Satellite image of Antarctic sea ice

Source: NASA/Goddard Space Flight

Center Scientific Visualization Studio

New policies and regulations can have a substantial impact on the rate of climate change. Many solutions have been raised. We look at the most likely, including greater energy efficiencies, carbon cap-and-trade systems, carbon taxes, new fuel economy standards and renewable energy technologies such as wind, solar power and bio-fuels. But until these mitigation measures are enacted, we need to look at practical adaptations as well, including zoning requirements, appropriate land use regulations and a new structure for insurance rates.

 

A global policy challenge

The world’s countries need to take significant steps to mitigate climate change. In particular, we must transition from the use of fossil fuels to non-polluting forms of energy such as solar and wind energy, and learn to use energy more wisely. To minimize the adverse impacts of climate change, we need to enact regulatory tools and financial incentives that will encourage both businesses and citizens to reduce emissions of carbon dioxide and other greenhouse gases.

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Climate change policy in the United States

The U.S. Congress has been debating whether and how to implement various carbon reduction measures in the U.S. for several years, and how to engage other nations on a more global solution. President Barack Obama has endorsed a long-term target that would cut emissions to 80 percent below 1990 levels by 2050. The U.S. House recently passed The American Clean Energy and Security Act, which calls for an 83 percent cut in carbon emissions by 2050 using a different base year: 2005. The U.S. Senate refused to take similar action, however, so that legislation is now stalled. The U.S. Environmental Protection Agency (EPA) launched a new regulatory program in January 2011 that seeks to reduce carbon emissions, beginning with the largest sources. The EPA began this new program based on the authority granted to it under the Clean Air Act.

The Obama administration has proposed that we invest billions of dollars in “green energy” technologies to, for example, advance the next generation of bio-fuels and fuel infrastructure, accelerate the commercialization of plug-in hybrids, promote development of commercial-scale renewable energy, and modernize the nation’s electrical grid. Many of these goals were embodied in The American Recovery and Reinvestment Act, commonly known as the "stimulus package," enacted in early 2009.

Can we really change our behavior and our policies? As the authors of the Northeast Climate Impacts Assessment report wrote: “Although the task of reducing emissions may seem daunting, the nation achieved a similarly rapid energy transformation only a century ago as it shifted from gaslights and buggies to electricity and cars over a few short decades. In 1905, only 3 percent of U.S. homes had electricity, virtually none had cars, and few could envision how these innovations would transform America and its economy half a century later…With foresight and perseverance we can dramatically modify our energy system once again….” And we can do so without jeopardizing our quality of life.

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How can energy efficiencies be implemented?

According to energy secretary Steven Chu, energy efficiency is the easiest path to take to remediate climate change; he calls it the “the lowest hanging fruit.” According to research from the McKinsey Global Institute, the projected growth in the world’s energy demand could be cut in half by 2020 just by taking advantage of opportunities to cut waste. These include changes like turning off the lights in office buildings at night, producing higher-mileage cars, and developing more efficient household appliances and lighting. Ideally, consumers should be provided with the tools to monitor and adjust their energy use during the day, so they could cut back when prices are high. That would be a stimulus to reduce emissions of carbon, as well as save money. NSTAR, the major utility that provides power to the Boston region, has just begun to test such a system.

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Industrial power plant

© UCAR

What is a carbon cap and trade system?

One of the policy measures already in widespread use in the Northeast and Europe is a “cap and trade” system.

How does cap-and-trade work? According to The Wall Street Journal, “A cap-and-trade system uses financial incentives to encourage companies to reduce the amount of carbon dioxide they emit. A regulatory body sets an overall limit, or cap, on annual carbon-dioxide emissions and then assigns shares of that total to major polluters. If a company wants to emit more than its individual cap allows, it must buy emission permits from a business that is emitting less than its allotment. Over time, the pollution caps are ratcheted down, making it more costly to keep polluting, and achieving the desired reductions in greenhouse-gas emissions.” (“Paying to Pollute,” WSJ, September 15, 2008). The benefits of cap-and-trade solutions are that the pollution levels are clearly defined, and that companies can make the decision as to how to reduce their emissions as cheaply as possible.

Currently, the European Union has a cap-and-trade system in place for its 27 member states. In addition to the buying and selling of permits directly to companies, there is a secondary market and most permits are bought and sold on electronic exchanges. Investors can trade carbon permits just as they trade stocks, bonds and other financial instruments. A new program called the Regional Greenhouse Gas Initiative, or “RGGI,” operates similarly in 10 Northeastern and mid-Atlantic states. RGGI has an auction process by which companies must bid on the right to emit; proceeds from the auction are channeled back into green energy solutions. The program has generated hundreds of millions of dollars in this way over the first few years of implementation. The Western states in the U.S. are working on a similar plan, and backers of both regional programs assume that, ultimately, a nationwide program will take their place. Having gone first, businesses in our region will have a strong competitive advantage in such a national system.

The prospects for passage of a nationwide carbon cap and trade program within the next few years are now quite dim, as many members of Congress elected in November 2010, together with a handful of Congressmen who have long resisted such a program, have pledged to ensure that no new legislation enacted. As noted above, however, the EPA is proceeding with a new regulatory program for reducing carbon emissions using legislature authority enacted years ago. The agency will require use of best available technology at major sources of carbon emissions, rather than a cap and trade program.

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Source: U.S. Treasury

What is a carbon tax?

A carbon tax is a tax on emissions of carbon dioxide and other greenhouse gases. The purpose of a carbon tax is to reduce emissions of carbon dioxide by making it more expensive to pollute. A carbon tax can be implemented “upstream” on oil producers or refiners, or “downstream” on consumers who buy gasoline for their cars. It can be placed on selected industries, such as power plants that use fossil fuels, or implemented economy-wide on many industries. Proponents like this form of direct taxation because is straightforward and easy to understand, and doesn’t require extensive monitoring and enforcement. Many carbon tax schemes use a portion of the revenue generated by the taxes to reduce other taxes (e.g. income or property taxes) or to fund worthy projects such as green energy alternatives. The overall aim is to encourage energy producers and/or consumers to shift their spending to lower carbon activities. By making carbon-based fuels more expensive, the tax will enable non carbon fuels or technologies such as solar or wind power to compete more successfully. However, the carbon tax has to be pretty steep before consumers will be induced to change their habits (In 2008, it wasn’t until the price of gas reached $4.00 per gallon that people started buying more cars than SUVs.) If the Senate approves a carbon cap and trade system later this year, we are unlikely to see any congressional action on a carbon tax.

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Heavy traffic on a California freeway

© UCAR

How do we modify fuel economy standards?

Fuel economy standards have been set since 1973, when they were enacted in the wake of the 1973 Arab Oil Embargo to reduce fuel consumption by raising the average fuel economy of cars and light trucks sold in the U.S. Called CAFÉ (corporate average fuel economy) standards, they set a composite mileage goal for all the cars a manufacturer sells. Since these averages are measured “across the fleet,” each carmaker must sell a car with mileage above the standard for each car with mileage below the standard. (Trucks and full-sized SUVs that weigh more than 8500 pounds are currently excluded.) Carmakers that do not meet the standards are required to pay penalties.

Current fuel economy standards are 27.5 mpg for cars and 22 mpg for light trucks. Average fuel economy is 25 mpg across all vehicles. In 2010, the Obama administration announced new national standards that require new cars and trucks to reach an average of 35.5 mpg by 2016, a 40 percent improvement over the current level. The new standard will be phased in gradually over the next several years and applies to all states throughout the country, including California. Previously, California and a handful of other states had been moving to adopt their own standards. The new policy represents a dramatic departure from a decades-long debate that saw little or no progress on fuel economy.

Most of the major auto companies already have, or plan to introduce, various kinds of new technologies (such as hybrid vehicles or all-electric vehicles like the Chevrolet Volt or Nissan Leaf) that will offer greatly improved fuel economy. More than 1 million hybrids have already been sold in the U.S. China already has fuel economy standards for cars that are much higher than those currently in effect in the U.S.

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A wind turbine in Golden, Colorado

© UCAR

How do we set renewable energy standards?

To date, a number of states have adopted programs to mandate the use of renewable energy. These programs typically require energy producers to generate a given amount of power from carbonless technologies. They may also include renewable energy credits that can be traded on the open market.

Results so far have been mixed. According to “Energy Goals a Moving Target for States,” an article in the New York Times, even with the fast growth of recent years, less than 3 percent of the nation’s electricity is coming from renewable sources, excepting dams and more than half of the states have adopted formal green-energy goals but only a few—Texas and New Mexico for example—have met or exceeded their goals. In many cases the stumbling block has been a shortage of power lines to transmit the electricity generated from these means. In other cases (such as with the Cape Wind project in Massachusetts) there has been strong opposition to sitting renewable energy facilities in areas valued for other purposes.

Typically, the goals set by individual states range from just a few percent to 30 percent or more, depending on the availability of renewable energy resources and the political appetite for embracing them. If successful, renewable energy standards will increase the demand for production of renewable technologies, which should, ultimately, bring the per unit cost down. Some analysts worry, however, that a patchwork quilt of standards among individual states will ultimately be counterproductive, creating bureaucracy and conflicting rules and regulations. (Most electricity grids are regional, transcending state boundaries.) One solution is to institute a national renewable portfolio standard, which would require a set percentage of the country’s supply of electricity to come from renewable sources. This would have the result of requiring utilities to adopt alternatives on a broad scale, and give a boost to technologies whose cost will drop as the volume of production increases.

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Air pollution in Mexico City

© UCAR

What adaptation policies are practical?

It will be the focus of government, business and conservation groups to ensure that mitigation measures, while important, are not the end point. Because climate change is already under way, and it will take several years before policies such as a cap and trade system or carbon tax take hold, we need to implement policies to help us and the marine world cope with the problems caused by climate change, whether those be increased shoreline erosion or changes in the range and distribution of commercial fisheries or endangered animals or habitat. For example, the resilience of coral reefs to climate change can be increased by removing other stresses—such as pollution or disturbances from fishing gear. Projects like the Aquarium-supported Phoenix Islands marine protected area are imperative to save pristine coral reefs and the unique fish species they support.

To protect our cities from rising seas, we will need to revisit current zoning requirements, wetlands permits, and/or licenses regulating development along the shoreline. In urban areas such as Boston, it may be possible to bolster coastal property against rising seas and increased risks from storms, but there’s a significant amount of historical evidence to suggest that those measures won’t be effective for long expanses of coastline where coastal erosion is already a major challenge such as the eastern shore of Cape Cod or the southern coastlines of Martha’s Vineyard and Nantucket.

The solution in those areas is to buy time by enacting appropriate land use regulations and/or setting insurance rates that discourage people from living in the most vulnerable areas. Figuring out how to encourage people to relocate out of vulnerable areas before their property gets flooded or erodes is, of course, a very difficult political problem, especially given the high value of increasingly scarce coastal property. It will take courageous governmental leaders, wise insurance commissioners, and enlightened real estate developers to take on that challenge.

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