Regulating Carbon Pollution through the Climate Action Plan: Window Dressing or Pathway to an Energy Revolution?

On Monday, President Obama revealed the final details of his Climate Action Plan, partially fulfilling a campaign promise he made in the lead up to the 2008 elections. Some critics of the Plan claim that it will have a negative impact on the job market, especially in the major coal producing states. Other critics say that it does not go far enough to reduce toxic greenhouse gases and is still subject to being undermined by the judiciary.

On the other hand, most responses to the Plan have been overwhelmingly positive, with the New York Times citing it as the most important action ever taken by a president to address climate change. It remains to be seen whether or not this is a testament to the kind of enthusiastic over-optimism that often plagues American politics when major policy transformations are afoot. On the other hand, the Plan does raise an interesting question for the long term: is the regulation of carbon emissions merely a form of political window dressing or can it be a lasting solution to counter the negative effects of climate change?

The main focus of the Climate Action Plan is the regulation of carbon emissions coming from electric power plants, with a goal of cutting emissions to 32% below 2005 levels by the year 2030. Since coal is the fuel most widely used to generate electric power in the United States, with 26% of carbon coming from the energy supply sector overall, it makes sense that the White House would make these plants the focus of its mission to drastically reduce greenhouse gases.

According to the EPA’s Global Greenhouse Gas Emissions data, fossil fuels and related processes like deforestation account for 74% of carbon dioxide emissions (a scant additional 3% of these emissions come from other processes, like reforestation and certain soil improvement methods), while some agricultural activities, certain waste management techniques and energy use account for 14% of methane emissions. Emissions of nitrous oxide and fluorinated gases from certain agricultural and industrial processes account for the remaining 9% of harmful emissions.

It remains to be seen whether legislation can effectively address or regulate all these sources of carbon pollution. The Climate Action Plan has been designed with some of the issues that have undermined similar efforts in the past in mind. Some aspects of this design remain flawed: for example, imposing carbon taxes may provide a short-term solution for finding less harmful ways to create energy from fossil fuels (if the idea of “clean carbon” is to be believed). However, how does one determine the value of emissions? This is not a feasible task, and it is likely to remain an unbalanced and somewhat arbitrary one, which likely translates into endless litigation in the courts.

Other aspects of this legislation may well provide a remedy to historical impasses. For example, interregional disparity on the carbon issue has varied greatly in the US, and this disparity has repeatedly stymied regulation. By contrast, Europe has experienced little interregional disparity on this issue, with most European States (and all EU member states) essentially in agreement about the need to reduce emissions and explore alternative, less polluting sources of energy. The Climate Action Plan addresses this disparity by giving states some the ability to customize their own path to meet carbon reduction goals and to work with each other cooperatively to help meet these goals.

Whether or not this will ultimately prove satisfactory to high coal producing states remains to be seen, but acknowledgment of the challenges that the Plan poses to such states can translate into more time for these states to develop alternative (read: renewable) energies that could spark a whole new energy revolution with the proper investments and incentivization of industries, particularly those that stand to lose the most, with increased taxes and penalties on emissions.

Fossil fuel development will naturally decrease with a decrease in global demand, which at present seems to be the likely trend for the future. This is true despite the big push for natural gas in the US, which is not only polluting but is still in its early stages of development, with a host of environmental problems surrounding current processes of fracking. However, giving businesses financial and regulatory incentives to decrease their development of fossil fuels and pursue clean, renewable, and potentially more lucrative sources of energy, can go a long way in bringing some of the biggest industrial polluters to the table.

Here in the US, we haven’t historically had the kind of incentives that our European counterparts were able to marshal to bring polluters to the climate change table. We can’t offer EU membership in exchange for cleaning up polluters’ carbon emissions acts. But the Obama Administration did unveil a plan to allow states to join an interstate cap-and-trade system with financial benefits, such as carbon reduction credits (i.e. permits that can be cashed out in a cap-and-trade market). These credits can be used by individual businesses as a source of additional revenue by, for example, selling pollution credits to other companies. Cap-and-trade remains contested, however, so it is still unclear how well this incentive will work to achieve its intended objectives.

However, when these kinds of inducements are combined with investments, tax credits, or other financial incentives to businesses to develop renewable energy, fossil fuel production and demand will fall much farther. If the estimates recently given by the UN’s Intergovernmental Panel on Climate Change (IPCC) are correct, renewables could supply 80% of the world’s energy within the next four decades. The fossil fuel industry would be foolhardy to pass up the chance to cash in on the veritable energy revolution that is taking place. Perhaps the global gathering of nations this coming December will reveal some of the ways that Japan, China, and some EU countries have been able to rapidly monetize the growing market in renewables. If so, they could provide the blueprint for long-term profitability to many US businesses willing to jump into the fray.

While it is difficult, if not impossible, to imagine a world that completely eliminates fossil fuels, their usage can be greatly reduced so as to transform the impact on the global environment that carbon pollution has created up to this point. Without financial incentives to bring this about, regulation and legislation alone cannot get the job done.