On June 2, the United States government will begin the single most important step it's ever taken to fight climate change: limiting greenhouse gas emissions from power plants, the country's largest climate polluter.
Some fear the Environmental Protection Agency's regulations will be catastrophic, a heavy-handed big-government overreach that will drive up the price of energy. Yet some energy policy experts say those misgivings are unfounded. Indeed, there's good reason to think the regulations can succeed.
Over the last decade, as federal climate efforts stagnated, some states pursued ambitious strategies of their own. They quietly put prices on greenhouse gases, harnessing market forces to cut carbon pollution.
"We have a ton of evidence that states have already taken action," said Sara Hayes, a policy analyst at the American Council for an Energy-Efficient Economy, an energy industry think tank. These programs, she says, have for the most part been successful -- one multi-state program has cut pollution from power plants by 40 percent -- and could serve as models for meeting federally-mandated pollution cuts. In short, the future is already here---and it seems to work.
The most high-profile state program is California's Global Warming Solutions Act of 2006, which pledged to cut the state's greenhouse gas pollution to 1990 levels by the year 2020. The Act's centerpiece is a so-called cap-and-trade program, in which power plants, refineries and other major greenhouse gas emitters purchase state-auctioned pollution permits that they can use or trade to other companies. Each year, fewer credits are sold, creating an incentive for companies to become cleaner and more efficient.
California's system has received plenty of attention lately, said Tim O'Connor, director of the California Climate Initiative at the Environmental Defense Fund, as states and the utility industry prepare for the EPA's plan to regulate emissions from power plants. Also in the spotlight are the Regional Greenhouse Gas Initiative, a cap-and-trade program for power companies in nine northeastern states, and a carbon tax in the Canadian province of British Columbia.
It's an ironic turnabout. Four years ago, a national cap-and-trade program was nearly created by Congress, only to collapse in a last-minute storm of partisan acrimony. That failure was considered emblematic of Washington's inability to confront climate change, and environmentalists despaired of the Obama administration ever making good on its climate vows.
Yet even as Congressional action stalled, the state level programs grew, and a series of court decisions paved the way for the Environmental Protection Agency to regulate greenhouse gases under the Clean Air Act. What politicians couldn't agree upon, the agency would mandate---a task given new urgency by a grim parade of weather disasters, from epic drought and massive western wildfires to extreme winter cold and Superstorm Sandy. Whether these are directly linked to climate change is a matter of scientific debate, but they represent the sort of weather expected to become more frequent as Earth's atmosphere warms.
In June 2013, President Obama promised to cut U.S. greenhouse gas pollution by nearly 10 percent by 2020. It's an ambitious goal, but largely achievable by focusing on a single sector: power generation, which presently accounts for about 40 percent of all U.S. carbon dioxide emissions. Cut those by 20 percent---a ballpark figure for what's expected from the EPA's upcoming proposal---and nationwide emissions will fall by roughly 7 percent.
"It's an exciting time," said Kate Konschnik, an environmental expert at Harvard Law School. "But any time there's potentially change in the air, there are folks who are concerned about it." Indeed, the EPA's proposal---which will be open to public comment for two months, and finalized in 2015---is expected to be bitterly contested. Many lawsuits are likely, and what Politico called the pre-game scuffle has already broken out, with conservative and industry groups predicting a disaster.
The U.S. Chamber of Commerce, a corporate advocacy group, has charged that regulations would cost $51 billion and 224,000 jobs. The National Mining Association ran advertisements predicting a near-doubling of electricity costs. Those claims were quickly rebutted, but they reflect a deeper fear that the EPA will try to micromanage the cuts rather than trusting companies to find their own solutions. That sort of command-and-control approach "is likely to be a costly disaster," said Andrew Moylan, a senior fellow at R Street, a free market think tank.
According to Konschnik, Hayes and O'Connor, though, command-and-control doesn't appear to be likely. Instead, they expect the EPA to present each state with a pollution target, then let states and the utility industry collaborate to meet that goal by whatever means make the most sense for them. That will probably involve some combination of increased efficiency, reduced power consumption and market-based programs like California's.
Though that state's carbon market only went live in 2013, analysts already say that it appears to be healthy. Companies are participating; by the end of 2015, when transportation-related pollution is included in the market, it will cover a full 85 percent of California's greenhouse pollution.
"There is no other program in the world, and certainly not in the United States, that incorporates such a large percentage of economy-wide emissions," said O'Connor. "We've seen story after story of refineries and manufacturers talking about investments they're making to improve efficiency and reduce pollution."
Though it's too soon to measure pollution reductions in California, more direct results can be seen in the Regional Greenhouse Gas Initiative. Since 2005, power plant pollution in the nine participating states has fallen by 40 percent, and the sale of pollution credits has raised $1.6 billion in revenues. Some of that pollution decline can be attributed to the boom in cheap natural gas, said O'Connor, but not all of it---and the decline continued even as northeastern economies rebounded from the financial crisis.
In addition to cap-and-trade, noted Moylan, states and power companies could also consider a carbon tax like British Columbia's. Set at $30 Canadian dollars per metric ton, and ultimately reflected in the price of gasoline and fuel, it presently raises $1 billion in annual revenue, which is in turn used to fund business and income tax cuts.
Petroleum consumption in the province has dropped by 15 percent. Polls show that roughly two-thirds of the Canadian public support the tax---an impressive number, given the general unpopularity of taxes. The states of Washington and Oregon are now considering similar programs.
"States can put together a program that works for them to meet the EPA standards, and as we move down the line, we'll see what works and what doesn't," said Konschnik.
California, RGGI and British Columbia are far from the only models. A recent World Bank report described a global proliferation of market-based climate programs, from New Zealand and Norway to India and Kazakhstan. According to the Environmental Defense Fund, an estimated 250 million people in China now live in regions covered by cap-and-trade pilot projects, many of which were inspired by California's.
Combine market-based approaches with common-sense efficiency and better building codes, said Hayes, and it should be possible to cut U.S. greenhouse gas emission by nearly one-fourth with incurring extra costs. Meeting the EPA's standards, she said, should not be difficult.
"These programs show that costs are likely low. In many ways they're providing economic benefits, and are delivering on the environment," said O'Connor. "There is nothing to fear."
