When and Where Can Climate Policy Succeed?
The Green New Deal has focused renewed attention on policy to address Climate Change, but also raised concerns about how to pass and sustain energy policy in a polarized system. Economists say the obvious solution is pricing carbon, but Barry Rabe finds that carbon tax and cap-and-trade policies have faced big hurdles in passage, implementation, and sustainability. Leah Stokes finds that other policies like tax credits and renewable portfolio standards have proved popular after initially passing without much notice. But fighting fossil fuel companies for any sustainable climate policy remains an uphill battle.
Grossmann: This week on the Science of Politics, when and where can climate policy succeed? For the Niskanen Center, I’m Matt Grossmann.
The Green New Deal has focused renewed attention on policy to address climate change but also raised concerns about how to pass and sustain energy policy in a polarized system. Economists say the obvious solution is pricing carbon, but it has been difficult to make work politically. With the world facing a catastrophic path, can America act? This week I talk to Barry Rabe of the University of Michigan about his MIT Press book Can We Price Carbon? He finds that carbon tax and cap-and-trade policies have faced big hurdles at all stages: passage, implementation, and sustainability. We can learn from the successes and failures if we’re willing to admit that the economic models might not match practical politics.
I also talk to Leah Stokes of UC Santa Barbara about her energy policy article with Hanna Breetz, Politics in the U.S. Energy Transition. She finds that policies like tax credits and renewable portfolio standards have often proved popular and sustainable after initially passing without much notice, but she says fighting fossil fuel companies remains an uphill battle.
Both say there’s been a lot of action to examine. Rabe’s book is a broad look at schemes to price carbon.
Rabe: This book represents an effort to look at the ability in politics, in governments around the world, to do what economists have been saying for decades is the best way to go at climate change, namely applying a carbon price through a tax or a carbon trading system to the use of fossil fuels. I look at that experience particularly in the United States and Canada but also elsewhere in the world, how well that idea has played out over these last few decades. The book title Can We Price Carbon? does indeed conclude with a question mark. I’m not in the habit of putting question marks in titles, but I left the experience with some real questions about the political viability and durability of this, although there are some very interesting cases from around the world. I try to present a package of what we can say from real world experience in testing this, a fascinating idea from a discipline of economics.
Grossmann: Stokes and Breetz see lots of action in other climate policies with incremental building of new clean energy technology.
Stokes: The article looks at big efforts at the federal and state level to try to drive wind energy, solar energy, biofuels, and electric vehicles. We chose those technologies because they are the most important new technologies to try to deal with climate change across the energy system in both transportation and electricity. What we really found was a number of dynamics playing out across these different areas and technologies and different levels of government, which is that immature technology is often underestimated or misunderstood, that you have these large bills that get passed in Congress in particular but often sometimes in statehouses, and that that provides opportunity for cover for these new technologies to kind of get enacted. Once they are enacted, oftentimes the government continues to invest in these technologies.
So the first battle is really important, to get the law in place, but then afterwards we have these incremental extensions but that over time, as incumbents learn more about these technologies and these laws, they come to attack them more. So we’ve seen increasing politicization in this policy area. Where historically we might’ve thought energy is kind of a bipartisan space, especially with these new technologies, we’re starting to see a big polarization where Republicans and Democrats are farther and farther apart. We really tend to think that’s because of incumbent interest groups, fossil fuel companies, utilities, automakers, et cetera, who don’t like these new policies because they’re cutting away their market share.
Grossmann: Both are seeking to challenge some conventional wisdom. Rabe says what works in economic models does not always translate easily into political reality.
Rabe: In the discipline of economics, a very powerful social science, one that has had enormous influence in our thinking in the environmental and other areas, this is settled and the overwhelming consensus from economists across the ideological spectrum is that putting some kind of a price on carbon is by far and away the most effective and efficient strategy to consider. That does become challenging when one moves out of the theoretical arena of economics into real world politics and real world practice, although a great many governments have been mightily experimenting with this and as recently as the Paris Accords in 2015, the last major global climate agreement, there was wide, far-reaching really agreement across a diverse array of national leaders that this was the the best way to go if one could go forward with that. The challenge then of course is taking those theoretical assertions and those proclamations at a very high level of generalization and making them work in in real political laboratories, parliaments and legislatures. I think that’s where this becomes becomes more challenging, as well as really engaging the public to fully understand and appreciate and then possibly support a policy like this over a long period of time.
Grossmann: And Stokes says lots of policy change has been influential even though it was not expected to be by law makers or energy companies.
Stokes: I think a lot of people believe that politicians and energy companies know what they’re doing. That is definitely the conventional wisdom and what my research shows, as well as with Hanna Breetz, is that a lot of the times actually Congress, when it passes a law, is paying attention to certain parts of the law that end up being not that consequential and really not spending a lot of time on provisions that after the fact seem really important, and so I call this dynamic in my book the fog of enactment, which is this idea that when you’re passing laws, particularly if they’re in a novel area, a new policy area, or they use a new mechanism to address a problem or they’re dealing with new technologies, a lot of the time both companies and politicians don’t really know what they’re doing.
That means that there are really clear limits on the ability for groups and organizations to forecast what these new technologies and policies are going to do and I think that there are some people who would agree with this point of view. There’s a lot of people who criticize, for example, the Energy Information Administration or the International Energy Agency. These are these big bodies that put out annual forecasts about what’s going to happen in energy and climate and they’re usually wrong. So there’s some view that forecasting is difficult but, to add that into sort of policy making, a lot of people believe that interest groups and politicians know what they’re doing. So I think that we are really challenging the conventional wisdom, particularly in political science and public policy research.
Grossmann: Rabe’s work came out of looking at the history of tobacco pricing and his work on action and the states.
Rabe: I’ve long been interested in the question of how you use taxes to deter behavior that can cause problems. That began for me as the son of a cigar salesman and looking at questions when my dad was concerned about possible increases in cigarette taxes, this is a long time ago now, and yet a hugely effective way in the U.S. but really around the world. We have driven down tobacco use rates by applying a similar mechanism to what we are talking about now in the area of carbon. But a more direct point of interest for me was well over a decade ago I began examining the kinds of climate policies that were most likely to be adopted by governments, beginning with work in the American states, including a previous book but also a good deal of other research.
I was really even struck at that time that carbon pricing would surface in some discussions and some debates, actually being adopted in some states, but there were other policies that economists tend to really question or doubt in terms of their overall impact or performance but that seemed to be a lot more politically popular and, not just popular, were likely to be adopted. And so I decided at that point, and this is now well over a decade, to kind of monitor what was going on everywhere in the U.S., every state as well as the federal government, similarly in other places, and really track what was happening over time. Was it possible to develop the best possible policy or at least those that economists would be advocating or not? And the effort in this book is to come to terms with what I was able to find through that exercise.
Grossmann: Stokes and Breetz sought to combine their interests in energy and transportation to look for common patterns.
Stokes: Hanna and I met in grad school at MIT where we were both doing our dissertations on energy policy. She was really interested in transportation policy, things like biofuels and electric vehicles, which wasn’t something that I really knew a lot about and I was really interested in electricity policy, so things like wind and solar and renewable portfolio standards and net metering laws. We just kind of formed a friendship over our shared interest in the policy and politics of energy system transitions, even though we were looking at really different cases and eventually I just convinced her that we should write an article together that thought about the energy transition in one big way.
Because a lot of times if you read the literature in energy policy, people will sort of take a small policy or one technology and write a whole article about that and what we wanted to do here was really think about the climate crisis, the big challenge of changing the way that we do our energy systems in the United States and of course that will spill over to how other countries manage their energy systems. We wanted to understand, well, what are the policies driving this transition and what are the kind of politics that play out? So what we really did was we took our independent research and kind of smashed it together into a single article and tried to see what are the similar dynamics that are playing out in transportation and electricity policy.
Grossmann: We’ll start with the good news from Rabe’s work. There are some real successes in carbon pricing to learn from.
Rabe: The good news here is it’s actually been possible to do this in some places around the world. This begins really with multiple Nordic countries. Northern European countries from 1990 to 1992 set very high carbon taxes and prices, set them up to build political support over time and essentially do what they were supposed to do in places like Sweden, Norway, Finland, and others, to not eliminate fossil fuel use but drive it down in a cost effective way. We’ve seen other experiments, as you note, though a little closer to home in Canada, the experience over the last decade in British Columbia with a carbon tax, in states of the American Northeast known as RGGI, the Regional Greenhouse Gas Initiative, in terms of cap and trade, even in cases like the European Union where early efforts to put a carbon price or a cap-and-trade regime into operation struggled in many respects, now appears over the last few years to have really gotten a second wind in effect and is now beginning to do what its proponents were advocating all along.
So the n of cases here is small. It’s always hard to generalize with great confidence from that small n, but there are a number of examples including other countries, Ireland is a good example of this, where you can begin to stitch together a series of success stories, some going back actually over multiple decades, some more recent in nature, but all the ones in the book that I really characterize as quote successes are ones that were not only able to find a way to agree through democratic political systems to adopt a policy initially but actually stood up and launched the policy and managed it effectively, maintained or expanded coalitions over time. So when early advocates or champions or entrepreneurs would leave the scene or partisan control of a government that initially approved the policy would leave the scene as is inevitable in democratic systems, the policy continued and the base of support actually expanded. So I argue that these kinds of cases are successful not only in terms of being able to do what carbon prices are supposed to do, to reduce emissions in a fairly cost-effective way but to build and sustain that support over time and be managed in fairly effective ways.
Grossmann: There are even some potential failures that are improving, but there are also quite a few failures.
Rabe: There are some reasons to note cases like the European Union Emissions Trading Scheme seems, after decade or so of struggles, to have completed a number of reforms, ironically in the very contentious political process of the European Union and a number of recent studies suggested that ETS is performing at a higher level. We’re also beginning to see significant movement in other areas, as I noted, including interestingly in Asia, but there are a large number of failures, and really at each point of what I call the life cycle of policy, this idea of adoption, but then launched through administrative channels, sustaining over time.
In almost every stage of that process, certainly in North America but also more broadly, there are multiple cases where there have been significant challenges both to adoption and maintaining over time. Just amongst the American states, if we were having this conversation about 10 years ago, we would be talking about 23 states in three regions, including the Midwest, the Northeast, and the Pacific West that had formally engaged or pledged to pursue cap and trade. That is now down to 11, may grow actually to 12 before the end of this year, but we’ve actually seen a kind of reversal or reverse diffusion of that process and so alongside the issues of the relative success of those states in the Northeast, a whole bunch of states, including Michigan, Wisconsin, Western states and others, have actually pulled away from this and reversed initial commitments, which I think underscores or shows anyway how vulnerable some of these policies can actually be.
Grossmann: Polarization with rotating party power means the constant threat of reversal.
Rabe: Well, as in other areas, this has become a considerably more polarized issue along partisan lines in the United States but not just the United States. We will see later this year a couple of very important elections in Canada, first in the province of Alberta, a major fossil fuel producer, and then at the federal level which will go a long way to determine whether Canada will stay the course on what is called the Pan-Canadian Framework, a national or federal strategy which has given a lot of latitude toward individual provinces. There the premier of Alberta and the prime minister of Canada in separate elections that are coming will be facing significant challenges from opposition parties that have said, in effect, if they are elected they will act to reverse the policy. So it’s not just something concentrated in the U.S. and the partisan issues are real.
That said, in these more successful cases that I’ve defined, including some from the United States, there have been ways to build and even expand political support across partisan lines. Now those Northeastern states that have stayed the course in the Regional Greenhouse Gas Initiative, there’ve been transitions in all of their governorships and state legislatures and throughout the course of that policy several of those governors with support have been Republicans. Now the Northeast is not necessarily politically typical of the rest of the country, but we see this in other areas as well. We’ve even seen in more recent Congresses at least a few Republican members of the House and even the Senate say that they would be open to the idea of a carbon tax or a carbon price or even endorsing a policy.
We’re a long way in the U.S. and in most countries from having a big, broad, bipartisan consensus on these issues, but there is precedent for it and it’s not purely a theoretical exercise. In some cases it really has been managed and maintained. I do think here the experience in British Columbia is especially interesting because now, more than a decade ago, a center right government adopted the initial policy actually with opposition from the political left. Political support has now expanded across all of the parties in British Columbia and they have taken their carbon tax to an even newer high over the last couple of years, $50 a ton, which is the largest new carbon tax introduced anywhere in the world in the last 20 years.
Grossmann: Although the American public is unique, he sees many of the same political issues elsewhere.
Rabe: When you look at public opinion, in any kind of measure do you believe there’s solid evidence of global warming or human causation? American public opinion, while concerns about and belief in those things have begun to increase in recent years, there’s still a level of divide that is considerably greater than other places around the world but, that said, the kinds of political issues and challenges and divides to adopting and sustaining a carbon price have really been more of the global experience, and then in that sense the U.S. does not look that radically different than, say, Australia or Canada, certainly other major fossil fuel producers with the exception, interestingly enough, of Norway, a major producer of oil which adopted and has now sustained a pretty robust carbon tax, including one applied on its oil production operations for decades now.
But at one level the political issues and challenges of this really do converge and, you know, going back to those moments at the Paris Accords of 2015, the sort of high water mark both for a global consensus on moving on climate change and a broad embrace of a carbon price, a great many of those heads of state back in 2015 who pledged doing something substantial with a carbon price, a good number of them have had a hard time or at least some considerable difficulty translating those pledges into political action in their own context, although again we do begin to see some really interesting new examples, perhaps most notably from Asia, places like South Korea, Japan, and even China beginning to move into this space.
Grossmann: There are many barriers to success starting with industry opposition.
Rabe: If I might begin with opposition from the fossil fuel industry, in a country like the United States, far beyond the controversies over coal, especially if we look at the expansion of production of oil and gas through fracking, hydraulic fracturing and horizontal drilling, but also expanded discoveries of oil or accessing oil and gas deposits many places around the world. The opportunity to sustain fossil fuel production over the last decade or more has just changed and expanded in ways that were not anticipated a decade or so ago when we were talking about peak oil and peak gas and running out and the assumption that the scarcity might drive prices up and with it fuel a movement toward renewables or greater energy efficiency. So that expanded level of interest and economic support linked to fossil fuel production, refinement, supply change, is vast and cannot be underrated and in turn I think it’s safe to say that for firms that can make considerable profit and employ lots and lots of people through fossil fuel production or use, their role in this is significant and carbon prices can be a threat. Now, a great many of them have offered rhetorical support in theory for a carbon price.
In my observations or experience in the U.S. but also internationally, industry support for a carbon price tends to be greatest when the immediate possibility that carbon price will be adopted is particularly low, but the closer you get to the details and the particulars of one, that’s when the industry opposition really begins to ratchet up and intensify. We’ve seen this in ballot propositions in the last few years in states like Washington. We’ve seen this in other states whenever fossil fuel taxation or pricing is considered, certainly in Washington but also internationally. As again we begin to look at more and more countries that are beginning to think about a fossil fuel development future or a refinement future, that really does become a formidable coalition, one that is hard to move and hard to nudge.
Rabe: Of course, it’s not only that issue that’s a challenge for carbon pricing.
Grossmann: Stokes agrees that difficulties come just as much after implementation. It’s hard to make sticky climate policy.
Stokes: My book is all about the post-enactment politics that play out and, unfortunately for the climate, I tend to agree with Barry on this one. So the politics continue and in fact amplify during implementation and that means that we’re often likely to see renewed attacks on these laws from interest groups who basically learn, once the policy hits the ground, that they let this little provision sneak through and it turns out that they don’t like that provision. They’re learning about the policy during implementation.
So you see this a lot with net metering laws. They have been rolled back, monthly charges have been put on these systems, and that means that new people wanting to install solar, it’s getting a lot harder for them to do that. It’s becoming a lot more expensive. There are ongoing politics in the energy and climate space that make the kind of stickiness that we see in social policies, I believe, less likely. And so, yeah, this is going to be a long, drawn-out, multi-decadal battle between companies that make money off of polluting our commons and warming the planet and killing people and sort of the rest of us hopefully waking up to the fact that that is happening and holding them accountable.
The challenge is that those groups, the fossil fuel companies and utilities, have made a lot of money for a lot of time, and they have really large war chests to spend a lot of money on politics.
So, for example, with the Washington state ballot initiative, there was so much work done by the advocates to pre-negotiate who was going to get the money back and they thought, “Okay, we have a slam dunk here,” and yet they were outspent enormously by fossil fuel companies who just blanketed the airwaves with fear mongering about how these costs would be terrible for people and never really focusing on the benefits that were part of the ballot initiative as well. I do fear that taking on the fossil fuel industry is the hardest thing that we really have to do as a society and it is not going to be simple. These politics are not just a question of getting the laws in place. It’s really a question of durability over time and Barry’s work speaks to that quite brilliantly.
Grossmann:But looking at the US history does provide some lessons. The production tax credit shows you can have a big impact from a small provision that no one expected.
Stokes: You see really commonly that there are big bills passed by which I mean huge laws that have many pages, lots of provisions, many groups at the table and when you are negotiating over something that big, it’s hard for various groups and actors to figure out what they should be paying attention to, right? There’s so many things going on. So, for example, with the Energy Policy Act of 1992, that’s where the production tax credit was first past and that is the provision that’s really kicked off when energy across the states. You know, if you look at the testimony at the time, the bill versions, the sort of debates that were happening, there was almost nothing written about or talked about the production tax credit. It was originally an idea that came from the department of energy under George H. W. Bush’s administration and the president kind of dismissed it.
They didn’t like it. They got rid of it when they made their bill. But it just kind of kept getting restuck in there. Nobody was paying a lot of attention to it. The Republicans and Democrats both said, “Yeah, okay sure we’ll go for that.” It was sort of a bipartisan agreement. Everybody was busy fighting over whether or not oil drilling would be expanded in the Arctic National Wildlife Refuge. That’s a fight that still plays out today and they were fighting over café standards. These are basically fuel standards for cars. How far should a car be able to drive on gasoline. So, those kind of big, hot button issues where the interest groups knew what they wanted, where the parties knew what they wanted, that’s where a lot of the attention went. So, this much smaller provision was able to slip through kind of unnoticed.
That doesn’t just hold for the Energy Policy Act of 1992. If you read our article, we have numerous examples of that happening and if you look at other examples we don’t talk about things like the Public Utilities Regulatory Policy Acts, this is a law called PURPA. It was passed in the late 1970s and it was actually the first law that kicked off for [inaudible 00:25:53] energy and at the time, nobody paid much attention to it and it ended up being hugely consequential.
Grossmann: With an inside, outside advocacy push, you can also pass laws in the states such as those on renewable portfolios.
Stokes: Renewable portfolio standards really form the backbone of the book that I’m finishing which is called Short Circuiting Policy. What I argue is that early renewable portfolio standards were passed by interest group entrepreneurs. So, these advocates that kind of went state by state and found opportunities to pass these laws. Again as part of broader things that were happening. Things like electricity restructuring and what I show in that work is that actually a foundation, in this case the energy foundation was really pivotal in the mid 1990s in terms of funding a network of interest groups who were trying to figure out how could they kickstart the clean energy revolution.
In the 1990s, people really didn’t know what was the right way to do this. How could we get policies passed that would actually incentivize wind and solar technology. They were having very vibrant debates within the advocate community about different policies. So, assistant benefits charge for example was another idea. There was the renewable portfolio standard and there was also just this idea that people could pay a little bit extra on their electricity bills and voluntarily buy more green power.
So, there’s all these different ideas and this foundation was funding a group of advocates to think through these ideas. Then what they would do is that when a given opportunity came up in a state, they would support those groups to try to get it stuck on to a bill. So, you see this very clearly in Texas in 1999 when it was restructuring its electricity system. There were two main groups working on that. The Environmental Defense Fund, a pretty classic environmental group that is often an insider group that goes into negotiations over bills on the inside of a legislature at the federal level or the state level.
They were pushing this idea from the inside and on the outside, you had a group called Public Citizen which is a grassroots public interest group that was doing classic grassroots organizing to try to get specific politicians to support these provisions. So, in the early day of an RPS, utilities and fossil fuel companies who are the opponents nowadays of these policies, they didn’t really know what to make of them. They didn’t really think they would be that big of a deal. So, what they did was they would water down the provisions. They would make them as weak as possible. Then they would get passed and they wouldn’t really expect much to happen. But what these groups didn’t anticipate was that if you took the federal production tax credit and you combined that with the state renewable portfolio standard, you could actually start to see a massive growth in wind energy technology you’d never really seen before.
Stokes: So, you saw technologies really outpacing people’s expectations. So, Texas passes this RPS and actually they beat those targets really quickly. So, it was actually interest groups moving state by state to try to get these laws passed when certain opportunities arose. Over time you started to see a more classic diffusing story where different states were copying one another, but in the early days in particular, there was a lot of uncertainty and there was a lot of stealth politics playing out where interest groups were able to get these laws enacted for the first time.
Grossmann: Net metering for solar power, Stokes says, also passed without much controversy, working in concert with federal law. But industry eventually noticed the success and fought back.
Stokes: In the early days of that nearing, the story is very similar. Again, this was an idea that was funded in part by the energy foundation and you had a person who had written a thesis on the idea of net metering who literally went state house by state house and helped draft some of the early laws and get them enacted. The interesting thing about net metering was that there was almost no controversy when these early laws were passed in the 1990s. The late 1990s because utilities saw solar as kind of a niche technology that was used in things like remote cabins in case you couldn’t get electricity there. So, they didn’t really think that this would be a big technology. Keep in mind that the solar investment tax credit didn’t get passed until 2005.
So, to some extent, the utilities were right. Without some kind of incentive support, net metering really wasn’t going to kick off a solar revolution. But what happened was when you passed that federal law in 2005, you started to get this innovation in terms of business models where there were new companies, solar leasing companies, coming up with this idea that they could take a federal tax credit and combine it with state net metering laws and create a new business model that they could sell to individual citizens and say, “Hey, would you like to put solar on your roof? Well, we can make that profitable for you.”
So, you actually saw a massive growth in solar, way faster than any utilities or even policy makers really anticipated. That was when you started to get a really big backlash starting in 2013 where the Edison Electric Institute which is the association for electric utilities, the private electric utilities in DC, they started to work to say, “Hey how can we weaken this policy and roll it back across the states?” They’ve been very successful at doing that. So, even those this policy is sort of consumer and public facing and is benefiting every day citizens, it hasn’t been enough to hold the policy in place. You’ve seen pretty protracted battles in places like Nevada and Arizona, Indiana. A lot of states have been rolling back this policy.
So, some of the conventional wisdom that we might have where we bring the public into the policy and therefore we have a benefit from it and therefore it should be sticky and be more resistant to rollback, that really hasn’t helped in the case of net metering. I think that’s just be utilities are a very strong vested interest that has dominated a policy domain for over 100 years and public groups have a much harder time just organizing themselves to say, “Hey maybe I might in the future want to put solar on my roof, so I would prefer if you didn’t get rid of this policy,” is a kind of classic collective action problem about the public versus a sort of concentrated vested interest group.
Grossmann: Historically, many of the successful under the radar policies came in big energy bills after crises.
Stokes: A lot of these federal energy laws are very long and complex pieces of legislation that take years to negotiate. They’re often triggered by energy crises. So, oil prices getting very high, natural gas prices spiking. You have some kind of focusing event. This is work that Eric Smith, one of my colleagues has focused a lot on and Hannah [Breets 00:32:41], my co-author also works a lot on that you have these crises and that drives these policies on to the agenda. So, that’s why we saw the 1992 law, that’s why we saw the 2005 law. So, if we were to have something like that, it would probably be driven similarly by some kind of crisis.
Currently, congress and the president don’t believe that climate change is the crisis that I believe it is. So, I don’t think that’s going to drive this onto the agenda, but I think you do see in that case that even when you’re dealing with a fossil fuel crisis, you can still have these windows of opportunity to put little provisions into laws that end up having a lot more consequence than people anticipate. So, a big package on energy or climate change is a kind of vehicle that we could see in the future where we could be getting more support for solar or wind or for electric vehicles or even for things like advanced nuclear. These kinds of low carbon technologies that are really essential to addressing climate change.
Now, is president Trump likely to do this under the current or future administrations? I don’t think so because if you look at history, the president is often the one driving these energy bills on to the agenda. He goes and makes speeches and he says this is a big problem. President Trump has not been very interested in doing that. He initially talked about doing stuff on infrastructure, but in practice, very little has been done under the Trump administration on infrastructure. He doesn’t seem to be very focused on the policy details which is what you really need to pass one of these kinds of technical omnibus bills. So, I don’t see a lot of movement on this in congress and of course we know that congress is not even passing very many laws anymore. They’re doing a lot less than they even did 10, 20 years ago. It will take several years to negotiate a package like this.
This is in part what the Green New Deal people are trying to do. They’re trying to say, “Hey, let’s have a resolution. Let’s start talking about this,” because they recognize it will take several years to negotiate. But you’re not really seeing a broader energy conversation going on right now where people are saying, “Hey let’s get this on the agenda. Let’s start debating it.” So I don’t really see a big omnibus energy bill passing like the 1992 or the 2005 law really any time soon.
Grossmann:The same kinds of dynamics come up in the transportation space, but there the technology did not live up to the policy hype.
Stokes: The transportation sector has different set of interest groups, actors, but some of the dynamics are similar. So, initially biofuel is gone in the agenda because of sort of a farm lobby where you saw corn being used as a fuel and therefore used as a new revenue for farmers. Conner really talks about the details and the politics around that in great detail, but I think her story of Sally [inaudible 00:35:38] ethanol is an amazing story where you see the same kind of dynamics playing out that I’ve talked about in the electricity sector. Basically there was this new technology and congress decided to pass a law. The second renewable fuel standard law in 2007 and they thought that they could mandate a whole amount of this new technology.
What happened was that the technology really wasn’t available. So, congress ended up passing this impossible mandate. You can see in that case the fog of an actor playing out in a different way than the electricity sector. So, in the electricity sector you sort of forecast that the technologies aren’t going to do very much and they end up outperforming. In the transportation sector, the technologies often end up underperforming. So, you get these huge mandates for biofuels and then the industry and the technology really are not there to meet those mandates at all. But it just shows you that across the board that energies are really technical and difficult policy domain and that a lot of the time, both interest groups and politicians don’t really know what they’re doing and it’s very hard to understand what policies will do once they’re implemented.
When you look at electric vehicles, it’s a pretty interesting story for the same reasons. You see a lot of technology under performance. So, California starting in the late 1980s and early 1990s did a big push to try to drive electric vehicles. What you can see there is that initially the technology really wasn’t there to meet the mandates. So, in 1990 California passed a zero emissions vehicle mandate kind of like the mandates that we see in electricity for wind and solar, but there weren’t actually electric vehicles available to meet those mandates. So, the policy didn’t quite work. So, this just shows that fog enactment can really cut both ways.
Grossmann: Stokes says our main policy tools have been subsidies. It’s a lot harder to impose costs.
Stokes: Imposing costs is really hard. I will say that a lot of people focus nowadays on the sort of subsidies or benefits to these new technologies but you have to remember that energy policy was done this way before we started talking about clean energy. There was a lot of subsidies given to fossil fuels and those subsidies remain. So, not only are we subsidizing wind and solar today, we are continuing to subsidize fossil fuels through the federal tax code. Similarly, nuclear energy was really developed in that kind of a way. So, energy policy is often at the federal level a story of carrots rather than sticks.
When there have been efforts to try to impose costs, most recently in 2009 with the Waxman-Markey bill, this was the really big law that almost pass both chambers and would have created a carbon tax and invested a lot of R&D and actually done a lot of things. That bill really struggled because of in part concerns about cost. You have to remember that the fossil fuel industry is an extremely well organized politically influential industry that gives a lot of campaign contributions that is extremely effective at lobbying. They are very smart about what cost imposition is going to look like. There is no fog of enactment operating with a carbon tax. People know that it is going to impose costs on dirty fuels.
So, using that approach is very difficult. There have been some groups who have been pushing this idea of a cap and dividend. Which is the idea that you would create a tax on carbon and then you would recycle those revenues back to the public through basically rebates of some variety. That’s been tried currently in Canada and we’ll see how that plays out. It’s been done in British Columbia historically in Canada. It was put on the ballot in Washington state in the fall and failed. The story there is not as straightforward as people would hope. It seems that the costs are still pretty salient to people and even if you give them the benefits back after the fact, they still kind of focus on the cost.
So, I’ve done a little work looking at the BC carbon tax and divided and there isn’t a lot of evidence that people like it just because they’re getting these dividends back. So, the jury is still out on if we could have a sort of hybrid mechanism where we oppose costs but still recycle the benefits back, but I wouldn’t be too optimistic that it’s going to function as well as certain advocacy groups, groups like the citizens climate law be really hope that it will.
Grossmann: Ray agrees, but he says we can think harder about selling the benefits even if we do impose a carbon price.
Rabe: Parallels with trade are fair to consider. So, if we’re talking about some kind of offset or compensation, that’s really important to consider for a number of reasons for those who might be disadvantaged. I do argue and I think this has been born over multiple decades in this area of carbon pricing that the policies that are most successful that last over time and perform well are ones that think not only about how you impose that prices, but how you might use that revenue, not to eliminate the pain or completely offset it, but is it possible in the public imagination to argue that, yes we are going to impose this tax, but here is the package of how that revenue is going to be allocated.
Can that be a winning combination? Now, that’s not easy and that winning combination may differ from jurisdiction to jurisdiction, but even going back to the cases that I noted earlier, the case of British Columbia, a key selling point there was the notion of revenue neutrality. For every dollar extracted through a carbon tax, a dollar would be invested in initially a rebate to citizens of British Columbia, but then over the longer haul, tax reductions dollar for dollar. But how you use that revenue in a way that it’s fair, just, and also works in terms of political terms. That’s an enormous challenge, but also an enormous opportunity I think.
Grossmann: He agrees with Stokes that non-carbon price policies might be more sustainable even if they’re less cost effective.
Rabe: I think that Leah raises some great points here. I actually argue in the book that what we’ve seen empirically is that not only are governments more likely to adopt things like portfolio standards, but to maintain them and expand support over time. When we do surveys on this, these other kinds of policies, particularly a clean energy standard or an equivalent continue to poll much better amongst Democrats, Republicans and it’s been any form of a carbon tax. I think she’s right that certainly some of these policies have been well designed, have been thoughtful and been able to sustain support. The portfolio standard adopted in Texas initially in 1999 has been hugely successful.
Although I would also argue that that’s been combined with [inaudible 00:42:46] Texas version of a carbon price. A fee on electricity bills have raised nearly $9 billion. To take that renewable electricity that was being produced in part through a mandate in remote parts of Texas but then actually pay for that in new transmission to get that into population centers. So, I think a challenge here but also a really interesting opportunity is to look not just at the track record of what has or has not worked in the carbon pricing area but also some of these other policies that are probably not going to be as cost effective per unit or molecule of greenhouse gas reduction as other policies, but maybe reasonably effective and actually may work in harmony.
Especially with something like a carbon tax or adding a direct price may only further fuel some of these issues and transitions. That said I think there also are a lot of policies that we have opportunities and perhaps need to consider dispensing with. The extent to which governments, federal and state, but governments around the world subsidize energy production of fossil fuels. Drilling subsidies in some cases in the US, going back to the first World War period. Created on a temporary basis. These are expensive policies. I call these the reverse carbon prices because they provide continued subsidy from government, state and federal to the fossil fuel industries to reduce their cost and produce more. We have a wide range of policies to look at and consider here, beginning with some of the ones that you mentioned.
My hope would be certainly in the US and we’re beginning to see this internationally, there would be a review of not just how you design a carbon price, but how you would design it to actually work effectively with existing policies that have a lot of political support and then which policies are just things that should be retired and eliminated in some kind of a strategy. To me, at the top of that list would be substantial subsidies for fossil fuel expansion.
Grossmann: Stokes thinks the US deserves a bit more credit for already contributing to disruptive energy policy and technology.
Stokes: The US in terms of clean energy and some of the work that I’ve worked on is really an important leader internationally. This country spends more historically and to some extent currently on research and development, for energy technology, it is still a leader internationally in terms of clean energy innovation. You have countries like China starting to challenge that dominance, but what the US does is really consequential to what the entire planet will do on climate change. In some ways, I feel that the US is a leader too from a policy perspective. A lot of people point to Germany to say that Germany with the energy [inaudible 00:45:34] and their [inaudible 00:45:35] tariff policy, they did a huge investment in solar.
Stokes: But what a lot of people don’t realize is that at that same time, Germany retired all of its nuclear energy fleet and continues to subsidize really low quality coal that is domestically manufactured. So, the kinds of bankruptcies that we’re seeing in the United States in the coal industry is really not playing out in Germany yet. In fact, they have a plan to phase out their subsidy to the coal industry in …
They have a plan to phase out their subsidy to the coal industry in the order of decades. So, it’s easy to point to Germany and say, oh wow, they’re a leader. And it’s true that they did subsidize solar for the rest of the planet. But when it comes to their overall electricity mix, they really are not a leader. Shutting down nuclear means that the carbon intensity of their mix has slightly increased in certain years and continuing to subsidize coal as an advanced economy is really shameful policy.
Stokes: So I feel that the United States is having a more messy political battle between advocates and opponents and that is manifested in some of these denial campaigns. But you can also see its consequences in terms of these big companies going bankrupt. Utilities like FirstEnergy, no longer able to subsidize its coal generating fleet and having to put that through bankruptcy. Coal companies like Peabody going bankrupt. You really are seeing some big shakeups happening in the U.S. context that other more planned economies that function under these corporatist systems are really not going through.
Grossmann: Rabe says we are reducing carbon, but the latest news is not good.
Rabe: In the United States, there has been some appreciable reduction in greenhouse gas emissions, especially since the high water mark of 2005, and those changes have been most notable in the electricity sector where the reductions have actually been quite significant. Those are linked in many respects to shifts from coal to natural gas, but also the significant gains in energy efficiency and expansion of the use of renewables, most notably wind, but also increasingly solar. That said, the news of certainly the last year or so since the initial publication of the book is that the United States and the world have not cracked this problem. And simply left on its own it’s not clear the technological change will continue to produce a reduction in emissions. American emissions they actually went up not minimally last year, very dramatically in China, other places around the world, and those numbers are not looking as good as they were, frankly, when I closed the chapter on the last revisions that I could make on the book.
We’ve also begun to see as the science of climate continues to be even more confident that not just minor reductions but deep reductions in fossil fuel use and greenhouse gas emissions are going to be just crucial and essential. That slow patterns of adjustment are probably going to be insufficient. So we really do have some significant challenges on our hands.
One other piece that I think has begun to shift as well that so much of the hope in the U.S. and really around the world in this transition from coal to natural gas. That is predicated on the assumption that the methane, the CH4, which is a much more potent greenhouse gas than carbon dioxide in the first century of its release into the atmosphere, that those emissions are kept as close to zero as possible at the point of production at the drilling operation, but on that supply chain. And all that we’ve seen in the last couple of years from very rigorous studies suggest that the methane numbers from oil and gas production and down that chain in the U.S., China, and elsewhere is much higher than we thought as recently as just a few years ago. So all of that further calls into question how we pursue a strategy that will probably have to have deeper and faster cuts than we anticipated even a few years ago.
Grossmann: Both see better news in state policy.
Rabe: And I think states do occupy a very interesting point right now in the American system. They have been active. Some of these policies are interesting to consider and I think the classic formulation of federalism is allowing states to become laboratories of democracy. We can see a lot of illustrations and examples of what didn’t work and last over time, but we can also see models and best practices in a way that’s not purely theoretical. They’ve actually been tested within jurisdictions. I think those lessons and ones from around the world create a real opportunity for us in the U.S., but also our national counterparts, to base policy not just on a theoretical abstraction, but what might work. And there’s some very interesting conversations underway in a good number of states, including states like New Mexico by the way, which produce a lot of fossil fuels, how they begin to transition and manage their economies effectively. And hopefully that gives us even more momentum going into the future of this.
Stokes: A lot of people like to talk about cities because when the Trump administration decided to say it was going to remove itself from the Paris Agreement, which is the big international climate change agreement, a bunch of cities and companies and state said we’re still in. And they had big conferences and they talked about what they would do. And you’ve seen this proliferation at the local level of these 100% by 2030 or 2050 clean energy targets. And I tend to be fairly skeptical of those approaches because cities don’t really have the jurisdiction or the tools to meet the targets that they say they want to meet. What I’m way more excited about are states and exactly what you just talked about, the shift in democratic control that happened after the midterms. We are starting to see a pickup in a lot of state houses recommitting to the clean energy transition.
So for example, New Mexico has passed a new renewable energy law, Maryland is poised this week to pass a new renewable energy law. And the amazing things about these laws is that they’re actually setting up timelines that are on the order of what we need to be doing to address the climate crisis. So they’re saying things like 50% clean energy by 2030 and 100% by 2050, and that is what we need to be doing. Now, the downside of course, is that these are only a few states. So if we focus too much on what Maryland or California or New Mexico or New York are doing, we can miss the broader story, which is that the south has never passed a clean energy target of any kind. That Florida, their utilities have been battling just small incremental policies like net metering or little bits of renewables for a decade.
Stokes: So, it’s not enough to go piecemeal state by state and say, wow, New Mexico’s on track to meet the problem, and Maryland is, because actually all of the United States needs to be on track to meeting the problem. And hopefully if we do that here, that will create spillovers for other countries because we’ll make technology cheaper and other countries will start following. I am hopeful about renewed action at the state level and it’s certainly new and it’s probably a reaction to the Trump administration, but I would just caution people that this is not enough to solve the problem.
Grossmann: The Green New Deal has re-raised the call for national action. Rabe says it’s increased the salients but it’s hard to see signs of successful coalitions or policy.
Rabe: I think the Green New Deal has provided a real service by raising this issue anew and underscoring the need for policy, however one crafts that, that ultimately has impacts and cuts across multiple sectors that this cannot be focused just on transportation or just the electricity sector or building energy efficiency. It’s an across the board set of questions, and with it we probably are going to need to think creatively and outside the box through a combination of policies. That said, a real challenge moving forward with the Green New Deal, but any kind of policy design that could be viable in the U.S. in coming years, but also more broadly, is how you really begin to stitch together a coalition that is broad, diverse, can be maintained and built over time. In a country like the U.S. it cannot just involve people who come from states or legislative districts that don’t have much manufacturing, that don’t produce fossil fuels.
It’s going to require some kind of broader buy in, especially in a country where now more than half of our states produce some level of fossil fuels. So this is going to be an enormous challenge. I also think if indeed there is some expectation that 2020 could be a kind of landmark election where climate change might be a much more prominent issue than it has been in previous ones, that it might deliver electoral outcomes and lead to more officials being elected who want to do something about climate change, it is dangerous to then think that there’s very little policy design underway or in planning now for activity that then would have to take place early in 2021 after perhaps a new president and a new congress take power. I think the history of successful environmental legislation, clean air, clean water, a great example is the 1990 Clean Air Act amendments, is that one has to begin to move into some level of detail about what those policies would look like if not marking up bills.
What are the particular tools, policies, if there is going to be a carbon price, how is that going to work? If there is revenue that’s going to have to be applied, where is that going to come from? This is a time not just to raise awareness that climate change is a big problem, but beginning to think about what those ideas might be and how that might come together. And I have been concerned thus far that I don’t think we’ve seen those more specific ideas or coalition building efforts through the Green New Deal. And Washington DC is still a pretty fractious place. Interesting conversations and discussions underway, but we really do have a window of opportunity right now to begin to think about what those characteristics might look like.
Again, especially if we’re looking for policy that not just can be jammed through a congress after a one time only election, but really maintained and sustained over a longer period of time. It takes no climate sense to develop a policy that can last a few months or a few years and then gets reversed before it really kicks in. And that’s not just an American challenge, that’s a global challenge in how you bring some of these things together.
Grossmann: Stokes says the Green New Deal is learning a lesson of last time’s failure that public mobilization is necessary, but it still faces the problem of a realistic inside game.
Stokes: [Theves Scotchwall 00:10:48] was asked to write a postmortem on why the Waxman-Markey Bill failed. And what she argued was that the bill was really an inside congress deal. That you had groups like the Environmental Defense Fund sitting down with lawmakers and hashing out the details and the bill was like a thousand pages, but that they paid very little attention to the public or playing an kind of ground game. Whether that’s to really convince the public or just convince politicians that the public wants them to do those things. And there’s a lot of evidence from public opinion polling that the public does want action on environmental issues broadly and climate change specifically. But you know, those advocates really didn’t focus on that. And so I think with the Green New Deal there is a need for a broad based grassroots campaign.
I do think however that that is what the Green New Deal people are focused on already. If you look at what Alexandria Ocasio-Cortez is talking about, she’s talking about a broad-based public movement. The Sunrise Movement is obviously one example of that, as well as 350 Citizens’ Climate Lobby and other existing groups. I think what those groups are less focused on is the inside Congress negotiations that are going to have to play out. They are putting out a package and it has a lot of different things in it and granted it is just a resolution, but at the end of the day if this is going to move to actual legislation in Congress, there are going to have to be deals cut and I’m not sure how open to that many members of the group pushing this idea are.
And that’s going to be problematic because you’ve seen some of these tensions already playing out, where some groups are obviously against nuclear and yet nuclear is the largest source of carbon-free energy that we have in the U.S., and in fact retirements of nuclear energy is a big threat right now to meeting climate change because nuclear energy retirements are being replaced by natural gas. I think that there is some missing of some of the inside Congress, potential bootlegger and Baptist coalitions that could unfold with groups like the nuclear industry. So it will be curious to see how that plays out, and I will say that I am very hopeful about the Green New Deal in that at least it tries to solve the problem.
Grossmann: Rabe still recommends a price on carbon, but see some promise in direct taxes on production.
Rabe: I do think some combination of a carbon price, most likely a tax, makes enormous sense, especially if that can be designed to compliment what is already underway or likely to emerge. Again, examples of these clean energy standards and the like, so that policies are mutually reinforcing or complimentary to one another. I do think that can be part of the mix. I am also intrigued by the experience of almost all of the oil and gas production states about what happens when you place a tax at the point of production, known in many states as severance tax. In this case we’ve seen, although the initial adoption was brutal, states like Texas, North Dakota, Alaska maintain very high rates of energy taxation even though there were at the outset and have been continued industry threats to leave if those texts were maintained or at times to be increased.
I think we have enormous opportunities to learn from this severance tax experience and this could be a future area for federal involvement and federal action, especially going back to my point earlier on methane, looking much more closely at how we monitor and manage and try to reduce methane that is being produced from oil and gas production, but also sanitary landfills, waste disposal facilities and agriculture. This is truly low hanging fruit that emerges from inefficiencies and operations, whether it’s a landfill agriculture, but also oil and gas production. I think we’ve seen in a number of places around the world, most notably Norway, putting prices at the point of production, including methane into that calculation, by the way, Norway took steps on this a long time ago and appears to have methane release rates from oil and gas productions that are a fraction of what we’re seeing in some states, most notably perhaps visibly North Dakota with its very high methane release rate.
So I would also put a pitch in to think much more about how we monitor continued production and extraction and consider placing some kind of a tax or pricing mechanism there and then possibly sharing that revenue with states to really develop better technology, to help them prepare for transitions to futures where something that they’re all concerned about, what happens when they stop producing less fossil fuels and have to move into some other areas. So some kind of combination in that area, but I would really encourage a greater focus on this point of production that relates to methane and this idea of how we think about that stage of the process.
Grossmann: Stokes next step for research focuses on backlashes to climate policy from energy companies and citizens.
Stokes: So I’m finishing a book right now called Short Circuiting Policy, which is about organized interests in the American states and the backlash against clean energy. And it looks at basically what’s been happening at the states and how fossil fuel companies and utilities have been pretty good at rolling back these policies and delaying the clean energy transition. So hopefully I’ll be done with that book in the next month or two and it will be out in early 2020.
Other than that I have a whole bunch of projects looking at, for example, state legislators and their staff and how they don’t understand what the public wants on things like climate change, minimum wage increases, and many other policy areas. So broadly I’m interested in understanding what are we doing on environmental issues in the United States and what are some of the barriers to greater action. So for example, I have another project looking at protest against wind energy. When we talk about what something like the Green New Deal or really any comprehensive policy to address climate change is calling for, they’re actually calling for multiplying wind turbines by a factor of 10. So we have about a thousand wind projects in the United States right now and we’re talking about multiplying that to about 10,000. Those projects will have to be sited in communities all across the United States, and we’ve seen that certain places, Massachusetts being a pretty prominent example with things like Cape Wind, there’s been a really big public backlash against those projects.
Stokes: And so what I’ve been doing is mapping all the projects and using newspaper data to try to understand where do people protest against wind energy and where do they not, so that we can do a better job when we site wind energy in the future, building up local support and making sure that we can actually do this transition in a fast way. Because sticking a bunch of wind energy in peoples’ backyard and then adding transmission lines on top of that without giving people benefits or without thinking about where you’re putting these projects is likely to provoke a backlash. And that kind of a backlash will also slow the energy transition.
Grossmann: Rabe is also looking at energy transitions in fossil fuel states, but he wants more focus on other greenhouse gases like methane.
Rabe: I actually find myself looking much more at some of these severance tax and methane kinds of issues. I’ve really been intrigued to look at how a number of states have begun to think long term. They know that there is this problem of the so called resource curse and as they become more and more dependent over time on fossil fuels for their economies and the like, they run risks of not having good diversified economies. We’re beginning to see a few states, most recently North Dakota in recent years, actually create trust funds. Building on something that was done earlier in places like Alaska, to actually set aside some of the short term bounty from these oil and gas taxes, especially when the revenues surges, and stock that away for a substantial investment, careful investment and longterm strategies. In Alaska, for decades that has meant a dividend check that every Alaskan receives, which is very interesting to think about giving some carbon tax proposals that would actually return revenue to citizens through that tax.
But there are other ideas and mechanisms as well, and so I’m really interested in these questions of extraction, the severance tax regime, and thinking much more about methane, which my colleagues in the natural and physical sciences examine a lot, but the social sciences, including my own discipline of political science, our own discipline, Matt, have been much slower to engage. How do we deal with some of these other greenhouse gases, CH4 methane, but others, that extend the problems of climate change because it’s not just carbon dioxide? And might there be some real opportunities to make some substantial gains without huge economic disruptions in these areas?
Grossmann: There’s a lot more to learn. The Science of Politics is available bi-weekly from the Niskanen Center and on iTunes. I’m your host, Matt Grossmann. Thanks to Leah Stokes and Barry Rabe for joining me. Please check out their work, Politics in the U.S. Energy Transition and Can We Price Carbon? And then listen in next time.