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Getting Ahead of the Curve: Corporate Strategies That Address Climate Change
Prepared for the Pew Center on Global Climate Change
Andrew J. Hoffman, The University of Michigan
This report serves as a "how to" guide for corporate decision makers as they navigate rapidly-changing global markets. The report presents an in-depth look at the development and implementation of corporate strategies that take into account climate-related risks and opportunities.
The report is comprised of two main sections:
1. The Synthesis Report lays out a step-by-step approach for incorporating climate change into corporate strategies and is based on results from a 100-question survey completed by 31 companies, six in-depth case studies, outside literature on corporate strategy, and input from the Pew Center's Business Environmental Leadership Council (BELC).
Synthesis Report (1.5MB pdf)
2. The Case Studies section features an in-depth look at the strategy-making process of these six companies:
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on Global Climate Change Pew Center
There is a growing consensus among corporate leaders that taking action on climate change is a responsible business decision. From market shifts to regulatory constraints, climate change poses real risks and opportunities that companies must begin planning for today, or risk losing ground to their more forward-thinking competitors. Prudent steps taken now to address climate change can improve a company’s competitive position relative to its peers and earn it a seat at the table to influence climate policy. With more and more action at the state level and increasing scientific clarity, it is time for businesses to craft corporate strategies that address climate change.
Pew Centerreport, author Andrew Hoffman of the has developed a “how to” manual for companies interested in developing effective climate strategies. One of the clearest conclusions is that businesses need to engage actively with government in the development of climate policy. After years of inaction, momentum is growing at the federal level to pass mandatory climate legislation. Nearly all the companies surveyed in this report believe that federal legislation is imminent, and 84 percent of those believe federal standards will take effect before 2015. With a number of new climate bills forthcoming, it is clear that Congress has entered the design phase for legislation. Now is the ideal time for the corporate sector to engage constructively with lawmakers to ensure that sensible policy is developed to reduce greenhouse gas emissions at the lowest possible cost. Universityof Michigan
And constructive engagement is tightly linked with another compelling theme of this report: the shift of companies’ focus to creating climate-related market opportunities. Companies with a strong history of reducing emissions are shifting their focus from risk management to exploring new business platforms. They understand better than their peers that new markets will be created and existing ones will change. There will be winners and losers. The shape of climate legislation will be the strongest factor in determining how the market rewards innovators of climate-friendly products and services, as well as how it punishes laggards. More than ever, integrating climate issues into corporate strategy is a necessary aspect of managing risk and seizing competitive advantage.
The Pew Center would like to thank Mike Lenox, Forest Reinhardt, and Paul Tebo for their comments on an earlier draft of the report; Alcoa, Cinergy (now Duke Energy), DuPont, the Shell Group, Swiss Re, and Whirlpool for agreeing to be profiled for the case studies in the report; all the companies that completed the Corporate Strategies Survey; and the many member companies of our Business Environmental Leadership Council that provided comments and guidance throughout the research process.
This report compiles the experience and best practices of large corporations that have developed and implemented strategies to address climate change. Based on a 31-company survey, six in-depth case studies, a review of the literature, and experience gained by the
The report describes eight specific steps clustered into three stages that describe the various components of a climate-related strategy. Table ES1 summarizes these steps, which include assessing emissions and exposure to climate-related risks, gauging risks and opportunities, evaluating action options, setting goals and targets, developing financial mechanisms, engaging the organization, formulating policy strategy, and managing external relationships. The report is organized along the framework presented in the table, though it must be emphasized that individual companies do not necessarily follow the steps shown in a linear fashion.
Lessons learned at each step of the strategy development process are presented throughout the report. Taken together, four overarching themes emerge from the survey results and case studies. The first is the importance of strategic timing. Some companies acknowledge the dangers of starting too early on climate action, while others highlight the risks of starting too late. Despite continuing uncertainty, there is general consensus among the companies in this report that recent changes in the level of external awareness about climate risks, state government action, momentum toward stronger federal policy, and consumer demand for cleaner and more efficient products make it imperative to act now. Well-timed strategies can prepare companies for eventual regulation and create flexibility for longer-range strategic options.
A second theme is the importance of establishing an appropriate level of commitment. While the companies in this report are leaders in their industries, some caution against getting too far ahead of the competition. For many companies, uncertain demands from government, the marketplace, and the financial community—coupled with limited hard data and models to guide aggressive action—make it challenging to support extensive expenditures on GHG reductions. Therefore, many companies justify early action on other grounds: the managerial imperative to undertake low-risk initiatives that produce immediate or near-term cost benefits; their fiduciary obligation to address risks from climate change and from related regulations, particularly to the extent these could affect future asset values and market positioning; and socially and ethically responsible business values—that is “doing the right thing.”
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A third theme for many companies is the need to influence policy development. Any policy that regulates GHG emissions will certainly constitute a major market shift, setting new “rules of the game” and changing the competitive landscape. Companies in this report feel they cannot leave the ultimate form of such regulations to chance. All policies are not equal; they will, by their nature, favor certain actions, companies, and industries. Early action is seen as a way for companies to gain credibility and leverage participation in the process of policy development, and thereby have a measure of control over their future business environment.
A fourth and final theme is the importance of creating business opportunities. Companies with a history of climate-related activity are trying to shift their strategies from a focus on risk management and bottom-line protection to instead emphasize business opportunities and top-line enhancements. Firms that incorporate climate change into their core business strategies will be in the best position to take advantage of emerging opportunities and gain competitive advantage in a changing market environment. Sustainable climate strategies cannot be an add-on to business as usual; they must be integrated with a company’s core business activities.
In the end, it is the consensus of the companies in this report that climate change is driving a major transition—one that will both alter existing markets and create new ones. As in any such transition, there are risks and opportunities, and there will be winners and losers. In this context, a growing number of companies believe that inaction is no longer a viable option. All companies will be affected to varying degrees, and all have a managerial and fiduciary obligation at least to assess their business exposure to decide whether action is prudent.
About the Author
Andrew J. Hoffman
Holcim Professor of Sustainable Enterprise
University of Michigan
Dr. Hoffman is the Holcim (US) Professor of Sustainable Enterprise at the University of Michigan; a position that holds joint appointments at the Stephen M. Ross School of Business and the School of Natural Resources & Environment. Within this role, Professor Hoffman also serves as Faculty Co-Director of Michigan’s dual-degree (MS/MBA) program of the Frederick A. and Barbara M. Erb Institute for Global Sustainable Enterprise. Professor Hoffman’s research deals with the nature and dynamics of change within institutional and cultural systems. He applies that research towards understanding the cultural and managerial implications of environmental protection and sustainability for industry. He has published over fifty articles/book chapters and four books.
Prior to joining the faculty at the University of Michigan, Professor Hoffman was an associate professor of organizational behavior at the Boston University School of Management, a visiting professor at the Kellogg School of Management and Reykjavik University and a senior fellow with the Meridian Institute. Prior to academics, he worked for the US Environmental Protection Agency (Region 1), Metcalf & Eddy Environmental Consultants, T&T Construction & Design and the Amoco Corporation.
CLIMATE CHANGE: THE STATE OF THE QUESTION AND THE SEARCH FOR THE ANSWER
SPEECH BY EILEEN CLAUSSEN, PRESIDENT, PEW CENTER ON GLOBAL CLIMATE CHANGE
ST. JOHNS UNIVERSITY, October 5, 2006
Thank you very much. It is an honor to be here at St. John’s and to be a participant in your religion and science project.
I thought I would open today with a passage from Rachel Carson’s Silent Spring:
The history of life on earth has been a history of interaction between living things and their surroundings. To a large extent, the physical form and the habits of the earth’s vegetation and its animal life have been molded by the environment. Considering the whole span of earthly time, the opposite effect, in which life actually modifies its surroundings, has been relatively slight. Only within the moment of time represented by the present century has one species acquired significant power to alter the nature of his world.
That species, of course, is us. And alter it, we have. Which brings me to the somewhat cryptic title of my remarks, The State of the Question and the Search for the Answer.
You might well ask -- what is the State of the Question? It seemed fairly straightforward to me when I first sat down to prepare these remarks, but the more I thought about it – the more elusive the question became. After much pondering, I decided that perhaps this needed to be done somewhat in reverse – that in order to figure out the State of the Question, we actually needed to first ask and answer a series of preliminary questions that will lead us finally to the state of the question.
So let’s begin our search with questions about the science of climate change, the technologies that can be used to address the problem, and the policies that will help get those technologies into the marketplace. And let me provide some relatively easy answers. And then I can move on to what I view as the larger question and the search for that answer.
- First, do we know enough about the science of climate change to justify taking action now?
- Second, do we as a civilization possess the capacity, the tools and the technologies to address this issue in a meaningful way?
- And, third, are there are public policies that will help us reach our goals in ways that will not cause undue hardship?
Is the Science Certain?
Starting with the science, the question is: do we know enough to act? And the answer is unequivocally yes. Every year (and even every month, it seems), the science on climate change becomes more certain and more disturbing.
Consider September. NASA released a study showing higher temperatures and a pronounced retreat of winter sea ice in the Arctic over the past two winters. This study has raised the level of concern because although for years, scientists have reported declines in summer sea ice, this is the first time a similar pattern has been shown happening in the dark of the Arctic winter, a new step in the progression toward an ice-free Arctic. September also produced a report in the journal Nature putting to rest any suggestion that long-term changes in solar output, or luminosity, might be influencing global temperatures and climate. This claim has long been put forward as a reason for inaction – it’s not human interference that is causing the earth to warm, it’s a natural phenomenon. Not so according to solar astronomer Peter Foukal, who together with his colleagues has found that the theory of sunspot-driven climate change has no veracity. The impact of sunspots on the climate are simply too small and too constant to account for the changes in temperature that we are seeing.
So the drumbeat continues. And what the drumbeat tells us in no uncertain terms is that climate change is happening. Scientists are increasingly concerned too that the impacts we are seeing are happening much sooner than expected. Global temperatures have risen by more than 1 degree Fahrenheit over the last century, with average warming of as much as 4 degrees in some regions.
And this warming trend has accelerated in recent years. The ten warmest years recorded have all occurred between 1995 and 2005. 2005 itself was the second hottest year on record, surpassed only by 1998, when El Niño conditions in the Pacific Ocean contributed to above-average temperatures worldwide. And the trend continues in 2006. For the United States at least, the first six months of this year were the warmest such period on record. No U.S. state was cooler than average for the six-month period; and five states experienced record warmth.
Scientists say these increases in global temperatures will continue and accelerate in the years ahead. The projection is that average global temperature will rise by two-and-a-half to 10 degrees Fahrenheit over the next century, with the level of warming in the United States projected to be higherthan the global average.
We are often asked if the role of human interference in this warming is equally unequivocal, and the answer is also yes. The level of warming we have seen cannot be explained by natural causes. Scientists have established a clear connection between rising temperatures and rising concentrations of greenhouse gases, primarily from the burning of coal and oil. In fact, looking back 400,000 years, we can see that global temperatures and atmospheric carbon dioxide levels go up and down together as if in a dance; they are intimately connected.
In 2004, a researcher named Naomi Oreskes conducted a review of over 900 peer-reviewed journal articles to see if there was indeed a consensus among the scientific community on the role of human actions on the climate, and what she found was this: not one of the authors disagreed with the evidence showing a human impact on the climate over the last several decades. Not one. Her findings titled, Beyond the Ivory Tower: The Scientific Consensus on Climate Change, were published in the Journal Science.
Last year the United States National Academy of Sciences joined a group of 10 other science academies from throughout the world in a statement calling for “prompt action” on global warming by world leaders. The statement could not have been more explicit about the connection between human activity and climate change. It stated: “Action taken now to reduce significantly the build-up of greenhouse gases in the atmosphere will lessen the magnitude and rate of climate change.”
Of course, it is not just rising temperatures that concern scientists but rather what those temperatures will mean to life on earth. We are confident that we will see an increase in weather extremes – more droughts, more storms, and more floods; the melting of glaciers and global sea-ice and the inevitable rise in sea-level; water shortages; and species loss, to name just a few. I will be talking later in my remarks about the impacts of climate change. For now, I will simply say that the impacts of climate change on the natural world will continue to intensify, and will become more and more substantial over time. And it is frankly remarkable to me that people, especially in Washington, still suggest that more research is needed before we should seriously deal with climate change.
Do We Have the Capacity to Respond?
And so the logical next question is— do we have the capacity and the technologies to do something about this? And the answer again is: Yes. We do. We may not have them all but we most certainly have more than enough to get started in a very serious way.
Each of us make choices every day that can make a difference. The cars we drive, the way we choose to get to work, the lighting and the appliances we have in our homes, the companies we invest in, the letters we do or do not write to our Congress people and our local and national newspapers. Each of us has a voice and a choice. There are countless things we can do in our daily lives to limit our impact on the climate.
And I know we have the capacity to solve this problem in large part because of the companies I work with on this issue. When we established the Pew Center in 1998, we knew that corporate involvement in shaping climate solutions was going to be essential. This was a real departure at the time—there was a real wall of opposition in corporate circles to even acknowledging that climate change was a concern. This was part of a deep-seated almost ideological divide that existed between ‘corporate America and ‘environmentalists’ – you were either pro-environment or pro-business – but you weren’t both. But climate change is different- it’s bigger and more complex than other environmental issues we have dealt with. So we persevered—and, since engaging our original 13 companies to launch our Business Environmental Leadership Council, we have grown the group to 41 companies today. These are mostly Fortune 500 firms representing most industrial sectors and many are among the largest emitters of greenhouse gases.
Thinking back to those original members of the council and why they joined, I have a deep respect for the way they took a stand on this issue and defied the prevailing sentiment in industry and business. I remember a conversation I had with a CEO of one of these very large companies and I asked him why he had agreed to join the Pew Center when it was clearly not going to win him friends amongst his contemporaries and he told me that it was time to think about his legacy, his children and his grandchildren. He believed the science of climate change and felt a responsibility to the next generation.
But these are business leaders and so they were thinking about something else too: they were thinking about the bottom line, and whether they had the ability in their own operations to reduce emissions. In other words, they didn’t buy the argument that responding to climate change in a serious way would somehow bankrupt our economy.
Is it a going to be a challenge? Of course. Protecting the climate will require a decades-long commitment to develop and deploy new, low-carbon technologies around the world. But the fact is that many technologies exist right now that will allow us to begin making substantial cuts in our emissions of greenhouse gases. And I want to talk briefly about some of the most promising technologies for reducing emissions in two key sectors of the economy: electricity and transportation.
Starting with electricity, this sector produces 38 percent of U.S. carbon dioxide emissions. Most of the electricity generated by the sector is used in buildings—homes, offices and industrial facilities. It powers everything from heating and cooling systems to computers, lighting and machinery. Reducing carbon dioxide emissions related to electricity use will require far-reaching changes in how we produce and consume energy. But “far-reaching” is not the same as “impossible.”
One of the members of the Pew Center’s Business Environmental Leadership Council is Alcoa. And, over the last 20 years, this company has reduced the electricity required to produce a ton of aluminum by 7.5 percent.
Another member, IBM, has instituted energy conservation measures that resulted in a savings of 12.8 billion kilowatt hours of electricity between 1990 and 2002. The resulting reduction in carbon dioxide emissions: 7.8 million tons. And the resulting savings to the company’s bottom line: $729 million in reduced energy costs.
And since 1990, customer energy efficiency programs at Pacific Gas and Electric Company (PG&E) have cumulatively saved more than 138 million megawatt hours of electricity. As a result, the company has avoided between 36 and 80 million tons of carbon dioxide emissions.
Do we have the capacity to reduce emissions? You bet we do and these companies are showing us how. They are also showing that they can do it in ways that do not compromise economic growth.
Now, all of these examples I have talked about are on the demand side of the electricity sector. They are all focused on reducing consumption at the level of the electricity consumer. What about the supply side? Do we have the capacity and the technologies to do something there as well? And, once again, the answer is a resounding yes.
Right now, we have the ability to produce electric power and heat much more efficiently using both fossil fuels and renewable energy. We can build power plants that use a process called Integrated Gasification and Combined Cycle (IGCC). IGCC delivers efficiency gains along with reductions in air pollution by converting coal into a cleaner-burning gas. But right now, there are only two true IGCC plants in operation in the United States.
We can also build combined heat-and-power (or cogeneration) plants. Rather than wasting excess heat generated in the course of producing electricity, these cogeneration plants capture it for use in heating homes and industrial sites. The ABB Group of Companies have built approximately 1,500 small cogeneration plants in Europe. These plants produce both electricity and steam to heat nearby buildings, reducing greenhouse gas emissions by 60 percent compared to coal-fired power plants. In the United States, however, cogeneration is nowhere near reaching its potential for delivering significant reductions in emissions.
And then there are renewable sources of energy. Large-scale renewable energy can be cost-competitive with other forms of conventional electricity in some cases. But renewables such as wind power, solar power and biomass still count for only a tiny share of overall electricity generation in the United States. The reason: today’s marketplace (and today’s public policy environment) favor traditional energy sources.
And then there are the technologies that show great potential in reducing emissions from power generation, but that require additional work. One example is underground storage (or sequestration) of carbon. In the IGCC power plants I mentioned, carbon can very easily be captured for long-term storage in underground geological formations. This is an enormously promising option for protecting the climate. In a nation that currently meets more that half of its electricity needs with coal, you would think we would be all over this, trying to figure out how to make sequestration work. But our efforts in this arena pale in comparison to the need. The Federal government is investing in one massive demonstration that will not be completed until 2018. What we need are multiple, smaller demonstrations that yield results more rapidly and that will affect investment decisions in the coal burning power plants that are being planned for construction over the next decade. All 130 of them.
Cars and trucks are responsible for 32 percent of U.S. carbon dioxide emissions – but again significant reductions in these emissions can be achieved through the use of “off-the-shelf” or already existing technologies. One recent study found that commercial (and cost-effective) technologies exist right now to increase fuel economy and/or reduce tailpipe greenhouse gas emissions by as much as 25 percent. Over the longer term, technologies like plug-in hybrid engines, biofuels made from agricultural products and hydrogen fuel cells promise even larger reductions.
This is not pie-in-the-sky stuff. We simply need to do our homework to develop and refine and test the full range of technologies—and, if they work, then provide the support they need to move from the laboratory to the marketplace.
Opponents of strong action to address climate change often focus on the economic costs of dealing with the issue. Yet if we look closely at the analyses they use to support their claims, we can see that the models are full of assumptions that defy reality, that the policies modeled are far more draconian than contemplated by any policymakers, and that the costs of not acting are not included. The bottom line is that, yes, significant investments are needed. And a technological revolution, which is what we need, will not be free. But addressing this issue in a reasonable and concerted way will not bankrupt our economy. Not addressing it just might.
U.S. insurance company AIG has warned of—and I quote—“far-reaching negative impacts on economies and societies worldwide” from climate change. According to the global insurance giant, Allianz, climate change already is increasing the potential for property damage at a rate of between 2 and 4 percent every year.
And it is not just about the benefits that will come with avoiding costs. Think for a moment about the economic opportunities tied to developing and deploying these new and emerging technologies I’ve talked about. GE has committed to doubling its investment in environmental technologies to $1.5 billion by 2010. That is the equivalent of starting a new Fortune 250 company focused exclusively on clean technology. This is what I call a win-win. GE sees the potential for real profits – green is green -- and I see the potential for real progress on the climate front.
If we do it right, protecting the climate could mean new industries, new markets and new jobs, as well as a new future for localities and states that successfully position themselves as centers of innovation and technology development for a low-carbon world. In many cases, however, the benefits and the opportunities tied to climate action simply are not a part of the conversation – and the result is added support for the myth that we can’t afford to do anything about this issue.
But the truth is that we can’t afford not to do this. We know what technologies will get us started on a path to reduced emissions, and we also know that there are promising technologies out there that can deliver substantial, long-term reductions as part of a global energy technology revolution.
Are There Policies That Can Help?
This brings us to the third question: do policy solutions exist that will prove effective without causing more harm than good. And the answer, again, is yes.
A revolution such as this simply will not happen without a push and a pull from government. And the fact is, we know what kind of policies will work to reduce emissions across the economy. Again, there is no question about this. And we also know what kind of policies won’t work. For example, while the White House and its allies continue to say that our current, voluntary climate policies are enough, U.S. emissions keep on rising. Last year, the Department of Energy reported a 2-percent jump in greenhouse gas emissions between 2003 and 2004. Since 1990, our emissions have increased by more than 16 percent.
Voluntary policies are not going to get the job done. Mandatory policies are clearly what we need. And so in 2005, the U.S. Senate passed a bipartisan measure calling for a national, mandatory, market-based program to slow, stop and, ultimately, reverse the growth in U.S. greenhouse gas emissions. Although the measure was nonbinding, it marked the first time the Senate has gone on record to support mandatory action on this issue.
Among the key climate policy solutions we know about is “cap-and-trade.” This is a policy that requires emissions reductions while allowing companies to trade emission credits so they can achieve their reductions as cost-effectively as possible. The most important benefit of this approach: it establishes a value for emissions reductions, as well as an economic advantage for the technologies that can achieve them.
The cap-and-trade model already has proven successful in this country in reducing emissions of the pollutants that cause acid rain. We know it can work. Cap-and-trade, in fact, is the cornerstone of climate legislation introduced by Senators John McCain and Joseph Lieberman, and others, in both the Senate and the House have also introduced cap and trade legislation. In the state of California, where Governor Schwarzenegger
recently signed the most ambitious state program to address climate change, there is authorization to move forward with a cap and trade program. Many of the businesses we work with at the Pew Center support the cap-and-trade approach because it is effective—and because it will grant them the flexibility they need to achieve the necessary reductions at the lowest possible cost.
Here in New York, your governor is supporting a cap-and-trade initiative together with seven other Northeastern and Mid-Atlantic states. It is called the Regional Greenhouse Gas Initiative (or “RGGI”). This innovative pact among the states is aimed at reducing carbon dioxide emissions from power plants in the region. It’s the first cap-and-trade program to control these emissions in the United States—and it reflects a sophisticated understanding among these governors that mandatory, market-based policies are essential. It also reflects an acknowledgment that, when it comes to government action on climate change, the more parties that work together, the greater the efficiencies and the lower the costs. This is why the ultimate goal has to be a national cap-and-trade system that covers the entire U.S. economy.
But cap-and-trade is not the only policy solution to climate change. We need a wider range of policies. Governments also need to invest in research to develop some of the most critical, long-term, climate-friendly technologies. And policies are needed to ensure that those technologies that reduce emissions can gain a solid foothold in the marketplace.
Many of these policies are sector specific. I already talked about the transportation sector and its emissions. And it’s worth noting here that many governments around the world have adopted more stringent policies than the United States to reduce tailpipe greenhouse gas emissions and/or increase the fuel economy of cars and trucks. Even China has higher standards than we do. So, of course, it is clearly possible. Despite the automobile companies’ resistance, technologies exist to reduce emissions from this sector. And by adopting tougher but reasonable standards, we can hasten the rollout of cost-effective, commercially available technology to reduce vehicle emissions.
Typically, the state of California has been a national leader on this issue. Lawmakers in that state have taken steps to begin regulating carbon dioxide emissions from cars and trucks. It is a policy that 10 other states are poised to follow if it survives a legal challenge from the automakers. California’s standard for vehicles could reduce annual greenhouse gas emissions in the state by 30 million tons of carbon dioxide by 2020. And the reductions will build from there as other states follow California’s lead. And, once again, the work of California, like the work of New York and its partners here in the East, will build momentum for national action to reduce emissions from cars and trucks.
So that’s an important policy solution in the transportation sector. In the electricity sector, a policy that shows real promise for reducing emissions is something called the “renewable portfolio standard” (or RPS). As of today, 22 states, including such large emitters as Texas and California, now require that electric utilities generate a specified amount of electricity from renewable sources. These states see an RPS not only as a way to protect the climate but also as a way to support new energy industries and new jobs. The state of Texas, for example, estimates that the amount of renewable energy that has entered the system because of the state’s RPS exceeds the amount of renewable energy produced in the state over the past 100 years. By reducing fossil fuel generation, the Texas program should cut carbon dioxide emissions by 3.3 million tons. And this is a policy that was signed into law by none other than former Governor George W. Bush.
The work that states like Texas and California are doing on the climate issue could produce enough material for an entire lecture—and I encourage you to visit the Pew Center’s website so you can see our database of state activities and related reports. My point today is that these states know what types of policies will be needed to reduce our nation’s emissions—and a growing number of our lawmakers in Washington know it too. It is going to take mandatory, market-based policies, as well as policies that support research, development and deployment of new low-carbon energy technologies.
And it is also going to take international policies. This, too, is not in question. Climate change is a global problem requiring global action. Even if we were to get smarter about reducing the United States’ contribution to climate change, global energy use will continue to surge, carbon dioxide emissions will continue to grow, and climate change will remain a significant threat. We cannot protect the climate without a global framework that enlists all countries to do their part to reduce emissions, and that provides poorer countries with the support they need to do so. Because climate change is truly an issue that knows no bounds.
The Kyoto Protocol has been the focus of a lot of attention and a lot of discussion (and a lot of controversy) over the past several years. Kyoto, of course, is the international agreement that commits participating countries to specific targets for reducing their emissions. However, Kyoto’s targets take us only to 2012, and without commitments from the United States, Australia, China and other major emitters, it’s not nearly enough. What’s needed looking forward is a new global framework for action, one that engages all the major emitting countries and that provides them with the flexibility they need to reduce emissions in ways that make the most sense for them.
The Pew Center recently held a series of discussions with a range of policy makers, companies and NGOs from 15 countries to consider the elements of a global framework that looks beyond 2012. The participants laid out a number of clear priorities. For example, they strongly endorsed market-based approaches as a core element of the international effort, but they said we shouldn’t necessarily limit ourselves to Kyoto-style targets setting binding absolute caps on emissions. Most importantly, they understood that not every nation is the same; not every nation has the same emissions profile; not every nation has the same capability; and not every nation is in the same state of development. So we have to be flexible and we have to recognize that developing countries, who are still trying to supply their populations with basic services, including electricity, may have to make their contribution to solving this problem in a different way.
From this effort, and from the work we are continuing to do that will further flesh out this framework, it is clear that there are policies at the global level that can lay the groundwork for effective action. But the global discussion on future frameworks is only beginning – and the United States is not even at the table.
The Search for the Answer
So if I could briefly recap: The scientific integrity of climate change is solid – the earth is warming. This warming will likely manifest itself in ways that are detrimental to life as we know it. And human actions are largely to blame for the warming.
We have the capacity to solve this problem. Many of the technologies to combat global warming already exist. And importantly, we know that there are policies we can put in place that will unleash the kind of technological revolution we are going to need.
So now, after searching through some of the answers we arrive at the State of the Question. And it is this:
Given everything we know, why are we doing so little to address climate change?
And I believe the answer to this question leads us directly into the provinces of values and ethics, because it forces us to confront a still more fundamental question: what is our responsibility to others? What is our responsibility to our children and our grandchildren, and to their children and grandchildren? Do we leave them a world that is better or worse than the one we inherited? Of course most people, when asked, would insist that we should leave a world that is better than the world that we inherited. But if we do not grapple with this problem, if we do not adjust our behavior in an intelligent, measured way—we will neither protect our environment nor sustain a growing global economy. And the world we leave will be in far worse condition that the one we were born into.
The first thing we have to understand is that it is not we but future generations who will likely bear the brunt of the effects of climate change. And the brunt will be borne not by the wealthy but by the poor.
Consider for a moment some of the expected impacts of a changing climate: more flooding and more droughts; a scarcity of fresh water resources; extended heat waves; more powerful storms and other extreme weather events; rising sea levels; damage to fragile ecosystems; diminished agricultural yields; and threats to human health as communicable diseases now known mainly in the tropics will worsen and spread to temperate climates.
Consider only the issue of sea level rise. By the end of the century, if nothing is done to rein in emissions of greenhouse gases, global sea level may be three feet higher than it is today, bringing unforgiving impacts to low-lying coastal communities throughout the world.
And we know that these impacts will be borne disproportionately by those least able to cope. So why are we paralyzed?
An estimated 97 percent of all natural disaster-related deaths happen in developing countries. These countries need help doing two things: they need help with planning so that disasters do not inflict such an enormous toll on their societies; and they need help with investments in safe drinking water supplies, better sanitation, sustainable farming, safer housing, anything that can help their residents make it through these disasters and resume their lives, and livelihoods, without having to start all over.
In addition to a responsibility to future generations, we also have a responsibility to the poor, both today and tomorrow. In developed and developing nations, poor people do not have the resources to respond and adapt to climate change in the same way in which the rest of us can respond and adapt.
Think about what we saw last year in the aftermath of Hurricane Katrina. We saw an American city, New Orleans, completely devastated, and we saw the city’s poorest residents suffering the most. I cannot categorically say that Katrina was caused by global warming, although scientists have observed that hurricanes are becoming more intense, and will continue to do so as ocean temperatures rise. What I can say, however, is that Katrina was a bitter taste of things to come. None other than the CEO of Wal-Mart, Lee Scott, has referred to climate change as “Katrina in slow motion.”
The disproportionate impact of Katrina on poor people should serve as a reminder to us all: people with resources can move and rebuild and start new lives in the event of hurricanes and other weather disasters brought about by climate change. Poor people, on the other hand, often have nowhere else to go, nowhere else to turn, no resources to make the kinds of changes in their lives that will protect them from this global problem.
What strikes you most when you look at the data on the impacts of climate change is that the most vulnerable countries are in the developing world. Africa, for example, is extremely susceptible to the impacts of climate change; in fact, the continent and its people already are showing signs of having trouble adapting to a warmer world.
Africa, of course, is not alone. Other parts of the developing world face similar threats. In Bangladesh, a one-meter rise in sea level would inundate 17 percent of the country. Even in areas that might be spared from flooding, the availability of freshwater will be threatened as saltwater intrudes into estuaries and groundwater.
Agriculture in developing countries will take a special hit. Wheat, for example, will virtually disappear as a crop in Africa; there will be substantial declines in Asia and South America as well. At a time when we are looking anew at debt forgiveness and other strategies for reducing disparities between rich and poor countries, it is essential that we consider the role of climate change in making those disparities even more pronounced.
And what of the developing countries whose very existence is threatened by climate change? I am talking here about small island states such as Tuvalu. This is a nine-island chain in the central Pacific that is home to 11,000 residents. On average, these islands are just one meter above sea level. As sea levels rise, these people will have to leave their homeland, becoming the world’s first climate refugees – but certainly not the last.
Now, if all of these countries I’ve talked about had in some way been largely responsible for climate change, that might be another matter. Maybe we would look at the issue a little differently, for example, if Africa had produced the lion’s share of the world’s greenhouse gas emissions over time and now was being asked to suffer the consequences.
But Africa produces just 2 to 3 percent of worldwide emissions of greenhouse gases. The United States, by contrast, with just 5 percent of the global population, is responsible for more than 20 percent of worldwide emissions. And there is also the issue of cumulative emissions. The fact is that climate change is a problem that has been decades in the making as carbon dioxide and other gases have accumulated in the atmosphere over time. These gases have a long life and can remain in the atmosphere for decades or even centuries. And, in the span of the last century or so, it was the United States and other already developed countries that were producing the lion’s share of these emissions.
Looking only at carbon dioxide, the United States was responsible for more than 30 percent of global emissions between 1850 and 2000. The comparable figure for China: just 7 or 8 percent. Even considering the high rates of projected growth in China’s and India’s emissions, the cumulative contributions of developed and developing countries to climate change will not reach parity until sometime between 2030 and 2065.
Clearly all of the major emitting countries need to be a part of the solution to climate change. But saying that all of today’s big emitters should be equally responsible for reducing their emissions is like going to a restaurant and having a nice dinner and then running into a friend who joins you for coffee. And, when the check comes, you make your friend who only had the coffee split the cost of the entire dinner. Yes, developing countries need to do their part, but there is no denying that the developed world, including the United States, has a moral and ethical responsibility to act first.
We also have a responsibility to help developing nations adapt to a warming world. No matter what we do, some amount of global warming already is built into the climate system. There will be impacts; there already are impacts. And it is people living in poverty in the developing world who will face the most serious consequences.
So it really comes down, again, to a question of responsibility. What is our responsibility? And it is not just our responsibility to our fellow man (or woman). There is also our responsibility to the natural world, to the earth. Beyond human societies, the natural world also will suffer from the effects of climate change. In fact, we are already seeing changes in the natural world due to climate change. Coral reefs are at risk because of warmer and more acidic ocean waters. Polar bears are threatened by declines in sea ice. Species already are disappearing because of new diseases connected to climate change. In short, climate change holds the potential of inflicting severe damage on the ecosystems that support all life on earth.
So why, then, have we failed to take responsibility? Why has there been such an absence of political will?
As I consider the politics of climate change, I am drawn to two answers.
First, this is a problem that demands solutions and sacrifice now, even though its most serious consequences will be felt in the future. Our democratic political institutions are based on time horizons that correspond to political terms of two, four or six years. But climate change is a problem that, although we are beginning to see impacts now, reserves its most severe consequences for future decades and centuries.
For a member of Congress or a President to ask today’s voters to sacrifice in some way when the benefits are not immediately apparent (and, frankly, hard to conceive) is asking a lot. This doesn’t mean we shouldn’t ask, but we need to understand the nature of our democratic political system. Any time a politician even suggests that there is a possibility that we should perhaps consider raising the gasoline tax, he or she is virtually guaranteed to be slammed by opponents in the next election. The pretext of the attack is that this politician is threatening our way of life.
It is now vs. the future. Today vs. tomorrow. And, more often than not, today is going to win. Our present generation enjoys the benefits of doing next to nothing to address climate change in the form of low energy costs, convenience and ample creature comforts. Even hinting that we may have to sacrifice some of those benefits for some elusive future gain does not win elections. Tomorrow does not win elections; today does.
The second answer revolves around money. In the same way that the voters of today benefit from the current system, so too do the influential interests that support today’s political campaigns and that have a strong lobbying presence in Washington and many state capitals. There is no National Association of Tomorrow’s People in Washington, but there are countless trade groups whose sole purpose is to make sure that our lawmakers’ decisions protect the ability of today’s industries and businesses to maximize current profits. Yes, many businesses have come around to recognizing the need for action to protect the climate, seeing it as assuring profits in the future. But the balance remains tilted in favor of the status quo. Today’s interests support political campaigns. Tomorrow’s interests do not.
And, in the same way that our national democratic systems are not well equipped to deal with a problem such as climate change, our international system is even more poorly equipped. We simply do not have mechanisms in place for mobilizing (and enforcing) international action on an issue such as this. And, given the potential for varying climate impacts in varying places around the world, some nations may erroneously think they will be better off as climate change continues, at least in relation to others. And, as a result, there are these varying levels of incentives, and varying levels of alarm, about the problem. And the result is an inability to reach consensus about a global approach.
And, it is because of the inadequacy of our political institutions (both domestic and international) to deal with an issue such as this that those with a vested interest in the status quo can prevail. All they have to do is raise questions about the science, the technology or the policies—and our institutions, which already are enormously challenged by this problem, simply back off.
James Freeman Clarke once said. “A politician thinks of the next election; a statesman thinks of the next generation.” Ladies and gentlemen – I believe it is time for statesmanship.
And while I am happy to discuss the shortcomings of many in leadership positions in this country – I don’t believe they bear the whole of the burden for their actions (or lack thereof). The public – you and I -- bear some of the responsibility. We have not clearly told our elected officials that we believe this is a vital issue – for today and tomorrow; that we are willing to change our energy habits and to make sacrifices if necessary. We have not made our voices heard.
And we must find a voice for those who do not have one – future generations, and people without means. For far too long, climate change has ranked near the bottom tier of environmental issues – but climate change at its core is not an environmental issue, it is a moral and ethical issue. I believe we will only see progress on this issue if and when our leaders finally see it that way.
While conducting some research to prepare for today, I reread the statement on climate change on the Catholic Bishop’s website and there was one part – attributed to Pope John Paul that I found beautiful in its’ simplicity – It says:
At its core, global climate change is not about economic theory or political platforms, nor about partisan advantage or interest group pressures. It is about the future of God's creation and the one human family. It is about protecting both "the human environment" and the natural environment.1 It is about our human stewardship of God's creation and our responsibility to those who come after us.
Ralph Waldo Emerson once said, “When we have arrived at the question, the answer is already near.”
So what is the question? I believe it is this: Why are we shirking our responsibility to address climate change? And Emerson was right: the answer is near. Because in arriving at this question, we are acknowledging that we should be doing more, much more, to protect our climate. We know what we need to do, and we know we can do it. We simply need to muster the courage and the political will to put the status quo behind us and shape a safer, better future for our planet and the generations to come.
Now, I will welcome your questions. Thank you very much.
Agriculture's Role in Greenhouse Gas Mitigation
Prepared for the Pew Center on Global Climate Change
Keith Paustian, Colorado State University
John M. Antle, Montana State University
John Sheehan, National Renewable Energy Laboratory
Eldor A. Paul, Colorado State University
Download Entire Report (pdf)
Eileen Claussen, President, Pew Center on Global Climate Change
This Pew Center report is the fourth in our series examining key sectors, technologies, and policy options to construct the “10-50 Solution” to climate change. The idea is that we need to tackle climate change over the next fifty years, one decade at a time. This report is also a companion paper to Agriculture and Forest Lands: U.S. Carbon Policy Strategies, being published simultaneously.
Our reports on electricity, buildings, and transportation described the options available now and in the future for reducing greenhouse gas emissions from those sectors. Agriculture may be less important than those other sectors in terms of its overall contribution to U.S. greenhouse gas emissions, but it has an important role to play within a strategy to address climate change. Agriculture is important not only because of the potential to reduce its own emissions, but because of its potential to reduce net emissions from other sectors. Agriculture can take carbon dioxide, the major greenhouse gas, out of the atmosphere and store it as carbon in plants and soils. Agriculture can also produce energy from biomass that can displace fossil fuels, the major contributor to greenhouse gas emissions.
Looking at options available now and in the future, this report yields the following insights for agriculture’s potential role in greenhouse gas mitigation:
• If farmers widely adopt the best management techniques to store carbon, and undertake cost-effective reductions in nitrous oxide and methane, aggregate U.S. greenhouse gas emissions could be reduced by 5 to 14 percent.
• With technological advances, biofuels could displace a significant fraction of fossil fuels and thereby reduce current U.S. GHG emissions by 9 to 24 percent. Using biomass to produce transportation fuels could also significantly reduce our reliance on imported petroleum.
• Further research is needed to bring down the costs of biofuels and, particularly if agriculture is to participate in a GHG cap-and-trade system, to better assess the impacts of practice changes.
• The level of reductions achieved will strongly depend on the policies adopted. Policies are needed to make it profitable for farmers to adopt climate-friendly practices, and to support needed research.
The authors and Pew Center would like to thank John Bennett, Henry Janzen, Marie Walsh, John Martin, and David Zilberman for their review of and advice on a previous draft of this report.
The impact of human activities on the atmosphere and the accompanying risks of long-term global climate change are by now familiar topics to many people. Although most of the increase in greenhouse gas (GHG) concentrations is due to carbon dioxide (CO2) emissions from fossil fuels, globally about one-third of the total human-induced warming effect due to GHGs comes from agriculture and land-use change. U.S. agricultural emissions account for approximately 8 percent of total U.S. GHG emissions when weighted by their relative contribution to global warming. The agricultural sector has the potential not only to reduce these emissions but also to significantly reduce net U.S. GHG emissions from other sectors. The sector’s contribution to achieving GHG reduction goals will depend on economics as well as available technology and the biological and physical capacity of soils to sequester carbon. The level of reductions achieved will, consequently, strongly depend on the policies adopted. In particular, policies are needed to provide incentives that make it profitable for farmers to adopt GHG-mitigation practices and to support needed research.
The agricultural sector can reduce its own emissions, offset emissions from other sectors by removing CO2 from the atmosphere (via photosynthesis) and storing the carbon in soils, and reduce emissions in other sectors by displacing fossil fuels with biofuels. Through adoption of agricultural best management practices, U.S. farmers can reduce emissions of nitrous oxide from agricultural soils, methane from livestock production and manure, and CO2 from on-farm energy use. Improved management practices can also increase the uptake and storage of carbon in plants and soil. Every tonne of carbon added to, and stored in, plants or soils removes 3.6 tonnes of CO2 from the atmosphere. Furthermore, biomass from the agricultural sector can be used to produce biofuels, which can substitute for a portion of the fossil fuels currently used for energy.
Carbon stocks in agricultural soils are currently increasing by 12 million metric tonnes (MMT) of carbon annually. If farmers widely adopt the best management techniques now available, an estimated 70 to 220 MMT of carbon could be stored in U.S. agricultural soils annually. Together with attainable nitrous oxide and methane reductions, these mitigation options represent 5 to 14 percent of total U.S. GHG emissions. The relevant management technologies and practices can be deployed quickly and at costs that are low relative to many other GHG-reduction options. To achieve maximum results, however, policies must be put in place to promote, and make attractive to farmers, practices that increase soil carbon and efficiently use fertilizers, pesticides, irrigation, and animal feeds. It is also important to ensure funding to improve the measurement and assessment methods for agricultural GHG emissions and reductions, including expansion of the U.S. Department of Agriculture’s National Resource Inventory. In particular, this inventory needs to include a network of permanent sites where key management activities and soil attributes are monitored over time. Such sites would provide information vital to helping farmers select the most promising management practices in specific locations.
Profitability of management practices varies widely by region, as does the amount of carbon storage attainable. Initial national-level studies suggest that, with moderate incentives (up to $50/tonne of carbon, or $13 per tonne of CO2), up to 70 MMT of carbon per year might be stored on agricultural lands and up to 270 MMT of carbon per year might be stored through converting agricultural land to forests. Mitigation options based on storage of carbon in soils would predominate in the Midwest and Great Plains regions; whereas in the Southeast, agricultural land would tend to be converted to forestland. Information on the costs and supply of GHG reductions from reducing nitrous oxide and methane emissions are very limited, and more studies in these areas are needed.
Agriculture can also reduce GHG emissions by providing biofuels—fuels derived from biomass sources such as corn, soybeans, crop residues, trees, and grasses. Substitution of biofuels for fossil fuels has the potential to reduce U.S. GHG emissions significantly and to provide a major portion of transportation fuels. The contribution of biofuels to GHG reductions will be highly dependent on policies, fossil fuel prices, the specific fossil fuels replaced, the technologies used to convert biomass into energy, and per acre yields of energy crops. In a “best-case” scenario, where energy crops are produced on 15 percent of current U.S. agricultural land at four-times current yields, bioenergy could supply a total of 20 exajoules (EJ)—almost one-fifth of the total U.S. year-2004 demand for energy. This corresponds to a 14 to 24 percent reduction of year-2004 U.S. GHG emissions, depending on how the biomass is used. If advanced conversion technologies are not widely deployed, or if yield gains are more modest, GHG reductions would be on the order of 9 to 20 percent. For biofuels to reach their full potential in reducing GHG emissions, long-term, greatly enhanced support for fundamental research is needed.
Application of best management practices in agriculture and use of biofuels for GHG mitigation can have substantial co-benefits. Increasing the organic matter content of soils (which accompanies soil carbon storage) improves soil quality and fertility, increases water retention, and reduces erosion. More efficient use of nitrogen can reduce nutrient runoff and improve water quality in both surface and ground waters. Similarly, improving manure management to reduce methane and nitrous oxide emissions is beneficial to water and air quality and reduces odors. Biofuel use, particularly substituting energy crops for imported petroleum for transportation, has important energy security benefits. However, as biofuel use expands, it will be important to ensure that biomass is produced responsibly, taking both environmental and socio-economic impacts into consideration.
Although challenges remain, agriculture has much to offer in helping to reduce net GHG emissions to the atmosphere, while at the same time improving the environment and the sustainability of the agricultural sector. Further research and development will result in improved assessments of GHG contributions from agriculture, increases in agriculture’s contribution to renewable energy for the nation, better ways to manage lands, and design of more efficient policies. Government policy plays an important role in making best management practices and biofuel production economically attractive, and farmers will adopt best management practices for GHG reduction only if they seem profitable. Perceived risks and availability of information and capital play important roles in perceptions of profitability. Thus, risk reduction, availability of information, and access to capital are some of the key issues that must be addressed through policies. With the right policy framework, U.S. farmers will be important partners in efforts to reduce GHG emissions while reaping multiple co-benefits.
Farmers’ decisions about whether to adopt new management practices and whether to grow energy crops will ultimately determine the level of success of any agricultural sector GHG mitigation strategy. Farmers’ decisions are motivated first and foremost by what they perceive to be most profitable. Thus, mitigation practices must be economically attractive to farmers. If farmers can be persuaded to adopt desired practices, the impacts on GHG emissions could be significant. It is technically feasible that 70 to 220 million metric tons (MMT) of carbon could be added to U.S. agricultural soils annually over two to three decades. This would remove 260 to 810 MMT of carbon dioxide (CO2) from the atmosphere annually, offsetting 4 to 11 percent of current U.S. GHG emissions. Economic potential to store carbon varies substantially by region, and current studies suggest that at prices of $50 per tonne of carbon ($13 per tonne CO2), soil carbon increases would be limited to 70 MMT per year. If an aggressive research and development (R&D) program succeeds in substantially improving per-acre yields of energy crops and reducing costs of conversion technologies, biomass from agricultural sources could supply up to 19 percent of total current U.S. energy consumption. This would yield GHG savings on the order of 180 to 470 MMT of carbon, which is equivalent to reducing CO2 emissions by 670 to 1,710 MMT CO2 per year (by substituting for fossil fuels) or 9 to 24 percent of total U.S. year-2004 GHG emissions.
Overall, studies so far indicate that agriculture is likely to be a competitive supplier of emission reductions if and when farmers are offered suitable payments. Among agricultural mitigation options, soil carbon sequestration will likely be most significant for lower carbon prices (less than $50 per tonne of carbon or $13 per tonne CO2). At higher prices, afforestation and biofuel options become increasingly more competitive.
Agricultural activities have a broad and multi-faceted impact on all three of the main GHGs—carbon dioxide, methane, and nitrous oxide—and policies designed to mitigate GHGs must consider impacts on all three GHGs. Globally, land use (including agriculture) accounts for about one-third of all GHG emissions due to human activities. In the United States the proportional contribution is smaller, about 8 percent of net U.S. GHG emissions. A variety of agricultural sources contribute to these emissions, including fossil fuel consumption in agricultural production; oxidation of soil organic matter and attendant CO2 releases; nitrous oxide emissions from nitrogen fertilizer, manure, and plant residues; and methane emissions from ruminant animals, animal wastes, and flooded rice.
However, agriculture as a sector is unique in that it can function as a sink for both CO2 and methane, helping to reduce their concentrations in the atmosphere. In addition, agricultural production of biofuels can provide a substitute for some of the fossil fuel currently used for energy. Thus, agricultural mitigation of GHGs includes utilization of agriculture’s sink capacity, reduction of agricultural emissions, and bioenergy production. Utilization of agriculture’s sink capacity is primarily accomplished through increasing soil carbon stocks. Soil carbon increases, which are typically in the 0.1 to 1 tonnes per hectare per year range, could be achieved through adoption of practices such as:
• Reducing the frequency and intensity of soil tillage;
• Including more hay crops in annual rotations;
• Production of high-residue-yielding crops and reduced fallow periods;
• Improved pasture and rangeland management; and
• Conservation set-asides and restoration of degraded lands.
Although soil emissions of nitrous oxide constitute the largest GHG emissions from U.S. agriculture in terms of global warming potential, both measuring emissions and achieving large reductions will be challenging. On average, nitrous oxide emissions are roughly proportional to the amount of nitrogen added to soils, through nitrogen fertilizer, manure, and nitrogen-fixing legume crops. Since nitrogen fertilizer use is an important component of modern, high-yield agriculture, more efficient use of nitrogen inputs is the key to reduction of nitrous oxide emissions through:
• Use of soil testing to determine fertilizer requirements;
• Better timing and placement of fertilizer; and
• Use of nitrification inhibitors and controlled-release fertilizer.
Agricultural methane emissions in the United States occur largely from livestock production through enteric fermentation and during manure storage. Methane capture and use to produce energy is an almost ideal way to address emissions from manure, as it reduces methane emissions, reduces GHG emissions from fossil fuels by providing a substitute energy source, and also provides air and water quality benefits. Strategies to address emissions from enteric fermentation include: improving animal health and genetics, feed additives, and more productive grazing systems.
Storing carbon in soils, reducing nitrous oxide and methane emissions, and producing energy from animal wastes all are potential sources of income or cost reductions for farmers. Relatively few studies of the economic feasibility of agricultural soil carbon sequestration have been done to date, and studies of the economics of nitrous oxide and methane reductions are even more limited. Initial conclusions from studies of the profitability of practices that sequester carbon include:
• Geographic differences in the technical potential and cost of carbon sequestration are substantial;
• Cost considerations are likely to limit agricultural mitigation to levels well below those suggested by technical potential; and
• Strategies based on contracts that pay per tonne of carbon stored or that take into account geographic variation in environmental and economic conditions are more economically efficient (less costly) than contracts based on average conditions.
In addition to profitability strictly defined, several other factors are likely to affect farmers’ willingness to participate in mitigation programs:
• Risk, particularly given the likelihood of long-term contracts for carbon sequestration and the high likelihood of changes in economic and technological conditions that can result in unforeseen costs;
• Financial constraints and access to credit when adopting new practices;
• Uncertainty about the long-term effects on crop productivity of adopting carbon sequestering practices;
• Program implementation costs, including contract and transaction costs; and
• Sociological factors, such as age and education level of farmers, farm size, and access to information.
Production of biomass energy could provide a significant opportunity for agriculture to contribute to GHG mitigation. The overall impact of agricultural biomass on GHG mitigation depends on (1) how much energy can be produced from biomass, and (2) the net (life cycle) GHG impact of biomass use for energy. Biomass is particularly well-suited to providing liquid fuel substitutes for petroleum. However, further development of advanced technologies for conversion of biomass into transportation fuels is needed to make biomass more cost-competitive with petroleum.
Current U.S. agricultural bioenegy products for transportation fuels include ethanol made from corn grain, and biodiesel. Although the efficiency of grain-based ethanol production has improved over time, fossil energy use in its production is still high (three units of fossil energy required to produce four units of ethanol energy), limiting its value as a GHG offset. Moreover, there is likely to be an upper limit on the amount of corn-grain ethanol that can be produced economically, currently estimated at 10 billion gallons per year, less than one percent of current energy demand. Biodiesel, made from oil seed crops (e.g., soybean, sunflower) is more energy efficient—about 1 unit of fossil energy to produce 3 units of biodiesel energy, but biodiesel from oil seed crops is currently 50 to 90 percent more expensive than conventional diesel.
Responsible use of agricultural residues such as corn stover or wheat straw for biofuel production could supply 2 to 6 percent of current total U.S. energy demand or 7 to 24 percent of total U.S. petroleum energy demand in the on-road transportation sector. Addressing sustainability issues (soil conservation) is important in determining the amount of residues that could be utilized. Production of energy crops such as switchgrass at current yield rates could displace perhaps an additional 3 percent of current energy supply while utilizing about 10 percent of the total U.S. agricultural area. Improvements in grass genetics could potentially boost this amount to 6 to 12 percent of current energy supply, using up to 15 percent of prime cropland. Potential bioenergy supply from corn, animal manure, CRP lands, agricultural residues, and energy crops grown on prime agricultural land could represent almost one-fifth of total year-2004 U.S. energy demand and more than 80 percent of current U.S. petroleum energy demand in the on-road transportation sector.
Designing and implementing effective agricultural mitigation strategies depends on cost-effective and reliable methods to estimate GHG fluxes and carbon stock changes. Collecting information on management activities such as tillage practices, fertilizer use, and grazing practices at some or all of the NRI locations would improve GHG inventories and assessments. Establishment of a national soil-monitoring network along with additional long-term experiments that include measurements of nitrous oxide and methane fluxes are also needed to improve GHG estimation methods and reduce uncertainty.
A single “magic bullet” solution to the problem of reducing GHG emissions from fossil energy is unlikely, and biomass can play a useful role within a diverse portfolio of GHG reduction strategies. Practices that sequester carbon can maintain and increase soil organic matter, thereby improving soil quality and fertility, increasing water-holding capacity, and reducing erosion. More efficient use of nitrogen and other farm inputs is key to reducing GHG emissions and nutrient runoff, as well as to improving water quality in both surface and ground waters. Using digesters to capture methane from animal wastes can improve air quality and reduce undesirable odors. Consequently, policies should consider not only the GHG benefits but also associated co-benefits to arrive at the most effective solutions in a comprehensive framework. Further R&D is needed to improve the assessment of agriculture’s GHG contributions, to find better ways to manage lands to improve environmental quality, to design efficient policies to implement mitigation options, and to strengthen agriculture’s potential to contribute to producing renewable energy. Although challenges remain, agriculture has much to offer in helping to reduce GHGs in the atmosphere while at the same time improving the environment and the sustainability of agricultural resources.
About the Authors
Colorado State University
Keith Paustian is a Professor in the Department of Soil and Crop Sciences and a Senior Research Scientist at the Natural Resources Ecology Laboratory (NREL) at Colorado State University. He also serves on the Scientific Steering Committee for the US Carbon Cycle Science Program. Professor Paustian co-chaired the Council on Agricultural Science and Technology (CAST) taskforce on agriculture, climate change, and greenhouse gases; and served as Coordinating Lead Author for the Intergovernmental Panel on Climate Change’s (IPCC) volume on greenhouse gas inventory methods for agriculture, forestry and other land use.
Professor Paustian’s work includes assessment of greenhouse gas emissions and carbon sequestration for the annual US inventory, and development of accounting tools for farmers and ranchers to get credit under the US 1605B voluntary GHG reduction program. He and his colleagues have developed models for estimating GHG inventories in developing countries, models now being applied in 11 countries in Latin America, Africa and Asia. Professor Paustian’s areas of research include assessment of agricultural mitigation strategies, evaluation of environmental impacts of agricultural bioenergy production, soil organic matter dynamics, and agroecosystem ecology. Professor Paustian has written more than 100 journal articles and book chapters. He is currently working to develop effective mitigation strategies and better methods to measure and predict greenhouse gas (GHG) emissions from agriculture.
John M. Antle
Montana State University
John M. Antle is a professor in the Department of Agricultural Economics and Economics at Montana State University. He holds a B.A. in economics and mathematics from Albion College, and a Ph.D. in economics from the University of Chicago. Prior to joining Montana State, he served as assistant and associate professor at the University of California, Davis; and as Gilbert White Fellow at Resources for the Future; senior staff economist for the President's Council of Economic Advisers; and member of the National Resource Council's Board on Agriculture. He was President of the American Agricultural Economics Association from 1999-2000. His current research focuses on the sustainability of agricultural systems, greenhouse gas mitigation and impacts of climate change in agriculture, and payments for ecosystem services in agriculture.
National Renewable Energy Laboratory
John Sheehan holds a B.S. and an M.S. degree in chemical and biochemical engineering from the University of Pennsylvania and Lehigh University, respectively. He has served as an analyst and project manager at the U.S. Department of Energy’s National Renewable Energy Laboratory (NREL) since 1991. During his tenure at NREL, Sheehan has led research on the production and use of biodiesel and ethanol. In the past six years, Sheehan has authored groundbreaking life cycle assessments of biodiesel and ethanol technology, including a comprehensive life cycle evaluation of soybean-based biodiesel. His most recent study is an evaluation of the sustainability of use of agricultural residues as a feedstock for fuel ethanol production.
From 2002 to 2005, Mr. Sheehan led strategic planning activities for the Department of Energy’s Biomass Program. In October 2005, he joined the newly formed Strategic Energy Analysis Center at NREL, where he supports the Office of Planning, Budget and Analysis within DOE’s Office of Energy Efficiency and Renewable Energy.
Eldor A. Paul
Colorado State University
Eldor Paul is currently a Senior Research Scholar at the Natural Recourses Ecology Laboratory and Professor of Soil and Crop Sciences Colorado State University. Previously he held academic positions in Canada, and at the University of California, Berkeley, and Michigan State University.
Professor Paul has written over 260 articles and books, and his research interests include the ecology of soil biota, the role of nutrients such as nitrogen in plant growth, and the dynamics of carbon and nitrogen in sustainable agriculture and global change. His studies on the sequestration of carbon and nitrogen under afforestation and the sensitivity of different soil organic matter fractions to increased temperatures have led to a better understanding of the role of soils in climate change.
June 14, 2006
Contact: Katie Mandes, 703-516-4146
THE EXPANDING ROLE OF STATE RENEWABLE ENERGY POLICY
Proliferation of State Activity Has National Significance
Washington, DC - A growing portion of U.S. states' electricity is being provided by renewable energy, according to a report released today by the Pew Center on Global Climate Change. States are using increasingly aggressive and ambitious Renewable Portfolio Standards (RPS) in order to spur economic development and create a reliable and diversified supply of electricity, as well as to reduce greenhouse gas emissions and conventional pollutants. As of mid 2006, 22 states and the District of Columbia have implemented an RPS; well over half of the American public now lives in a state in which an RPS is in operation.
The Pew Center report, Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards, authored by Barry Rabe of the University of Michigan, builds on earlier Pew Center analyses of the state role in climate policy development. The proliferation of RPSs at the state level provides real-world models of whether a federal RPS may be a feasible option to increase the nation's use of renewable energy sources as part of a larger energy and climate change policy.
"If we are to successfully address climate change, we must increase our use of renewable energy. States are leading on renewables, as they are in so many aspects of climate policy," said Pew Center President Eileen Claussen, "Engagement between states and federal policymakers on this issue has been surprisingly limited, and is long overdue. We need to begin thinking both about how the federal government can be most effective in this arena, and also how to enhance interstate collaboration."
In addition to examining challenges and opportunities inherent in policy design and implementation, the report includes case studies of five states - Texas, Pennsylvania, Colorado, Massachusetts, and Nevada. The author explores the political and economic advantages and pitfalls in each state, and finds an unusually high degree of bipartisan support and rapid expansion of RPSs at the state level. Economic development and job creation also emerge as drivers in virtually every state.
Despite the many advantages of state-level RPS policies, the report finds that states also face challenges. States increasingly are grappling with electricity transmission capacity constraints, differential treatment of various renewable sources as well as facility siting concerns. The biggest challenge in the future will likely revolve around the need for interstate collaboration and dialogue as the questions of cooperation across state boundaries arise. Ultimately, federal and state regulators will need to work together in the event of adoption of a federal RPS.
States are already beginning to cooperate regionally and that pattern is likely to continue, but there is much the federal government could do to enable a significant expansion of renewable energy. The Pew Center's recent Agenda for Climate Action recommends that renewables be a key element of a climate-friendly energy path for the U.S. It describes the areas in which federal efforts are needed, including R&D funding and technology development, and notes that there are many ways in which the federal government can support and encourage ongoing state renewables initiatives. These may involve incentives for uniform grid interconnection standards at the state level, or the creation of a uniform system for tracking renewable energy credits across the country. In designing federal policies, Congress should recognize the regional differences in renewable resources and existing state-level policy actions.
"Although there is no single technological or policy solution to climate change and energy independence in the U.S., renewable energy is clearly destined to play an important role in the years to come - and now is the time to lay the foundation," said Eileen Claussen.
A complete copy of this report - and previous Pew Center reports - is available on the Pew Center's web site, www.c2es.org.
The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States' largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
Race to the Top: The Expanding Role of U.S. State Renewable Portfolio Standards
Prepared for the Pew Center on Global Climate Change
Barry G. Rabe, University of Michigan
Download Entire Report (pdf)
Eileen Claussen, President, Pew Center on Global Climate Change
Since the release of our 2002 report on state-level climate activity, Greenhouse and Statehouse: The Evolving State Government Role in Climate Change, the pace of innovation and adoption has quickened. States are taking a broad range of actions that reduce greenhouse gas emissions. One of the most widely-used policy tools is the creation of a renewable portfolio standard (RPS). These standards generally mandate that renewable energy provide an increasing share of state's electricity. As of mid 2006, 22 states and the District of Columbia have implemented an RPS.
In this Pew Center report, author Barry Rabe of the University of Michigan concentrates on this subset of the increasingly broad range of state climate policy initiatives. This work presents an overview of this policy tool, focusing on case studies of five states: Texas, Massachusetts, Nevada, Pennsylvania and Colorado. These cases reveal a number of themes with implications for other states considering adoption of an RPS, as well the implementation of a federal renewable portfolio standard.
RPS enactment and expansion appear to draw strong political support independent of party lines. States are enacting or expanding RPSs for multiple reasons, including economic development opportunities and a more reliable and diversified supply of electricity. Environmental factors, such as reduction of conventional pollutants or greenhouse gas emissions, are often seen as secondary drivers in many states. RPSs are already boosting renewable energy supplies in a cost-effective manner, and appear to hold considerable potential for more dramatic gains. They are driving the expansion of important homegrown industries. However, this report also identified a number of challenges that could potentially deter future development and successful implementation of this policy tool.
Many RPS programs remain in very early stages of implementation, and many states are facing serious implementation challenges. How should renewable energy be defined? How should individual states deal with intra-state and inter-state transmission capacity, an issue that calls for greater inter-state collaboration in policy development? Should special status be accorded specific, disadvantaged renewable sources, which might lead to a collision between competing special interests and end up by raising costs?
This report illustrates a classic case of federalism in energy and environmental policy. States adopting RPSs are providing actual data and real-world models, and the early successes of these states are changing the debate about what states can individually accomplish with their energy systems, how states can cooperate regionally, and whether a federal RPS may be feasible. These states are also, however, pushing up against the limits of what states can do without federal support and coordination. Engagement between state and federal policy makers on this issue has been surprisingly limited, and is overdue. These policy experiments may prove a deciding factor in the energy path that the United States chooses to take, demonstrating that renewables can be a viable part of our energy future.
The Pew Center would like to thank Margaret Kriz, a Nieman Fellow at Harvard University, Kirsten Engel, Professor of Law at the University of Arizona, and Rick Gilliam, Senior Energy Policy Advisor at Western Resource Advocates for their comments on an earlier draft of this report. Barry Rabe would like to thank Katie Kerfoot for her research assistance, and Joshua Bushinsky, the States Solutions Fellow at the Pew Center, who authored the Appendix.
The role of American state governments in developing policies to reduce greenhouse gases continues to expand at a steady clip, measured both in the sheer number of policies and their potential impact on emissions. One of the most widely-used policy tools involves creation of a renewable portfolio standard (RPS). Such policies mandate that utilities operating within a state must provide a designated amount or percentage of power from renewable sources as a portion of their overall provision of electricity. This policy is not unique to the United States, as it is employed by a number of national governments as well as subnational entities that range from the state of South Australia to the province of Prince Edward Island. But they have proliferated among the American states at a rapid rate, having been adopted by 22 states and the District of Columbia as of mid 2006, with a strong likelihood of continued expansion in coming years. Well over half of the American public now lives in a state in which an RPS is in operation and at least one state has such a policy in every region of the nation except the Southeast.
This report builds on earlier Pew Center analyses of the evolving state role in climate policy development, placing a particular focus on the RPS experience to date. It presents an overview of this policy tool and examines key factors in both policy formation and implementation. This work considers the experience of all RPS states but devotes particular attention to five case studies that illustrate both common themes and points of divergence among individual state programs. The analysis concludes with an examination of RPS performance to date and some of the leading opportunities and challenges facing future development.
The continued proliferation of state RPSs and the decision in many states to establish second-generation policies illustrate that these policies tend to draw a fairly broad base of political support that often crosses partisan lines. States are compelled to enact or expand RPSs for multiple reasons, and greenhouse gas emissions may or may not be central factors in prompting adoption. Instead, states consistently anticipate significant economic development benefits from promoting renewables, particularly given the promise of developing home-grown energy sources that could lead to instate job creation. In turn, states are also attracted to RPSs by the prospect of greater reliability of electricity supply in coming decades and the prospect of reducing conventional air pollutants through a shift toward expanded use of renewables. Virtually all state RPSs make some use of flexible compliance mechanisms, including tradable renewable energy credits, although there is some inter-state variation in defining what constitutes a renewable energy source.
In recent years, important trends have emerged in RPS development. These include increasingly ambitious levels of renewable energy mandated over future periods, such as 25 percent of New York electricity by 2013 and 20 percent of Nevada electricity by 2015. In turn, many states have begun to differentiate between various sources of renewable electricity, providing special provisions to support certain forms of renewables that have lagged behind others due to high costs, and some are beginning to incorporate energy efficiency as a way to meet RPS goals. In a number of instances, RPSs have clearly played a central role in fostering rapid and significant expansion of the amount of renewable energy provided in a state.
Looking ahead, RPSs face a number of opportunities and challenges. As the number of state policies continues to grow, inevitable questions of cooperation across state boundaries arise. This may be particularly evident in those parts of the country, such as the Northeast and Southwest, in which de facto RPS regions are emerging through the independent actions of neighboring states. In turn, states increasingly face implementation challenges, including issues of siting new renewable energy facilities and, in some instances, expanding transmission capacity. Furthermore, there has been remarkably little engagement between state and federal policy makers on this issue and clearly a strong need for greater intergovernmental collaboration in thinking about sustaining the advances of individual state policies while consideration of a federal version of an RPS continues.
Challenges and Opportunities: The Next Round of RPS Development
A decade and a half after Iowa's enactment of the first state RPS, this policy has diffused to the point where more than one-half of the nation's citizens are covered by some version of a standard. The 22 states that currently operate an RPS represent nearly every region in the country, working from the same basic principles but tailoring their particular program to the special circumstances presented by each individual state. If anything, the trend toward proliferation and diversification has intensified in the last few years. More and more states are adopting RPS programs, a growing number have begun to give serious attention to an RPS, and existing RPSs are being revisited legislatively and increasingly expanded in scope and ambition.
Many of these programs remain in very early stages of implementation, reflecting the complexity of organizing renewable energy credit systems and other key features. But early indicators suggest that RPSs have considerable promise for boosting renewable energy supplies and doing so in a cost-effective manner. The basic structure of an RPS involves a blending of regulation and delegation of many choices to the marketplace that is clearly appealing to a diverse set of elected officials and organized interests. RPS enactment-and expansion-continues to occur in states with Republican, Democratic, and divided control of state political institutions.
States are clearly drawn to the RPS concept for multiple reasons. Economic development opportunities are paramount in all cases, as a growing set of states see significant job and investment opportunities in expanding their base of renewable energy. In turn, states envision advantages in creating a more reliable supply of electricity for coming years, a direct response to mounting concerns over both the price and availability of more conventional energy sources such as natural gas. Environmental factors, including reduction of conventional air emissions as well as greenhouse gases, figure differently in various cases but are clearly seen as a secondary driver in many states. Collectively, the evolving and expanding state experience with RPSs confirms the very real potential of policy development that simultaneously advances economic and environmental concerns.
Looking to the future, it appears reasonable to assume that additional states will enact RPSs in the coming years, just as existing RPS states continue to pursue implementation and revisit their goals. In anticipating the next generation of RPS development, a series of important challenges and opportunities appears to loom, concerning both continued policy development by individual states and increasingly salient interstate and intergovernmental factors.
First, a series of important issues has begun to emerge that may not have been fully anticipated at the point of enactment but could potentially deter successful implementation. Part of the initial attraction of the RPS concept was that while it did impose regulatory requirements specifying the amount of renewable energy that would be provided, it did not favor one source over another as long as it was deemed eligible. This meant that an initial regulatory intervention was followed by deference to the market, allowing different renewables to compete and demonstrate their ability to emerge as a viable alternative to traditional sources. The growing tendency to accord specialized status to more expensive renewable sources removes the level playing field originally intended in most states and, in some instances, may require significant financial subsidies from state sources or rate payers and thereby raise the cost of the policies. Moreover, the shift toward differential treatment has changed some of the recent debate over renewable energy policy in state capitals toward a collision between competing special interests, each seeking preferential treatment for its particular source (Rabe and Mundo 2007). Over time, one could envision a transformation whereby a well-intended effort to supplement select renewable sources altered RPSs into a complex formula with differential treatment for varied sources, thereby removing much of the flexibility of this policy tool and increasing the cost of implementation.
Second, much of the early planning for RPS targets assumed public support for renewable energy not only in general terms but also in presumed receptivity to siting facilities and related transmission capacity. In two of the five cases, one of the most important determinants of RPS success will involve siting issues. In Massachusetts, the formidable opposition to the Cape Wind project and the controversy surrounding development of biomass capacity raise the question of whether strong political support for renewables in abstract terms will actually translate into new renewable capacity that can be successfully sited. Without some breakthrough on siting issues within the state, Massachusetts could be forced to backtrack on its RPS targets. This problem may become increasingly common for those states with relatively concentrated and populated areas for outstanding renewable sources and it raises a new set of challenges for policy proponents. In Texas, perhaps the biggest potential impediment to achievement of its ambitious RPS goals is the construction of transmission capacity to move robust sources of wind power toward more populous areas. More generally, the development of both intra-state and inter-state transmission capacity remains a significant challenge, particularly in those regions of the country where there is substantial physical distance between the energy source and its potential consumers.
Third, the challenge of developing superior transmission capacity and RPS proliferation more broadly suggests an increasing likelihood that states may benefit from greater interaction and collaboration with each other. Case studies confirm that individual states are keen to maximize economic and environmental benefits from RPS implementation but they also highlight instances in which cross-state cooperation may be essential. This may include agreements for common definitions of renewables and related credits as well as shared efforts to promote regionally-based renewable resources with high potential. States will also need to guard against "double counting," ensuring that renewable generation can only count toward RPS and greenhouse gas reduction requirements in one state. Such collaboration is most evident at present in the Northeast, where states are physically small and their economic and energy systems are closely connected. But interstate collaboration is also emerging as an issue in other regions, particularly the Southwest with its growing cluster of individual state RPSs. Indeed, one of the strongest cases against "bottom-up" policy design in a federal system involves those situations in which multiple states fail to work cooperatively and instead establish a patchwork quilt of provisions that preclude interstate cooperation. States need to begin to look beyond their own borders and seize multi-state or regional opportunities that would benefit all parties. One early model for such collaboration involves an 11-state effort convened by the Western Governors' Association in attempting to develop a common regional system for the issuance, tracking, and retirement of renewable energy credits. The so-called Western Renewable Energy Generation Information System (WREGIS) has been working in recent years to establish such a unified system for credit definition and oversight (Xenergy, Inc. 2003) and also includes authorities from western Canadian provinces and Mexican states.
Thus far, states are clearly learning lessons from one another, just as Nevada has closely monitored developments in Texas in refashioning its own RPS. Much of this cross-state interaction, however, occurs only sporadically and state officials across the continent acknowledge that they lack resources to carefully evaluate other programs and draw important lessons. Review of legislative testimony in all of the states examined as case studies suggests only occasional and often imprecise reference to the experience of other states. State budget woes in recent years have clearly eroded the capacity of some state agencies to maintain policy analysis expertise, attend conferences and workshops out of state, and monitor developments in neighboring states. In turn, pressures to maximize the capture of economic development benefits within state boundaries can serve to deter serious exploration of cross-state collaboration.
One area with considerable potential for inter-state collaboration is the development of a common metric for determining the greenhouse gas emissions impacts as various levels of renewable energy are brought on line in concert with RPS requirements. Of the five case studies, only Massachusetts has attempted to estimate in a systematic manner the greenhouse gas reduction achieved through RPS implementation (Massachusetts Office of Consumer Affairs and Business Regulation 2005, 2006). But Commonwealth officials acknowledge that this reflects only an initial estimate. "There are lots of debates over the assumptions that one uses and disagreement among stakeholders," noted one senior Massachusetts official. "I do not see a consensus here anytime soon." In contrast, other states have been reluctant to even venture a guess as to likely greenhouse gas impacts, noting methodological complexities and resource constraints in developing the needed analytical capacity. "The RPS is clearly having an impact on greenhouse gases but it is hard to get the model right," noted a senior Texas official. "If you add a big wind farm, where exactly is that off-setting generation? It is hard to track all of that and determine how much thermal source is being replaced." State officials generally concur that the methodological issues can likely be resolved and would clearly welcome a mechanism to help establish a commonly accepted metric as RPSs promote higher levels of renewable energy. The appendix outlines the key issues for making these calculations, and a set of options that state officials might explore in working toward common methodology in this area.
Interstate collaboration could also take other forms, allowing neighboring RPS states to trade RECs and encourage integration between RPS implementation and other state policies designed to reduce greenhouse gases. One could also envision common efforts to build respective renewable sources through both informal and formal agreements between states. In recent years, multiple states have demonstrated new ways to work toward common cause in areas ranging from tax policy to vehicle registration to regional attainment of ozone standards, all with the intent of benefiting all participating states (Greenblatt 2005; Engel 2005; Zimmerman 2004). Renewable energy-and RPSs-may offer similar opportunities for states, much as other states are beginning to join common cause on other climate initiatives. In the case of cap-and-trade programs, for example, New York and seven other eastern states have concluded that it makes more sense to work together than separately, leading to the evolution of the Regional Greenhouse Gas Initiative (De Palma 2005). More broadly, states might also expand opportunities to work with other neighbors, such as Canadian provinces, in instances where considerable energy is already shared and similar policies are emerging between respective states and provinces.
Such collaborative precedents might fruitfully guide states away from steps that significantly constrain interstate movement of renewable energy and potentially violate the Commerce Clause of the U.S. Constitution. This is simply not an issue in those states with a strong recognition of cross-state interdependence. But it is conceivable that policies that are in some way designed to minimize the role of out-of-state renewables in meeting RPS targets could face a Constitutional challenge. Examples of such policies include those that confine acceptable imports to those that arrive via a dedicated transmission line, most notably Nevada and Texas. The Constitutional boundaries are not at all clear in this area, especially given the recent departure from the Supreme Court of Justices William Rehnquist and Sandra Day O'Connor, who held strong views on the power of states in relation to the federal government. To date, no legal challenges invoking the Commerce Clause have been brought against a state RPS but the very possibility of such a test further underscores the potential benefits of greater interstate collaboration to minimize the likelihood of such a confrontation.
Fourth, as the United States moves toward a de facto national RPS through a tapestry of state-based programs, it is important to find ways that the federal government can play a constructive and supportive role. President George W. Bush signed the Texas RPS into law in 1999 and two former cabinet-rank officers took similar steps when they served as governors of their respective states (New Jersey and Wisconsin). That statehouse experience has not, however, necessarily translated into constructive federal engagement and support for continued state experimentation with RPSs. Indeed, it is difficult to understate the antipathy individuals responsible for different areas of RPS development and implementation at the state level express over their dealings with the federal government. This cuts across partisan and regional lines and reflects a deep state-based desire that, in the words of one official, "the feds not come in and mess up all the good stuff we've been trying to do."
Repeated fluctuation in the federal production tax credit for renewable energy has fostered a boom-and-bust cycle for renewable development in a number of states, leaving significant lags in the development of renewables during those periods in which the credit has been terminated or its status has remained uncertain. Officials in Texas and other states with large renewable targets contend that this fluctuation has been the single biggest impediment to even further expansion of renewable capacity. In this instance, most state officials welcome the recent extension of the credit in the 2005 Energy Act as one of the more constructive federal actions in many years.
States also remain concerned by their very limited inclusion in Congressional debates over various energy and climate initiatives. Most state officials interviewed for the case studies readily acknowledge they knew little or nothing about various federal RPS proposals that have been advanced in the U.S. Senate; they are adamant that states have taken the lead amid federal inertia and that the collective state experience with this policy tool should be studied carefully in guiding any future federal actions. In particular, state officials are opposed to any federal legislation that would preempt or constrain existing state policies and are very concerned about any steps that would penalize them for taking early actions. There appears to be particular concern among state officials about avoiding one of the unexpected consequences of the 1990 Clean Air Act Amendments. In that case, the level of sulfur dioxide allowance authorized for expanding renewable energy was set quite low (one ton of emissions for each 500 mWh of new renewables). The small number of allowances provided to incentivize renewable energy was not sufficient to make renewables competitive with the cheaper compliance options of switching to lower-sulfur coal or SO2 scrubbers.
One constructive step that could be taken early in the next Congress would be a sequence of hearings designed to distill lessons from state practice that could guide future consideration of the design of a federal RPS. Such hearings might also explore models for a two-tier RPS system, with one tier that established a national framework and national REC trading process alongside another that allowed them to sustain renewable targets above any federal level through their own programs. These systems could be linked through allocating credits to states for early action. Terms for state entrance into a possible federal program have been a major focus in the creation of the Regional Greenhouse Gas Initiative. This experience and lessons from other forms of intergovernmental collaboration in environmental policy could also afford useful guidance for possible models of state and federal cooperation under a multi-tier RPS.
Despite persisting intergovernmental concerns, state officials generally recognize and welcome constructive forms of federal engagement. They perceive the federal production tax credit as an essential step to equalize the playing field with conventional sources that have long received a range of governmental subsidies. They also acknowledge the need for federal assistance in improving transmission capacity, particularly given the challenge of tapping renewable sources in remote areas and finding ways to transfer such electricity to high-demand areas. In turn, many state officials note that the federal government could also promote interstate learning about RPS experience and help with the development of common metrics to determine greenhouse gas impacts as well as foster cross-state collaboration.
It remains unclear whether the federal government might at some point draw larger lessons from the states and develop a nation-wide version of an RPS that thoughtfully and systematically builds on the best practices of state experience. At present, the American experience resembles that of other federated systems of government, such as the European Union and Australia. In all of these cases, RPSs continue to proliferate and mature, with the possibility of eventual incorporation into a policy that applies across jurisdictions. For now, states have moved to the cutting edge of this issue both domestically and internationally, having evolved in recent years from modest experimentation to the assumption of central roles in this area of climate policy development.
All references are cited in the report, which can be downloaded here.
February 8, 2006
Contact: Katie Mandes, (703) 516-0606
PEW CENTER ON GLOBAL CLIMATE CHANGE RELEASES FIRST COMPREHENSIVE APPROACH TO CLIMATE CHANGE
All Sectors Must Share in Solution
WASHINGTON, D.C. – The Pew Center on Global Climate Change released the first comprehensive plan to reduce greenhouse gas emissions in the United States. The Agenda for Climate Action identifies both broad and specific policies, combining recommendations on economy-wide mandatory emissions cuts, technology development, scientific research, energy supply, and adaptation with critical steps that can be taken in key sectors. The report is the culmination of a two-year effort that articulates a pragmatic course of action across all areas of the economy.
The report calls for a combination of technology and policy and urges action in six key areas: (1) science and technology, (2) market-based programs, (3) sectoral emissions, (4) energy production and use, (5) adaptation, and (6) international engagement. Within these six areas, the Agenda outlines fifteen specific recommendations that should be started now, including U.S. domestic reductions and engagement in the international negotiation process. All the recommendations are capable of implementation in the near-term.
The report concludes that there is no single technology fix, no single policy instrument, and no single sector that can solve this problem on its own. Rather, a combination of technology investment and market development will provide for the most cost-effective reductions in greenhouse gases, and will create a thriving market for GHG-reducing technologies. To address climate change without placing the burden on any one group, the report urges actions throughout the economy.
“Some believe the answer to addressing climate change lies in technology incentives. Others say limiting emissions is the only answer. We need both,” said Eileen Claussen, President of the Pew Center.
Emissions in the United States continue to rise at an alarming rate. U.S. carbon dioxide emissions have grown by more than 18% since 1990, and the Department of Energy now projects that they will increase by another 37% by 2030.
Joining the Pew Center at the announcement were representatives from the energy and manufacturing sectors. Speaking at the release were: David Hone, Group Climate Change Adviser, Shell International Limited; Melissa Lavinson, Director, Federal Environmental Affairs and Corporate Responsibility, PG&E Corporation; Bill Gerwing, Western Hemisphere Health, Safety, Security, and Environment Director, BP; John Stowell, Vice President, Environmental Strategy, Federal Affairs and Sustainability, Cinergy Corp., Ruksana Mirza, Vice President, Environmental Affairs, Holcim (US) Inc.; and Tom Catania, Vice President, Government Relations, Whirlpool Corporation.
While actions are needed across all sectors, some steps will have a more significant, far-reaching impact on emissions than others and must be undertaken as soon as possible.
- A program to cap emissions from large sources and allow for emissions trading will send a signal to curb releases of greenhouse gases while promoting a market for new technologies.
- Transportation is responsible for roughly one-third of our greenhouse gas emissions, and this report addresses this sector through tradable emissions standards for vehicles.
- Because energy is at the core of the climate change problem, the report makes several recommendations in this area: calling for increased efficiency in buildings and products, as well as in electricity generation and distribution. Incentives and a nationwide platform to track and trade renewable energy credits are recommended to support increased renewable power. In recognition of the key role that coal plays in U.S. energy supply, the report calls for the capture and sequestration of carbon that results from burning coal. Nuclear power currently provides a substantial amount of non-emitting electricity, and is therefore important to keep in the generation mix. The report recommends support for advanced generation of nuclear power, while noting that issues such as safety and waste disposal must also be addressed.
- While most of the recommendations focus on mitigation efforts, the report acknowledges that some impacts are inevitable and are already being seen. As a result, it proposes development of a national adaptation strategy to plan for a climate-changing world.
- Finally, despite the importance of efforts by individual countries on this issue, climate change cannot be addressed without engagement of the broader international community. The report recommends that the U.S. participate in international negotiations aimed at curbing global greenhouse gas emissions by all major emitting countries.
Other recommendations include: long-term stable research funding, incentives for low-carbon fuels and consumer products, funding for biological sequestration, expanding the natural gas supply and distribution network, and a mandatory greenhouse gas reporting program that can provide a stepping stone to economy-wide emissions trading.
The full text of this and other Pew Center reports is available at http://www.c2es.org.
The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States’ largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.
On October 18, 2005, the Pew Center on Global Climate Change, under a grant from the Joyce Foundation, held a workshop in Cleveland, OH called “Capitalizing on Climate-Friendly Technologies.” The workshop examined how Ohio companies can capitalize on climate-friendly technologies, discussed what the state can do to assist developers, manufacturers and vendors of these technologies, and began to explore strategies to take advantage of these market opportunities. Presenters and participants at the workshop included state officials discussing incentives and opportunities for economic development through public-private collaboration, corporate executives explaining company strategies, a federal official discussing incentives included in the Energy Policy of 2005, and independent business experts identifying economic development tools that increase competitiveness in climate-friendly technologies.
Technology Markets and Products
Rentech Inc. (pdf)
Director, Biotechnology Business Development
President, Primary Metals Development
Alcoa Corporation (pdf)
Technology and Economic Development Initiatives
Colorado Photonics Industry Association (pdf)
I-85 Corridor Alliance, Alabama (pdf)
NorTech, Cleveland, Ohio
Federal Incentives for Climate-Friendly Technologies
Senior Policy Advisor, Office of National Energy Policy
U.S. Department of Energy (pdf)
The Role of Public-Private Partnerships
Ohio Air Quality Development Authority (pdf)
Governor’s Science and Technology Advisor
Governor Taft's Office (pdf)
Senior Advisor, Clean Fuel Initiative of the Deputy Undersecretary of Defense for Advanced Systems and Concepts
U.S. Department of Defense (pdf)
THE ROAD TO SOLUTIONS: REDUCING TRANSPORTATION’S ROLE IN CLIMATE CHANGE
SPEECH BY EILEEN CLAUSSEN
PRESIDENT, PEW CENTER ON GLOBAL CLIMATE CHANGE
PACIFIC GROVE, CALIFORNIA
August 23, 2005
Thank you very much. I am delighted to have this opportunity to be in California. I come to you, of course, from Washington, D.C., which really is a ghost town this month. The President is at his ranch and Congress is out of session, and the biggest news from the capital last week was that the White House had named a woman as executive chef. Yes, things are slow.
Of course there is no word yet on whether the Democrats will try to subpoena all the recipes this person put together back in cooking school. Reading the New York Times report on the appointment of the new chef, you could tell how she won the heart of the President. Following the announcement, the Times said, the new chef immediately left on vacation and was unavailable for comment.
But Washington has not been quiet all summer. Before they left town, of course, our nation’s leaders decided to address the energy challenges facing our nation by extending daylight savings time for another month. When Congress resumes work in the fall, they intend to establish a national bedtime. Anyone caught with his or her lights on after the appointed hour will be detained as an energy combatant.
In any case, it is great to be in California, and to have an opportunity to talk about real solutions to some of the problems facing our country. But I have to begin by mentioning an ad I saw recently for the Chevrolet Tahoe. The Tahoe, as you know, is the top-selling large SUV in the country and has a fuel economy rating of 16 miles per gallon in the city, 20 on the open road.
Despite this, the Tahoe now is advertised as having – and I quote – "the best fuel economy in its class." I am not kidding. This is the equivalent of Arnold Schwarzenegger saying he is the best governor in the country who holds the title of Mr. Universe. Once you define your class in narrow terms like this, you can be the best in anything. Think about baseball . . . you can have the highest batting average in West Coast Thursday night road games, for example, or the most home runs against pitchers who are vegetarians. In all of these cases, the competition isn't, well, that competitive.
But GM’s advertising gambit for the Tahoe may actually be a positive sign; because it reflects an acknowledgement that fuel economy is now a factor in Americans’ decisions about the cars we buy. Gas prices have been rising. The Middle East continues to be politically volatile, threatening supplies. And climate change finally seems to be appearing on the political radar. Even our reluctant President is talking about the need for action.
Before the recent rise in fuel prices, when consumers were asked about key things they considered when buying a new vehicle, gas mileage was twenty-fifth on the list. I repeat: twenty-fifth. Now, however, it seems that gas guzzling is not as socially acceptable as it was in the past. For anyone who picks up the morning paper or watches the evening news, low mileage is becoming increasingly hard to justify on a financial or environmental basis. And now we see this reflected in the consumer surveys: a 2004 J.D. Power survey found that poor gas mileage was the number-five reason why consumers rejected specific models of cars and trucks. Among the other top five reasons were that the total price was too high, the consumer didn’t like the exterior design and styling of the vehicle, and there just wasn’t enough of that new car smell. (Okay, I am kidding about that last one.)
Seriously, all of us know very well that Americans love their automobiles. And the reason we are here at this conference is because this love affair is causing problems for the climate. But it is not just the environment that is at risk. Our national security is, too. James Woolsey, the former CIA director, drives a Prius. And the reason he drives a Prius is not because he loses sleep at night thinking about climate change. Yes, he believes in the science and certainty of climate change, but what he really loses sleep over is the idea that our dependence on oil poses a grave risk to our economy and our security.
Woolsey put it in a this way in a recent paper he coauthored with former Secretary of State George Schultz – and I quote:
“Four years ago, on the eve of 9/11, the need to reduce radically our reliance on oil was not clear to many and, in any case, the path of doing so seemed a long and difficult one. Today, both assumptions are being undermined by the risks of the post-9/11 world and by technological progress in fuel efficiency and alternative fuels.”
Of course, James Woolsey and George Schultz are not alone in noting the alignment between America’s national security and environmental interests. New York Times columnist Thomas Friedman has written often about the emergence of a movement he calls the “geo-greens” — people who are worried about our dependence on Middle Eastern oil for both environmental and security reasons.
Here is how Friedman explains it:
“Geo-greens seek to combine into a single political movement environmentalists who want to reduce fossil fuels that cause climate change, evangelicals who want to protect God’s green earth and all his creations, and geo-strategists who want to reduce our dependence on crude oil because it fuels some of the worst regimes in the world.”
Those of us who have been talking for all these years about the importance of addressing climate change should welcome the opportunity to broaden the case for action on this issue. And, we should work together with all of the allies we can find – on all sides of the political spectrum – to develop a plan for protecting our economy, our security and our environment in the decades ahead.
But I am not here to talk about why we need to act. I would guess that virtually everyone in this room acknowledges that reducing our dependence on oil and addressing climate change are two reasons why we must act. So what I want to do is issue a challenge to the American automobile industry. It is a challenge that will require the industry to apply all of its considerable ingenuity and technical skill. It won’t be easy, but I think it can be achieved.
And the challenge is this: the auto industry should set a goal to reduce vehicle carbon dioxide emissions from business-as-usual levels by 50 percent by 2050. I call it the “Fifty by Fifty” challenge.
Now, I admit this sounds like a lot. Actually, it is a lot. But people and governments around the world, including right here in the United States, now accept that it is going to take bold steps to address the problem of climate change. It is going to take a new industrial revolution. And industry, of course, will need to take the lead in making that revolution happen.
A recent study from the U.S. Department of Energy, along with Advanced Resources International and Energetics, looked at a scenario where we achieve significant increases in automobile efficiency over the next 50 years; substantial penetration of zero-carbon vehicles; and a complementary decrease in the number of vehicle miles traveled. And the result, according to the study, would be a reduction in business-as-usual emissions of 57 percent. So 50 percent, should be eminently achievable.
The U.S. auto industry historically has responded slowly to uncomfortable challenges – to the crusade for clean air, to fleet fuel efficiency standards, to the vehicle quality and reliability challenges from foreign manufacturers in the second half of the 20th century. And now the buildup of atmospheric CO2 poses another challenge. It is not a stretch to say that the industry’s response to the environmental and national security problems created by our continuing (and growing) reliance on oil will determine its future. To meet the “Fifty by Fifty Challenge,” automakers must begin increasing the efficiency of the vehicles they produce right now, while at the same time accelerating the development of zero-carbon autos. The goal should be to develop the capability to have one in four new vehicles sold produce zero emissions by 2050.
The auto industry has some of the finest engineers and marketing people in the world. I’m optimistic that when they focus their considerable talents on the most important problem of our time, we will all reap the benefits.
But, of course, industry cannot do this entirely on its own. Government should provide the impetus for action through a clear statement of intent to address the problem, coupled with tough but achievable standards. Many nations, including those of the European Union, together with Japan, Canada and even China, are acknowledging this. They are setting the bar high for themselves. A recent Pew Center report found that the European Union and Japan have the most stringent emissions standards in the world. Even the new standards proposed here in California would be less stringent than what is required right now in the European Union. When standards are measured in terms of the fleet-average fuel efficiency rate required of automakers, the U.S. standards were lower not only than the EU’s and Japan’s but also Australia’s, Canada’s and even China’s. We can do better than that – and we must.
One problem with creating a buzz about climate change has been that many of the problems it creates are viewed as occurring somewhere in the distant future. President Bush tacitly acknowledged this bias when he placed the issue among the nation’s “long-term priorities.”
But the reality is that the impacts of climate change are not “out there” – they are being felt right now around the world. We have now crossed a horizon where these problems can be viewed as becoming increasingly urgent and alarming not in 50 or 100 years but in that span of the automotive business cycle – over, say, a 20-year planning period. The famed “Snows of Kilimanjaro,” for instance, are expected to be gone completely in 20 years. And I believe U.S. automakers may suffer a similar fate if they do not face up to this challenge right now.
So that’s the challenge. The real question is: how do we get there? What should the policy agenda be?
I know you will be exploring these issues in more detail over the next three days. My job (I think) is merely to get you thinking about some of these things in broader terms – as much as you want to think about these things at all after drinks and a delicious dinner. (When I first saw the schedule for this evening, I thought I could call my remarks, “Toward a Policy Agenda for Climate Change – But First Toward Bed.”) So, I will try to get us where we need to go as efficiently as possible.
My own agenda tonight is to provide context for your conversations between now and Friday. And I want to do this by touching on four key points.
- The first is that transportation, as I have already said, is a fundamental part of the climate change problem – and must therefore be a fundamental part of the solution as well. If we don’t meet the transportation challenge, we won’t stand a chance of meeting the overall challenge of addressing climate change.
- Second, I want to emphasize the need for both short-term and long-term solutions —this is not an either/or proposition. We clearly need both.
- Third, I want to talk about the role of public policy in creating a favorable climate for technology development and deployment.
- And, last but not least, I want to talk a little more about the role of industry – and specifically the automobile and fuel companies – in forging solutions. One of the hit movies of the summer is “Batman Begins.” The caped crusader, happily for our metaphor, drives a car, the Batmobile, in which he rushes around saving the world. I hope tonight we can launch the world premiere of a new superhero, the automobile industry, dressed in its Day-Glo superhero Spandex costume, rushing in at the propitious moment to save the world from global warming.
As I mentioned at the start of my remarks, the reason we are all gathered here this week is because, well, people love their cars and trucks – and cars and trucks, in turn, are an important source of greenhouse gas emissions.
Here in California, where the notion of the “freeway” came to life, your state is home to 26 million registered vehicles. Nationally, Americans own more than 225 million passenger cars, trucks and motorcycles. According to the American Automobile Association, we will drive more than 3 trillion road miles this year. By my calculations, this is the equivalent of more than 500 trips to Pluto and back every year. That’s Pluto, the planet at the edge of the solar system, not Pluto the character at Disneyland.
Over it’s manufacturing and operating lifetime, a single typical American-made vehicle – say, a Ford Taurus -- is responsible for 61.9 tons of CO2 entering the atmosphere. The vast majority of this -- 55.1 tons -- is from fuel burned over the road life of the car. So reducing emissions from auto manufacturing operations, while not unimportant, is not the answer to this problem.
The operation of passenger cars and pickups in the United States contributes about 19 percent of U.S. CO2 emissions. In California, where you do more driving and have more efficient electricity generation than national averages, this percentage is much higher — transportation is responsible for over 40 percent of California’s GHG emissions.
Nationwide, transportation activities are responsible for more than 1.8 billion metric tons of CO2 entering the atmosphere each year. These emissions consist primarily of carbon dioxide from fuel combustion, but they also include nitrous oxide and other greenhouse gases. Our transportation sector alone emits more carbon dioxide than all sources in every other country except China.
Think about that for a minute – if our transportation sector were a country in and of itself, it would be third in carbon emissions after the United States and China – and China, I remind you, has four times our population.
Despite all the talk about hybrids and Americans’ increasing attention to fuel economy, transportation-related energy use and emissions both are rising in this country. Among the reasons: we’re driving greater distances; and the fuel economy of today’s cars and trucks actually has been starting to decline. For every Prius that Toyota sold in 2004 in the United States, it sold two full-size Tundra pick-up trucks, which consume nearly three times as much gas to go the same distance as the Prius.
Most of you have probably seen the recently released EPA report on automobile fuel efficiency. It shows that the average 2004 model car or truck got 20.8 miles per gallon. That is 6 percent less than the average new vehicle sold in the late 1980s. Something is clearly wrong with this picture if we are to be on a path to dealing with our national security and the need to address climate change.
The key to a solution lies, I believe, in establishing a framework for action for the next 50 years. At the Pew Center, we have been working on such a framework -- we call it the 10-50 solution.
By 10-50, we mean that America needs be thinking ahead 50 years, envisioning what our society and economy will have to look like at that time in order to achieve the goal of significantly reducing our emissions of greenhouse gases. That’s the “50” part. The “10” means that we need to identify policies and strategies that we can pursue in the next ten years that set a course for the decades after to achieve our long-range goal. The 10-50 solution therefore looks at both the short term and the long term – and it helps us figure out those short-term steps that will get us to a long-term vision of a low-carbon economy, including a low-carbon transportation sector.
The 10-50 approach takes a long-term view because the problem of climate change, as I have said, calls on us to create a new industrial revolution. This is a revolution that is going to have to reach across every major energy-producing and energy-consuming sector of our economy. It is going to take time to develop and deploy the full complement of technologies that are needed to wean our economy from an over-reliance on fossil fuels.
At the same time, the 10-50 approach enables us to identify the practical steps we can take right now and in the decades to come to achieve steady progress. It forces us to ask important questions about the mix of policies needed to unleash the power of the marketplace as a positive force for change.
So let’s look first at short-term technologies that can reduce greenhouse gas emissions right now. And the technology that appears to hold the most promise is, of course, the hybrid gas-electric engine. Clean-diesel engines also hold significant promise. German clean-diesel technology vehicles emit 30 percent less CO2 per mile. But with the diesel engine, we still have work to do on particulate emissions; I know that the technology is improving all the time, so diesels should probably be part of the mix going forward. Diesel hybrid technology could potentially contribute up to 30 percent toward reaching our goal of 50% reduction from business as usual by 2050.
Biofuel blends also can help in the near term. And what all of these near-term technologies have in common is that they will not require significant changes in our elaborate infrastructure for producing, distributing and retailing conventional petroleum fuels. Nor will they require appreciable changes in the most popular and important features of today’s vehicles, reliability, safety, convenience, and 27 cupholders.
Of course, the simplest and cheapest way to reduce CO2 emissions is to drive lighter cars, but getting Detroit to put today’s vehicles on the equivalent of the South Beach Diet has been a challenge. The recently released EPA report I cited shows that the average new vehicle weight of automobiles in America has risen to about 4,000 pounds today, from about 3,200 in the early 1980s.
And there are other things that can be done without a whole lot of trouble to increase fuel efficiency – technologies and vehicle designs that can, for example, reduce aerodynamic drag and reduce rolling resistance. Again, all of these are eminently doable solutions, and all of them can happen now or relatively soon.
And what about the longer-term technologies? Here, of course, I am talking about hydrogen fuel cells, biofuels, and all-electric cars and trucks. And there are others. What these technologies have in common, in addition to their potential contribution to reducing long-term emissions, is that none are ready for mainstream use. Fuel cells, advanced energy storage and many other “break-through” technologies will take decades to figure out. The sooner we get started, the sooner they can deliver on their enormous promise of significant, long-term reductions in emissions.
It is important to note here, too, some of the synergies between the technologies that will help us achieve short-term vs. long-term progress. For example, as we continue working on hybrid technologies, we are getting a significantly better handle on the electric systems that will be the driving force of hydrogen-powered and all-electric cars.
It is also important to note the importance of not putting all of our eggs into one basket. We need to be pushing ahead on all of these technologies simultaneously in case some of them don’t pan out. It is important – no, vital – that we vigorously pursue every lead we have.
Which brings me to the next part of my remarks: what are the policies that can get us to take the short-term actions that will make a difference, and also invest significantly in the longer-term technologies that we will need if we are to meet the challenge. I believe that the single most important thing that the government can do to set the stage for real progress in reducing transportation-related emissions is to adopt standards. As is often the case on these issues, the United States has a lot to learn from California. Not only has your Governor embraced an ambitious target for reducing overall emissions, but policymakers here also are seeking to take the concrete step of placing direct limits on greenhouse gas emissions from cars. Whether or not this effort will move forward is now up to the courts. However, if it does move forward, several other states have already signaled a willingness to follow California’s lead.
But state standards, while a big step in the right direction, are not enough. We do need national standards. In the best of all possible worlds, we would convert our current fuel economy standards to a set of tradable standards based on greenhouse gas emissions – and to make those standards stringent enough that they spur action, but not so stringent that they cause major disruptions in the auto industry. At the very least, we need once and for all to reform the CAFE program – for example, by establishing tougher standards with longer lead times, and by making the program more rational and more effective. Giving SUVs and other light trucks a pass on meeting tough but achievable efficiency standards is insanity when you consider the environmental and national security challenges we face today.
But despite their importance, standards are not the only answer. In the same way that we are going to have to apply a diverse mix of technologies to the challenge of reducing emissions, we also are going to have to apply a diverse mix of policies.
In the short-term, the government can do much more to step up consumer incentives for buying hybrids and clean-diesel vehicles. Hybrid vehicles are selling. But despite their popularity, they will not represent more than a small fraction of U.S. vehicle sales without government help. We need more tax incentives for getting more highly efficient, light-duty vehicles on the road. Especially intriguing is the notion of a so-called “feebate” system that charges fees on the purchase of inefficient vehicles and rebates toward the purchase of efficient ones. How better to convey the notion that consumer choices make a difference? Along those lines, government also can do a lot more to make certain consumers have good and reliable information about the impacts of their choices – for example, by mandating that new and used cars have uniform stickers showing their greenhouse gas emissions.
We also can remove incentives in the law for purchasing inefficient vehicles such as SUVs. It is frankly hard to believe these incentives exist, given the energy and climate challenges we face. Until recently, for instance, business purchasers of SUVs heavier than 6,000 pounds – which included 38 styles of passenger vehicles like the Lincoln Navigator and the legendary Hummer – could write off $25,000 from income on the purchase. It’s a big tax loophole – so big you could drive a Hummer through it, especially if you compare that to the paltry $3,000 incentive to buy a fuel-efficient hybrid.
And, last but not least, government can and should take steps to boost public-sector procurement of climate-friendly vehicles. The goal is to create and expand the market - and government can help do that with its own purchases.
And then there are the long-term policies. If you look across the list of long-term technologies that could help to solve this problem, you see that every one of them faces substantial barriers that the private sector plainly will not be able to resolve on its own. Take hydrogen as an example. It is essential that we find environmentally friendly ways of producing hydrogen, because if we merely use fossil fuels to do it without capturing and sequestering the carbon dioxide, the climate problem does not improve; it actually gets worse. And the development of a hydrogen infrastructure clearly is something that industry and individual companies cannot and will not do without some level of government involvement and incentives. With hydrogen as with other long-term technologies, government needs to work with industry to come up with demonstrations that will show what's feasible and practical - and how to do it right.
So the bottom line is: reducing the transportation sector’s emissions will require both private sector commitment and government leadership. Private business cannot shoulder this alone. Government must play a role. Only government can create and implement a national program of standards with trading. Only government can offer incentives to increase the deployment of low-GHG-emitting vehicles. Only government can boost RD&D on low-carbon fuels and energy storage options, and incorporate climate change and system efficiency considerations in federal infrastructure and transportation funding.
Why is this a government responsibility? Because responding effectively to climate change is in the public interest. This is a problem that poses a very real threat to our economy and our quality of life. And it is incumbent on government to create the conditions necessary for solutions to flourish -- to create, if you will, the climate for innovation.
And this is not an issue that we should be addressing exclusively on a domestic basis. There are real advantages to working with other nations to reduce transportation-related greenhouse gas emissions. One proposal that emerged from a series of recent dialogues that the Pew Center organized on this issue is to create harmonized cross-border standards for fuel economy or vehicle emissions. These standards could be tradable, and they could be either uniform across all countries, and they could be differentiated to allow a longer phase-in period to reflect different circumstances in different countries.
In sum, there are countless ways to reduce emissions from the vital and growing transportation sector. Our challenge is to adopt policies that will ensure that those reductions happen sooner rather than later – before the damage is done and the costs become prohibitive.
Which brings me to my fourth and final point: the need for industry to don its fearsome cape, step into its gas-electric fuel efficient hybrid Batmobile, subdue the villains and save the world. Good things are happening:
- Toyota has led the way in making the hybrid an important and growing segment of the automobile market.
- Ford last month brought a hybrid compact SUV, the Mercury Mariner, to market a year earlier than originally planned.
- Both Toyota and Ford recently called publicly on the Bush Administration and other G8 governments to adopt a cap and trade or other market based system to help shape consumer choice.
These are important developments. But they are not enough. The transportation sector is a rare case where a limited number of American companies – I can count them on one hand – literally have a chance to change the world.
We have a unique opportunity to bring the key players together around a relatively small table and achieve something historic. Coming to agreement on a set of principles, a set of concrete actions, and, yes, a set of ambitious but achievable standards really should be possible.
If we are serious about reducing emissions from this sector, and we must be, we need to challenge ourselves to work together and come up with a plan that gets us where we need to go. That is what the “Fifty by Fifty Challenge” is about – getting a commitment to reduce vehicle carbon dioxide emissions from business-as-usual levels by 50 percent by 2050.
It is time. Given the transportation industry’s starring role in the problems I have talked about, it must now play a starring role in solutions. Not merely a supporting role, not a walk-on role, but a starring role.
All of us appreciate the role of the automobile companies and the other players in the transportation sector in getting us from place to place. But now this sector has to take us to a different destination, a new place where this country can meet its transportation needs without putting our national security and our climate at risk. It might take us 50 years, but I believe we can arrive at that destination. It’s where we need to go. Ladies and Gentlemen, start your engines . . . the race to the future is on. Thank you very much.
Press Release: New Reports Detail Challenges and Opportunities for Climate Change and Buildings, Electricity Sectors
For Immediate Release: June 16, 2005
Contact: Katie Mandes
BUILDINGS, ELECTRICITY AND CLIMATE CHANGE
New Reports Detail Challenges and Opportunities
Washington, DC —The U.S. buildings and electricity sectors—which together account for the largest portion of our economy’s physical wealth and enable almost every activity of our daily life – also account for approximately half of our nation’s CO2 emissions. Effective long-term climate change policy in the U.S. must address emissions from these two sectors.
Two new reports released today by the Pew Center on Global Climate Change identify a number of technologies and policy options for GHG reductions in both sectors. The first report is Towards a Climate-Friendly Built Environment, written by Marilyn Brown, Frank Southworth and Therese Stovall of Oak Ridge National Laboratory. The other is U.S. Electric Power Sector and Climate Change Mitigation, written by Granger Morgan, Jay Apt, and Lester Lave of Carnegie Mellon University.
Long capital stock turnover, regulatory uncertainty and diverse and often competing interests all contribute to the difficulty of reducing GHGs from these two sectors. These reports find that a portfolio of affordable technology and policy options exist to completely transform the high-emitting buildings and electricity sectors to low-GHG emitting sectors over the next 50 years. However, the long lead time required to develop new technologies, deploy available technologies, and turn over capital stock, means that policies need to be launched now to create the impetus for change. Efforts must be sustained over time to achieve the deep reductions required.
"The importance of these two sectors to both the U.S. economy and to the issue of climate change cannot be over-stated,” said Eileen Claussen, President of the Pew Center on Global Climate Change, “This research shows that we can achieve enormous reductions in the building and electric sectors, but only if we craft a clear and comprehensive policy to guide them."
Some insights that emerge from the reports are:
- Policies are needed to enable meaningful GHG reductions from these sectors. The diverse and fragmented nature of the buildings sector, and the current state of regulatory uncertainty in the electricity sector prevent many available GHG reduction options from being adopted in the market in the absence of policies.
- Significant increases in R&D and deployment policies are essential if we hope to significantly reduce GHGs from these sectors. A significantly expanded R&D program is needed in the U.S. to develop new technologies, and deployment policies are needed to push and pull available fuels and technologies into the market in the near and long term.
- An elimination of most GHGs from these sectors is possible over the next 50 years. If managed properly, the electricity sector could undergo a complete capital stock turnover to low or non-GHG emitting generation sources over the next 50 years; while buildings in the U.S. could become net low-GHG energy exporters in the same time frame – but government policies are essential to provide clear policy direction in order to drive the massive public and private investments and choices necessary to enable such a future.
This report is part of the Solutions series, which is aimed at providing individuals and organizations with tools to evaluate and reduce their contributions to climate change. In 2003, the Solutions series released the first of its sectoral reports, Reducing Greenhouse Gas Emissions from U.S. Transportation, written by David L. Greene of Oak Ridge National Laboratory and Andreas Schafer of the Massachusetts Institute of Technology. Other Pew Center series focus on domestic and international policy issues, environmental impacts, and the economics of climate change.
A complete copy of this report—and previous Pew Center reports—is available on the Pew Center's web site, /global-warming-in-depth/all_reports/.
The Pew Center was established in May 1998 by The Pew Charitable Trusts, one of the United States’ largest philanthropies and an influential voice in efforts to improve the quality of the environment. The Pew Center is an independent, nonprofit, and non-partisan organization dedicated to providing credible information, straight answers, and innovative solutions in the effort to address global climate change. The Pew Center is led by Eileen Claussen, the former U.S. Assistant Secretary of State for Oceans and International Environmental and Scientific Affairs.