The Obama administration has proposed new rules intended to limit carbon emissions from electrical power plants. The rules are objectionable to virtually all Republicans as they extend federal environmental regulation, at least incrementally.
They also are so bland and cautious that they will satisfy few who think climate change is a vital problem. Most economists find them a third- or fourth-best approach in terms of economic efficiency. But they probably are the best one could do in the current political environment.
One problem is that the issue was overladen with politics from the start. Barack Obama promised, in the 2008 campaign, that he would initiate measures to reduce greenhouse gas emissions. The issue is vital to many of his supporters. Carbon from burning fossil fuels, especially coal, is the largest component of such gases. But more than five years have passed with little tangible action from the White House.
There is little chance of getting new legislation to limit carbon emissions through Congress, and that probably will become even more difficult after the congressional elections. So it was now-or-never time, and any initiative would have to involve application of existing law rather than new action by Congress.
From a political standpoint, Congress is dominated by infighting within the Republican party in this year’s elections and in the run-up to 2016. Surveys indicate a substantial majority of Americans are convinced that human activity is changing climate for the worse. This is true even for a thin majority of self-identified Republicans.
But among active Republicans who participate in primaries and caucuses or work for candidates, the view predominates that “climate change” is a hoax.
Moderates who once voiced support for carbon emissions controls are walking away from that position.
From an economic standpoint, greenhouse gases are an example of a cross-border external cost if there ever was one. Economists agree that measures to address externalities that cross state or national boundaries are most efficient when undertaken by the affected area as a whole and not piecemeal by individual states or nations. But that usually is politically difficult, and the more entities involved, the harder it is. In this case, the scope is global.
Economists also would advocate market-based measures, like emissions taxes or tradable emissions permits.
These positions, that cross-border problems be addressed with cross-border measures and that market-based measures are superior to the command-and-control regulation that long dominated U.S. environmental policy, are not controversial within the discipline. But they have failed to convince many people in the United States, especially those on the political right, who have embraced command-and-control over the past decade.
The Obama proposal involves using existing authority under the Clean Air Act to require states to implement measures that will reduce carbon emissions from power plants 30 percent from 2005 levels. This must be achieved by 2030.
On its face, this approach has problems. Just as international agreements require equal percentage reductions from some initial level, applying the same percentage to each state would induce both inefficiencies and unfairness, because the cost of reductions can vary greatly from state to state. The administration recognizes this and has specified different percentages for different states, from 18 percent for Kentucky to 44 percent for New York.
Moreover, while the measure is aimed at reducing pollution from electrical generating plants, states will have some flexibility in using “offsets,” or reductions in other sectors, to meet the goals. If there is a cheap way to reduce emissions in, say, the chemical industry or traditional steel mills, states can do that in lieu of measures limited to power plants.
The varying targets for different states end up being somewhat arbitrary and may be the subject of extended litigation. But they are less economically inefficient than a flat percentage across all states. And the option of implementing off-setting reductions outside of electrical plants reduces some of the inefficiencies that would result from making a sector that contributes only 40 percent of emissions to bear the brunt of total reductions.
Skeptics may note that electric plants were targeted because we already are in a technology-induced long-term restructuring of that sector anyway. The increased availability of natural gas from fracking of shale deposits has lowered gas prices and motivated electric companies to replace older coal plants with combined-cycle natural gas plants, as Xcel Energy did with some of its plants in the Twin Cities, including replacing the High Bridge Plant in St. Paul. Using 2005 as a base year for reductions means most such facilities already completed will count toward the targets.
Skeptics may also note that calculating mandated reductions only for emissions from the power industry means that the substantial, but poorly quantified, increases in leaks in raw natural gas into the atmosphere in the course of developing new gas fields won’t figure into the equation.
Critics are howling about a “war on coal.” Coal use will drop, but much of that would have occurred anyway because of market forces. And if we had a libertarian approach to resource policy based on property rights that required anyone mining coal to pay other landowners harmed by the mining activities, we would eliminate a great deal of coal mining east of the Ohio River anyway. “Mountaintop removal” would disappear.
Critics who argue that the proposed measures in themselves will have little impact on global CO2 levels and that actions by other nations are of equal importance are correct. Whether that justifies inaction on our nation’s part is a view that seems to vary greatly with where one falls on the political spectrum.
Some economists are optimistic that, having tried inefficient alternatives, the nation eventually will come around to market-based measures they favor. That will require a sea change for those to the right of the political center, a current moving back toward market-based approaches (even if they include the word “tax”) rather than away from them as has been the case since 2000. As with gay rights, this is an issue where views among conservatives vary sharply by age. Older conservatives tend to discount the legitimacy of climate change. But as age drops, concern grows. This is an issue that is not going away, and views across the political spectrum are likely to evolve over time.