Trying to Remain Positive

With inauguration day in the United States just two weeks away, it is difficult to harbor optimism about what the Trump presidency will mean for this country and for the world in realms ranging from economic progress to national security to personal liberty (as I wrote in this space one month before the November election – This is Not a Time for Political Neutrality, October 9, 2016).  In the wake of the election, expectations are no better, including in the environmental realm (as I wrote shortly after the election – What Does the Trump Victory Mean for Climate Change Policy?, November 10, 2016).  And since then, the President-elect’s announced nominations for key positions in the administration have probably eliminated whatever optimism some progressives may have been harboring.

Remarkably, the least worrisome development in regard to anticipated climate change policy may be the nomination of Rex Tillerson to become U.S. Secretary of State.  Two months ago it would have been inconceivable to me that I would write this about the CEO of Exxon-Mobil taking over the State Department (and hence the international dimensions of U.S. climate change policy).  But, think about the other likely candidates.  And unlike many of the other top nominees, Mr. Tillerson is at least an adult, and – in the past (before the election) – he had led his company to reverse course and recognize the scientific reality of human-induced climate change (unlike the President-elect), support the use of a carbon tax when and if the U.S. puts in place a meaningful national climate policy, and characterize the Paris Climate Agreement as “an important step forward by world governments in addressing the serious risks of climate change.”

It’s fair to say that it is little more than damning with faint praise to characterize this pending appointment as “the least worrisome development in regard to climate change policy,” but the reality remains.  Everything is relative.  Of course, whether Mr. Tillerson will maintain and persevere with his previously stated views on climate change is open to question.  And if he does, can he succeed in influencing Oval Office policy when competing with Scott Pruitt, Trump’s pick to run EPA, not to mention Rick Perry, Trump’s bizarre choice to become Secretary of Energy?

In the face of all this (and much else), is it possible to offer any statement of optimism or at least hope?  The answer may be found in the reality that U.S. policy – in many issue areas – consists of much more than the policies of the Federal government.  In a variety of policy realms, the states play an exceptionally important role.  One might not normally think about this in the context of addressing a global commons problem, such as climate change, but these are not normal times.

And so I will try to rescue myself from my current mental state – at least temporarily – by focusing today on policy developments in the State of California.  To do this, I offer an op-ed I recently wrote with Professor Lawrence Goulder of Stanford University, which was published in the Sacramento Bee a week before the November election.  Good policy developments at the state level are, of course, even more important now than they were then.

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Sacramento Bee

October 30, 2016

New emissions targets make cap and trade the best low-cost, market-based approach

By Lawrence H. Goulder and Robert N. Stavins

This is a critical time for California’s climate policies. Recently, Gov. Jerry Brown achieved his hope of extending California’s action beyond 2020, the termination date of Assembly Bill 32. Whereas AB 32 called for reducing the state’s greenhouse gas emissions to 1990 levels by 2020, the newly signed Senate Bill 32 and AB 197 mandate an additional 40 percent reduction by 2030.

Unless these ambitious goals are pursued with the most cost-effective policy instruments, the costs could be unacceptably high. The governor’s targets make it especially important to use a low-cost, market-based approach: cap and trade.

Unfortunately, rather than increasing cap and trade’s role, recent proposals emphasize the use of less efficient, conventional policies. The environmental justice lobby supports this change, contending that emissions trading hurts low-income and minority communities by causing pollution to increase.

In fact, abandoning cap and trade would harm these communities by raising costs to businesses and thereby prices to consumers. With cap and trade, the sources able to reduce emissions least expensively take on more of the pollution-reduction effort. This lowers costs and prices.

When the environmental justice community worries about cap and trade, their concern is not about the greenhouse gas emissions that cause climate change: These gases spread evenly worldwide and have no discernible local impact. Rather, it’s about “co-pollutants,” such as nitrogen oxides, carbon monoxide and particulates, which often are emitted alongside greenhouse gases.

By reducing California’s greenhouse gas footprint, cap and trade lowers concentrations of these co-pollutants. Still, it’s possible – in theory – for co-pollutant emissions to increase in particular localities. The best defense against this possibility is to tighten existing laws that limit local air pollution. This would prohibit any trades that would violate such limits.

The environmental justice lobby’s concerns about local air pollution are justified: A new report by the U.S. Commission on Civil Rights acknowledges that low-income and minority communities face disproportionately high air pollution. The best response to this situation is to strengthen existing local pollution laws rather than abandon cap and trade.

Moreover, it is not clear that cap and trade shifts local air pollution toward low-income communities. One recent report from the University of Southern California identified emission increases and blamed them on cap and trade. But increased emissions have been due mainly to economic and population growth. And although emissions from some sources did increase, they decreased at 70 percent of facilities, according to mandatory reporting to the Air Resources Board.

The key question, however, is not how emission levels changed, but rather how cap and trade contributed to the change. Without cap and trade, it is likely that any increases in emissions would have been even greater.

Beyond the environmental impacts, it’s important to consider economic impacts on these communities. Reducing greenhouse gas emissions tends to raise costs of energy and transportation. Because low-income households devote greater shares of their income to energy and transportation than high-income households, virtually any climate policy places greater burdens on those households. Cap and trade minimizes these costs.

Further, cap and trade offers the government a powerful tool for compensating low-income communities for such economic burdens. Most emission allowances are auctioned and pursuant to SB 535, 25 percent of the proceeds go to projects that provide benefits to disadvantaged communities. This has already amounted to over $158 million.

Cap and trade serves the goal of environmental justice better than the alternatives, and it deserves a central place in the arsenal of weapons California uses to address climate change. Rather than step away from this progressive policy, the state should increase its reliance on this progressive, market-based approach.

Lawrence H. Goulder is a professor in environmental and resource economics at Stanford University and former chair of the AB 32 Economic and Allocation Advisory Committee to the California Air Resources Board. Contact him at goulder@stanford.edu.

Robert N. Stavins is a professor of business and government at the Harvard Kennedy School of Government, and contributed to assessment reports to the Intergovernmental Panel on Climate Change. Contact him at robert_stavins@harvard.edu.

Author: Robert Stavins

Robert N. Stavins is the Albert Pratt Professor of Business and Government, John F. Kennedy School of Government, Harvard University, Director of the Harvard Environmental Economics Program, Director of Graduate Studies for the Doctoral Program in Public Policy and the Doctoral Program in Political Economy and Government, Co-Chair of the Harvard Business School-Kennedy School Joint Degree Programs, and Director of the Harvard Project on Climate Agreements.

2 thoughts on “Trying to Remain Positive”

  1. Your brief comment in the op-ed about local air pollution controls on co-pollutants, including particulates, being potentially useful in addition to cap-and-trade policies is important and useful. To elaborate a bit, Black Carbon (BC) is particulate matter that is not only detrimental to local health and food production, it is also a significant potent contributor to climate change. Thus, local policies such as those in some port cities that limit BC emissions from ships and other sources in the port are a promising ways to achieve local air pollution control and climate change mitigation.

  2. 350 Bay Area’s (and a lot of the climate movement’s) position on Cap and Trade is “Cap Yes, Trade No”. Trade, as it has been structured, allows companies to keep polluting and buy carbon credits to offset, leaving local pollution and CA’s carbon footprint the same or worse. Personally, it’s how the Trade side is implemented. If the rules allowed only for trade in the state, CA’s footprint would actually be reduced, and it would have a stronger climate leadership position, which is critical globally.
    If, as you suggest, “local” rules addressed frontline communities’ pollution load, health impacts could be reduced. But, as we have seen with the Bay Area Air Quality Management District (BAAQMD), that tends to be a David (grassroots) vs. Goliath (Big Oil) battle. Air Districts get sued over about everything, and at least the BAAQMD staff (from our perspective) tend to take polluter-friendly positions. Even with CA’s 80% GHG reduction by 2050 SB32 LAW, BAAQMD isn’t clear to cap refinery emissions – the biggest GHG polluting installations. How can you reduce something, if you can’t prevent it from growing? Pointing to Cap & Trade is one of the arguments against refinery caps. Relying on local rules is thin ice.
    Personally, I prefer “progressive, market-based approaches”, but HOW they are implemented is so critical to their actual effectiveness and Big Oil has plenty of resources to turn those implementations toward their favor. The “go full-speed pollute away, just grow some forests” message of Cap&Trade as it has been implemented, and the lop-sided battle of any additional controls makes “Cap Yes, Trade No” the best “progressive, market-based approach” to really address the climate catastrophe we are creating. As the caps come down, the market will find best solutions. Not polluting is much better than waiting 20 years for a forest to capture what we have put in the air.

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