probably amount to “just do something” goals. Last, the biggest question of all – whether a 17 percent reduction by 2020 is sufficient to help avert major climate problems – will have to wait for a later article.
Lead image: Spirit of America via Shutterstock