Insights about Climate Change Policy from Europe, New Zealand, and the USA

Suzi Kerr, the chief economist at the Environmental Defense Fund (EDF) and founder of Motu Economic and Public Policy Research, a think tank in her home country of New Zealand, shares her perspectives on climate change policy in the latest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  I hope you can find time to listen to our conversation here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs.  I’m pleased to say that my long-time colleague and friend (and former student), Suzi Kerr, fits well in this group with her abundant experience in academia and NGOs.

Dr. Kerr was involved in the early design of New Zealand’s successful emissions trading system (ETS), which began in 2008, and is similar in some ways to California’s cap-and-trade system, about which I have written many times at this blog and elsewhere.

“It was the second [ETS] in the world and it’s economy wide. It’s what we call upstream, so it covers…basically all fossil fuels and most other emissions in New Zealand. And one of the highlights I think is that it covers the forestry sector, and New Zealand is still probably the one that covers that most comprehensively.  A lot of what we were trying to do was experiment and learn so that others could learn from our experience.”

As Europe prepares to begin implementation in 2023 of its Carbon Border Adjustment Mechanism (CBAM), intended to mitigate carbon leakage and protect competitiveness while remaining in compliance with World Trade Organization (WTO) rules, Kerr expresses her belief that while the CBAM is lower cost to taxpayers and provides advantages over output-based allocation measures, there are many challenges standing in its way.

“The logistical issues of bringing in a CBAM are huge. If we all had carbon pricing, it would be pretty easy, but we don’t. We have a whole mix of policies in different countries. Some have carbon pricing, but [other nations have] other policies. That complexity is huge, and the other issue is equity across countries. Does it really make sense for us to be charging countries who have low policy stringency because they’re very poor?,” she says. “I think it’s critically important that the EU couple any introduction of CBAM with really active support for the poorest countries so that they are supported to have a climate transition rather than expected to do that entirely on their own.”

In the U.S., the Biden Administration has announced its new nationally determined contribution (NDC) under terms of the Paris Agreement, with a pledge to cut greenhouse gas emissions by 50 to 52 percent below 2005 levels by 2030.  I ask Suzi Kerr whether this target is achievable, given domestic U.S. politics.  She responds that she judges the pledge to be credible, but difficult to achieve.

“The research and the modeling all says it can be done. It’s certainly possible and a lot of it can even be done at very low cost. Whether it will be done is a much more challenging question and that’s where it gets really hard – actually implementing the policies that are effective. Even if you have the political will, that’s a difficult thing,” she remarks. “In general, history teaches us that policies are almost always less effective than we think they’re going to be.”

My complete conversation with Suzi Kerr is the 27th episode in the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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Reflecting on Trump’s Record and Anticipating Biden’s Performance

On January 20th, a bit more than two weeks from today, Joe Biden will be sworn in as the 46th President of the United States, along with Kamala Harris as Vice President.  Changes from one U.S. administration to another are always significant, but sometimes the anticipated changes are not dramatic when the same political party retains the White House, although the last time that happened was the transition in 1988 from Ronald Reagan to George H.W. Bush.  That said, I do not recall a transition that has represented anticipated changes – in terms both of style and substance – as great as the transition from President Trump to President-Elect Biden.

            One of the areas – among others – where that is the case is the realm of environmental, energy, and natural resource policy.  And there is no one better qualified to reflect on the environmental record of the Trump administration and the prospects of the forthcoming Biden administration that Richard Revesz, my long-time colleague, co-author, and friend.  He is my guest in the latest episode of my podcast, released today, January 5th, on the day a pair of Senate runoff elections in Georgia are taking place (which will determine which political party controls the Senate for at least the next two years).

            As readers of this blog know, in these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  Ricky fits the bill as the Lawrence King Professor of Law at New York University, where he was previously Dean, and was the co-founder of the Institute for Policy Integrity.  He is also the co-author with Michael Livermore of a new and important book, Reviving Rationality: Saving Cost-Benefit Analysis for the Sake of the Environment and Our Health.

            You can hear our complete conversation in the Podcast here.

First of all, reflecting on the past four years of the Trump Administration, Revesz points to the decisions to:  roll back motor vehicle energy efficiency (or CAFE) standards; repeal the Obama Administration’s Clean Power Plan; and pursue what the Trump administration termed “strengthening” regulation – all as examples of bad policies with negative consequences.

“On virtually any significant environmental issue, the Trump Administration was on the wrong side. It was on the wrong side of the legal issues; it was in the wrong side of the economic issues; it was in the wrong side of the scientific issues. And it was really on the wrong side of history,” he remarks.  Revesz also implies that the administration’s disrespect for science and economics might have very deep and injurious impacts on environmental policy going forward. 

However, Revesz expresses optimism that the incoming administration may be able to undo some of the damage done over the past four years.

“I am extremely hopeful and very optimistic that the Biden Administration will restore confidence in science and economics, and that these will be taken as serious analytical frameworks, and not as tools to be bent at will to justify the political preferences of the moment,” he says. “And that is extremely important because I don’t think our country could take another four years of the bending of truth without it having very serious long-term repercussions.”

Revesz also says he expects the Biden-Harris Administration to hold true on its campaign promises to push forward with tough greenhouse gas emission policies. 

“I expect we’ll see a continued significant ratcheting down of automobile emissions, including much greater penetration of zero emitting vehicles.  And we will see very significant work, I assume and hope, on the stationary source side. Even in the Obama Administration, where we ended up with regulations for new oil and gas facilities, we didn’t have regulations for existing facilities, which is where a lot of the emissions are. The electric sector will have to be looked at. And then other industrial sectors that have not yet been being gotten attention, like refinery cement plants, will need to get significant attention. So, I see a lot happening on the regulatory side.”

Despite the challenges the Biden-Harris Administration may face from legal challenges to new regulatory actions because of the 220 judges appointed by President Trump as well as the new 6-3 conservative majority in the Supreme Court, Ricky Revesz maintains that the new administration will be much more successful in defending its regulatory actions in the courts than was the Trump administration, which lost an astonishingly high 83 percent of challenges against its regulatory actions.

All of this and more is found in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  I hope you will listen to this latest discussion here.  You can find a complete transcript of our conversation at the website of the Harvard Environmental Economics Program.

My conversation with Professor Revesz is the 19th episode in the Environmental Insights series, with future episodes scheduled to drop each month.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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Is the Oil-and-Gas Industry Undergoing a Transformation?

            It is probably fair to say that there are some environmental advocates, at least in the United States, who consider the oil and gas industry to be the moral equivalent of tobacco companies, that is, simply out to maximize profits, without any consideration given to the broader, social implications of the use of their products.  Furthermore, some such critics may paint the oil and gas sector with a broad brush –ignoring ways in which the various companies may differ from one another. 

            My guest in the latest episode of my podcast, released today, Spencer Dale, and – more to the point – his employer, may provide a counter-example.  Spencer is Group Chief Economist of BP, the multinational oil & gas company based in London, where he leads BP’s global economics team.  As readers of this blog will know, in these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  Spencer Dale has had very significant experience in two of these realms – government and industry. 

In his current role at BP, Spencer Dale manages the company’s global economics team, and is responsible for advising the board and executive team on economic drivers and trends in global energy.  He previously served in a number of roles at the Bank of England, including as executive director for financial stability, a member of the Financial Policy Committee, and ultimately Chief Economist.  You can hear our complete conversation here.

The swift and sharp decline in oil demand experienced in recent months, driven by the global coronavirus pandemic and policy responses to it, has had profound impacts on the oil and gas industry, due to falling prices and reduced revenues.  But Spencer Dale notes that it may also create opportunities for companies and countries to support the transition to cleaner energy sources as they strive toward net-zero emissions in the coming decades.

“I think the pandemic has highlighted the fragility of the planet and the unsustainable way in which we are living on the planet today. Moreover, the scale of the government interventions we are seeing around the world give us an unprecedented opportunity to use those government interventions to boost the economy in such a way that the growth we see going forward is greener and more sustainable than it otherwise would have been,” he says.   

Spencer predicts that the COVID-19 pandemic will continue to take its toll on oil demand as people and businesses conclude that they and their employees can work just as productively at home as in an office, and can save considerable amounts of time and money via reduced business travel.

“I think the far greater impact on oil demand is not through these behavioral changes, however, it’s through the economic impacts,” he says. “Hopefully the pandemic will be brought under control within the next year or so, but the economic scars from the pandemic are likely to last far longer, and in particular, those economic scars are likely to fall disproportionally on emerging markets around the world.”   

Dale says he is proud of the leadership role BP is playing in the industry by pledging to reach net-zero emissions by 2050, and by shifting its business profile away from being an “international oil company” toward being an “integrated energy company.” 

“The nature of energy demand is likely to shift materially over the next 20 to 30 years, away from fossil fuels,” he observes. “And that’s to be replaced by very significant growth in renewable energy led by wind and solar power, and so we want to pivot away from those fossil fuels into a wider energy company.”

Dale also acknowledges the difficult challenge facing policymakers as they try to revive their economies and address the threats posed by climate change.

“If you ask governments today, with levels of unemployment…going back to levels not seen since many decades, if you ask them to trade off near-term jobs versus long-term climate issues, that’s a hard challenge,” he states. “But there doesn’t need to be a tradeoff between those two. You can design smart policies which are both good for long-run sustainability and also generate jobs in the near-term.”

All of this and more is found in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  I hope you will listen to this latest discussion here.  You can find a complete transcript of our conversation at the website of the Harvard Environmental Economics Program.

My conversation with Spencer Dale is the 18th episode in the Environmental Insights series, with future episodes scheduled to drop each month.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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