Climate Policy: From Anyway to Because
August 7, 2017
When I speak in public about energy, I often ask the audience three questions. First, I ask, “How many of you are climate deniers?” I usually get only a few hands, even in Houston. Next, I ask, “How many of you are climate skeptics?” I’m not quite sure where denial ends and skepticism begins, but the second question frequently draws a couple more hands. Last, I ask, “How many of you think there may be more skeptics or deniers in the crowd, but they don’t want to raise their hands?” The third question typically brings nervous laughter, and most of the hands in the room go up. To me, that laughter speaks volumes. In particular, it suggests that climate change has become another American ideological litmus test.
Part of the problem may be that the very real scientific uncertainties that accompany the issue play into today’s divisive domestic politics. Many die-hard deniers seem reluctant to accept conclusions bracketed by such uncertainties. Many true believers seem reluctant to endorse policies that might accommodate those uncertainties. Bridging the chasm between these calcifying polarities will probably require both sides to make concessions. It could take a while to shift climate discourse back to cause-and-effect science and cost-benefit analysis. In the meantime, U.S. policymakers may want to prioritize emissions-reducing investments that make economic sense anyway ahead of investments that only make sense because they reduce greenhouse gas (GHG) emissions.
In some cases, economics and technology create anyway options. One prominent example is U.S. power generators’ switch from coal to natural gas after fracking cut gas prices by more than half. Vehicle, appliance, and infrastructure efficiency upgrades can offer anyway pathways, too, provided that end users get the same (or better) results at lower average costs. Sticker shock can be an issue sometimes, but dramatically lower operating costs can offset the higher purchase prices of better cars, bulbs, and building materials. Similarly, time-of-day power prices can save informed consumers money anyway and reduce emissions by better aligning grid resources with demand. Even oil production offers anyway upside. Injecting carbon dioxide (CO2) into depleted oil and gas fields—enhanced oil recovery (EOR)—can extend production and reduce emissions at the same time.
The policy realm offers plenty of additional anyway opportunities. Carbon surcharges that help to pay for pro-growth tax reform might turn out to be prudent fiscal policy anyway, especially if federal lawmakers rationalize discordant regulations in the process. Reasonable methane controls for oil and natural gas production can reduce GHG emissions as they conserve resources anyway. Renewable power standards can improve resilience and diversify the grid anyway as they lower average GHG emissions per megawatt-hour. Federal standards that facilitate autonomous vehicle development could de-bottleneck urban thoroughfares anyway, reducing combustion emissions from gasoline as a bonus.
That said, flawed policies that fail to achieve their primary goals may not deliver much in the way of anyway emissions benefits, either. Papering over unsustainable entitlement spending with the proceeds of an intolerably high (or insignificantly low) carbon tax could damage the economy and leave the atmosphere unchanged. Impracticably strict methane rules could deter production, pare back tax receipts, drive up energy costs, and potentially make natural gas expensive enough for generators to burn more coal. Renewable mandates that escalate far faster than power demand grows could glut markets, push zero- and low-carbon resources off the grid, and undercut diversification. And a poorly conceived deployment of self-driving cars could make traffic—and GHG emissions—worse.
Even so, when it comes to explicit government incentives, anyway may be cheaper than because. Intuitively, private firms should need less of a nudge to expand or accelerate existing activities than they might need to pursue new, noncore, and high-risk projects. As an example, the same October 2008 law that spawned the Troubled Asset Relief Program created the Section 45Q tax credit for CO2 injection, which pays $10 per metric ton of carbon dioxide equivalent (MtCO2) for EOR (anyway) and $20 per MtCO2 for nonproduction ( because) geological CO2storage. Stakeholders may debate the scale and proportion of the credits, but Internal Revenue Service data show accelerating 45Q credit uptake. Thanks largely to EOR, it looks like the credit will hit its 75 million MtCO2 phaseout threshold next year. Meanwhile, carbon capture and storage (CCS) projects at U.S. coal plants are foundering despite billions of dollars of public and private spending over and above the 45Q credit.
Environmentalists champion because interventions on grounds that anyway options won’t be enough to keep the planet within a 2 °C carbon budget. Because may be harder than it seems. Technologies like CCS and new nuclear power could drive up energy prices, at least initially. Cost may not be the biggest issue, either. Widespread CCS—one of the most ambitious because options on the table today—could mean shipping hundreds of millions of tons of potentially corrosive supercritical CO2 through thousands of miles of new pipelines. A number of oil and gas producers lost their “social license to operate” by moving faster than public sentiment. Midstream, power, and industrial companies could lose their “social license to inject” the same way. To avoid that outcome, today’s anyway deployments might be an essential part of cultivating support for more significant mitigation efforts in the future.
Realistically, the road from anyway to because looks bumpy and steep. The long-tailed, continuous, and global nature of climate change makes it hard to convince taxpayers, ratepayers, and industry to commit their capital today to solving the world’s challenges tomorrow. The pure policy alternative, “technology-forcing” prescriptive standards, can seem unreasonable in the absence of visible necessity. It may be that only adversity—and human adaptation to that adversity—will persuade society to pursue major mitigation efforts. In any case, complex challenges tend to look easier than they actually are when one is standing on the flat part of the curve. Using renewables to supplement fossil fuels has already presented difficulties. Substituting renewables for fossil fuels could prove to be far more difficult in the future.
As much as the scale of climate change risk justifies action, uncertainties regarding the timing and magnitude of that risk also validate caution. Those who hope to move climate policy forward when Washington is stuck will probably need a better argument than because. I suggest anyway.
Kevin Book heads the research team at ClearView Energy Partners, LLC. He is also a (nonresident) senior associate with the Energy and National Security Program at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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