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The Path Ahead for U.S. Climate Change Policy

It is clear that the Biden Administration is devoting substantial attention to addressing climate change, certainly in comparison with the previous Trump administration, but there is a long road ahead for the development of substantive domestic policies to reduce greenhouse gas (GHGs) emissions. That is one of the messages that emerges most clearly from the most recent webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA). A video recording (and transcript) of the entire webinar is available here.

As you know, in this webinar series we feature leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. In this most recent Conversation, I was fortunate to engage with someone who has solid experience in at least three of these sectors – academia, government, and the NGO community. I’m talking about Nathaniel (Nat) Keohane, my former student, co-author, and friend.

Nat Keohane is Senior Vice President for Climate at the Environmental Defense Fund. In the Obama administration, from 2001 to 2012, he served as Special Assistant to the President for Energy and Environment, and before that, he was Chief Economist at EDF. Going back a bit further, he was an Associate Professor at the Yale School of Management, and before that, he earned his PhD degree in Political Economy & Government at Harvard University, and his BA degree in History and Environmental Studies at Yale University.

Our wide-ranging conversation took place just one week after the Biden administration’s Earth Day Climate Summit (April 22-23), and so it was a very good time to talk about the newly-announced U.S. pledge – its Nationally Determined Contribution (NDC) under the Paris Agreement – and about how the target in the NDC, a 50-52% percent reduction of U.S. greenhouse gas (GHG) emissions below the 2005 level by the year 2030, might be accomplished.

More broadly, Nat Keohane shares his insights on both the science and the politics affecting climate policy, and his hopes for the upcoming UN Framework Convention on Climate Change (UNFCCC) Conference of the Parties (COP-26), scheduled for November in Glasgow, Scotland.

“President Biden and his team hit the ground running immediately,” Keohane says, referring to the administration’s move to reenter the Paris Agreement on January 20th. “But there’s still a fair amount of skepticism in the rest of the world…and [there is] a need for the U.S. to demonstrate that it’s serious [about its commitment to climate policy].”

Keohane goes on to suggest that the ambitious new U.S. NDC will serve to incentivize other large emitters to increase the ambition of their pledges prior to the upcoming COP. Both Canada and Japan have already done so, Keohane notes, and there are hopes that China, India, and Brazil may follow suit if US Special Presidential Envoy for Climate John Kerry is successful in his climate diplomacy efforts with foreign leaders.

Here at home, Nat acknowledges that the Biden Administration faces an uphill battle passing significant climate legislation, but he argues that it can take very meaningful steps forward by regulating methane gas emissions, increasing investment in green technologies, and eventually building public support for a national carbon price, which would both stabilize GHG emissions and raise revenues.

“If we are going to really address climate change and reduce CO₂ emissions at the scale and scope and pace that we need to, both to solve the climate problem and to meet the President’s [GHG reduction] target … the best way to do it would include some sort of limit and price on carbon pollution across the economy.”

Keohane is very aware that the “the politics of a carbon price on Capitol Hill are challenging,” but he believes that a carbon-pricing approach could be sold to the American people as a way to raise significant revenues, as much as a quarter of a trillion dollars a year. “That’s a lot of money, and there aren’t a lot of other sources of revenue that come up with 250 billion dollars,” he says.

A carbon border adjustment – an import fee levied by countries with ambitious climate policies on goods manufactured in countries with no or less ambitious climate policies – is a controversial proposal that many countries and regions, including the European Union, are seriously considering (and in the case of the EU, moving to implement). Keohane calls it a “blunt force instrument … used to ideally help create incentives for other countries to act and to increase their ambition … but I don’t think we should think of it as a fine-tuned way to establish a carbon price that fairly addresses the carbon content of imported goods.”

As nations around the world prepare for COP-26 (assuming it does take place), Keohane expresses his hope that the U.S. will continue to leverage bilateral negotiations to encourage other large countries, particularly China, to increase their Nationally Determined Contributions (NDCs) before arriving in Glasgow. But, interestingly, Keohane also argues that climate leaders need to rethink the role of the COP moving forward.

“I don’t know exactly what that looks like. Maybe it involves more engagement among countries with best-practice sharing. Maybe it involves bringing in civil society or businesses to talk about implementation, but we need to think creatively,” he remarks. “Rather than have the object of every COP be some negotiated text in a world in which we’ve got the text … what we need is implementation.”

All of this and much more can be seen and heard in our full Conversation here. I hope you will check it out.

Previous episodes in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition,” Joseph Stiglitz’s reflections on “Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery,” Joe Aldy describing “Lessons from Experience for Greening an Economic Stimulus,” Jason Bordoff commenting on “Prospects for Energy and Climate Change Policy under the New U.S. Administration,” and Ottmar Edenhofer talking about “The Future of European Climate Change Policy.”

Watch for an announcement about our next webinar. You will be able to register in advance for the event on the website of the Harvard Project on Climate Agreements.

A New Day for U.S. Climate Change Policy?

There is certainly much enthusiasm and great expectations on both sides of the Atlantic Ocean regarding what can be expected from the new U.S. administration’s climate change policy. I offered somewhat modest expectations in an essay posted at this blog in mid-January before the Biden-Harris team was inaugurated. But now – in early April – major appointments have been made, executive orders announced, and new policies floated. So, this is a good time take a preliminary look at what has been accomplished in the first 10 weeks or so of the administration.

For that purpose, an exceptionally qualified observer is my friend and colleague, and most recent podcast guest, Jody Freeman, the Archibald Cox Professor of Law at Harvard Law School, where she founded both the Environmental and Energy Law Program and the School’s Emmett Environmental Law Clinic (which was directed for many years by Wendy Jacobs, who sadly passed away in February after a long illness).

Professor Freeman worked in the Obama administration, and before that she was closely involved in the Massachusetts vs. EPA court case that eventually led – via a U.S. Supreme Court decision – to EPA’s endangerment finding in the Obama years, which precipitated policy action on climate change under the authority of the Clean Air Act. You won’t be surprised that she pulls no punches in her comments on the Trump administration’s moves in the environmental realm, nor in her judgments and hopes regarding the Biden administration. You can hear our complete conversation in the Podcast here.

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. Jody Freeman very much belongs in this group, as one of the world’s leading authorities on environmental law, a former Federal government official, and a participant in deliberations in private industry.

Jody Freeman has this to say about the previous administration:

“The Trump Administration unraveled, weakened, or rescinded every climate regulation that the Obama Administration had put in place. And they went beyond that to weaken many other environmental rules too. And so, it’s an across-the-board effort to pull environmental protection back as much as possible and weaken the agencies that are responsible for putting rules in place to protect public health and to address climate change. In environment, climate, energy, it’s really hard to think of a major policy that was left untouched.”

On the other hand, Professor Freeman commends the Biden Administration’s early actions to reverse much of the climate policy damage caused by the previous administration.

“The president signed two sweeping executive orders on climate change within the first month. And they encompass everything you could possibly do with the agencies of the federal government, from how the Treasury Department finances overseas projects to how the Agriculture Department sends money to farmers. The administration is on the hunt for all of the policies that any agency can use to support its clean energy agenda.”

However, looking ahead, she recognizes that the Biden administration probably does not have the necessary votes in the Senate to pass any meaningful legislation placing a price on carbon. Short of that, she says there are many other actions the administration can take on climate and energy policy.

“Presidents like to use executive branch power. So, you can count on the Biden Administration to be trying to deploy all of the levers, all of the tools that it can use. And they include adopting new rules … for power plant emissions of CO₂, adopting new rules for car and truck emissions, adopting sector by sector rules that EPA has the authority to do. There are other agencies too, like the Department of Energy, which sets appliance efficiency standards. The Department of the Interior regulates extraction of oil and gas on public lands. You’ve already seen them freeze new leases on public lands, and they’re going to favor wind and solar siting on public lands.”

When I ask her about the negative perception of the fossil fuel industry among many climate policy advocates in the United States, Professor Freeman, who sits on the Board of Directors of ConocoPhillips, remarks that there are signs of progress on the horizon.

“I think the industry is in a moment of transition. I do see, for example, the European oil and gas companies are already making pledges and investments in alternative business models. By no means are we down the road far enough or fast enough, but you can see that they’re starting to think about becoming different kinds of companies over time. And I think the U.S. companies are following suit.”

My complete conversation with Professor Freeman is the 22^nd 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:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from the Washington bureau.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.

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

The Future of European Climate Change Policy

In my previous blog post, on January 14^th, I offered my personal views regarding “International Climate Change Policy & Action in the Biden Administration.” Today, I’m pleased to turn to a parallel assessment of future European climate change policy by Ottmar Edenhofer, a greatly-accomplished German economist, admired by academics, as well as leaders in government, industry, and non-governmental organizations.

Professor Edenhofer’s presentation, “The European Green Deal – Reform or Regulatory Tsunami?” and our subsequent discussion is the most recent webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA). As you know, in this webinar series we feature leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. A video recording (and transcript) of the entire webinar is available here.

Ottmar Edenhofer is Professor of Economics at the Technical University of Berlin, the Founding Director of the Mercator Research Institute on Global Commons and Climate Change, and Co-Director and Chief Economist of the Potsdam Institute for Climate Impact Research. He has been a major contributor to scholarship on the economics of energy and climate change, and served as Co-Chair of Working Group III of Fifth Assessment Report of the Intergovernmental Panel on Climate Change, where I had the pleasure of working under his leadership. He is a key advisor of the German Government, as well as the European Union. He holds a Ph.D. in economics and a B.A. degree in philosophy (a pairing of degrees which – I’m delighted to say – he and I share).

In his presentation and the discussion that follows, Ottmar Edenhofer offers a frank assessment of the European Green Deal’s potential to significantly address the impacts of global climate change.

“It’s a very good time to talk about the European Green Deal because now the prospects that United States and Europe could work closer together on climate change or climate policy and energy policy are very good,” Ottmar notes, referring to the change in U.S. administrations and recent remarks by European Commission President Ursula von der Leyen reaffirming the European Union’s (EU’s) intent to reduce its target for emission reductions from 40 percent to 55 percent by the year 2030 and to achieve net carbon neutrality by the year 2050.

Calling it a “huge task,” Edenhofer outlines the actions that would need to occur to achieve such ambitious goals, including enhanced efforts to decarbonize the power sector, accelerated electrification for end-users, increased investments in bio-energy and semi-synthetic fuels, and advancements in carbon dioxide removal technologies. Using the EU’s climate policy impact assessment as a framework, he walks us through three different policy scenarios, ranging from one that relies heavily on regulation to one structured primarily around carbon pricing.

Characterizing the heavily regulatory approach as a “high-risk scenario,” he instead promotes the idea of an “intermediate step” in a which a mix of policy measures and carbon pricing are deployed to move toward the goal of a 55-percent carbon emissions reduction, and toward a longer-term strategy of using carbon pricing alone as the primary driver in CO₂ reduction efforts.

“The crucial question therefore is, how can we design this intermediate step, and this is really the most important debate around this reform proposal,” he says, noting that several issues would need to be addressed. “The intermediate step has to address the distributional issues and guarantee the stability and manage the political economy challenge between the sectors.”

Professor Edenhofer suggests that the intermediate step that may gain the political support necessary to succeed would be one that would allow for two separate emissions trading systems – one for the energy and industry sector, and the other for transportation and buildings.

“Meanwhile we could define gateways between these two systems. “Creating such gateways might have a two-fold effect – the first one is that market participants already anticipate that there are gateways and they anticipate these enterprise expectations, and this could lead to a convergence of the different prices across the sectors. And secondly, this is a starting point to manage the division of labor among the sectors, and this could be a credible pathway toward a carbon-price scenario when we have one ETS with one credible CO₂ price scenario.”

In his presentation, Edenhofer also acknowledges the role that fiscal federalism could play in affecting the future direction of climate policy in Europe. While arguing that carbon pricing could generate roughly 800 billion euros between now and 2050, he notes that the funding base would shrink over time as emissions decrease, and therefore would not serve as a stable revenue source. He has answers for this challenge as well.

After his presentation, Professor Edenhofer responds to questions from the virtual audience of more than 200 people. One question focuses on the impact of the new Biden-Harris Administration in Washington on global efforts to address climate change.

“The good thing is they are back in the Paris Agreement. The announcement alone that the U.S. is committed has already helped.”

All of this and much more can be seen and heard in the full webinar here. I hope you will check it out.

Previous webinars in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition,” Joseph Stiglitz’s reflections on “Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery,” Joe Aldy describing “Lessons from Experience for Greening an Economic Stimulus,” and Jason Bordoff commenting on “Prospects for Energy and Climate Change Policy under the New U.S. Administration.”

The next bi-monthly HPCA Conversation on Climate Change and Energy Policy will take place in March. You can register in advance for that event at the HPCA website.