Obama Will Start 2nd Term With Unfinished Climate Business
Harvard Business Review -- President Obama has some unfinished business to attend to, and taking care of it will require help and support from corporate leaders across the country.
When he ran for president in 2008, Obama made three big promises: end the Iraq War, extend health care coverage to all Americans, and take federal action to reduce the threat of global climate change. He delivered on the first two. And though his Administration made some progress on emissions reduction by doubling federal fuel economy standards for passenger vehicles, the president chose not to move comprehensive climate legislation through a recalcitrant Senate in the wake of the Great Recession. After 2010, climate all but disappeared from the national conversation.
Hurricane Sandy put it back on the map. Sandy is just the latest reminder that climate change, which fed the storm's fury by warming Atlantic waters and loading moisture into the atmosphere, isn't going away. Since January, we have seen record drought, rising commodities prices, the lowest Arctic ice levels in recorded history, and a rash of costly extreme weather events. In fact, 2012 is likely to be the hottest year since accurate record-keeping began in the late 19th century. And as Sandy's $50 billion estimated price tag demonstrates, the cost of doing nothing is far greater than the cost of taking action. So what can the President do to fulfill his promise, reiterated in his victory speech, to ensure that America "isn't threatened by the destructive power of a warming planet"? Some argue that he can't do much, since he faces a divided Congress where some members still reject the reality of climate change. But as Obama is fond of saying, presidents are not elected to do the easy things, and political realities are not set in stone. Sandy has not only restarted the climate conversation in this country; it has also changed the calculus of what is politically possible.
Here are five steps the president should take to address climate change — from no-brainer ideas almost everyone can agree on to ambitious items that would require Congressional action. None is likely to be successful without the active support and participation of the business community.
1. Feed the conversation. President Obama can start by simply by talking about the issue — adding to the national climate conversation that began in Sandy's wake, and helping Americans connect the dots between emissions, climate change, and extreme weather. After two years of climate silence in America, this conversation is crucial — and if it is going to lead anywhere, it must include voices from business: Insurance companies talking about the cost of climate inaction. Main Street organizations talking about the need for community resilience in the face of severe weather events. Local first responders, who are often volunteers with day jobs in the business community, talking about the deadly weather trends they are experiencing. It is worth remembering that strong business support helped secure passage of the House climate bill in 2009, and though that effort failed in the Senate, no serious legislation can move without the backing of men and women in the engine room of the American economy. To be politically viable, climate solutions must be economically sustainable.
2. Reduce climate accelerants. President Obama can take immediate steps to reduce potent greenhouse gases other than carbon, such as methane and fluorinated gases used in refrigerants and industrial applications. Although carbon gets most of the attention, these substances are "climate accelerants" — they fuel global warming the same way gasoline fuels a fire. Consider methane, the primary component in natural gas. Though it burns cleaner than coal, when it leaks into the atmosphere uncombusted, its effect on the climate is 72 times more potent than that of carbon dioxide over a 20-year time frame. And methane is leaking from the entire natural gas system — from wells, pipelines, and storage facilities. Shockingly, no one knows precisely how much methane is leaking — that's why Environmental Defense Fund and the University of Texas are partnering with nine natural gas companies to measure the leaks. The good news is that we have the technology to detect and reduce leakage — and no one should be against common sense measures to prevent the waste of this precious natural resource. Depending on how much leakage we are able to stop, this initiative could have the same climate benefit as shutting down a third of the coal-fired power plants in the United States. Smart regulations are needed to address leaks from oil and gas drilling; the Obama Administration took a first step in this direction earlier in the year, but there's much more to do.. Natural gas companies such as Southwestern Energy have found that the cost of plugging leaks is offset by selling the recovered gas; the industry benefits from leak reduction and should support these rules.
We also need to phase out the use of fluorinated gases, which are, pound for pound,hundreds or even thousands of times more potent than CO2. Although today they represent only a small part of global emissions, their use is rising fast, especially in India and China. The U.S. has proposed bringing them under the Montreal Protocol on Substances that Deplete the Ozone Layer, and we should begin ending their use here at home. Fortunately, U.S. companies are technology leaders in developing acceptable substitutes. Just as business leadership was crucial when we turned back the threat to the ozone layer from chlorofluorocarbons, it will be essential today.
3. Start a clean energy race. The Obama Administration can do much more to promote energy efficiency and clean, renewable technologies. To begin, it can get serious about reducing subsidies for fossil fuels, which have slanted the playing field for too long. An industry that records hundreds of billions in profits every year needs no further help from the federal government. Obama should also continue tax credits for green, renewable energy while increasing R&D funding. Wind and solar are almost cost competitive with coal, and they're cheaper if externalities are taken into account. An extra boost in R&D funding could make all the difference. Congress should pass national clean energy standards, which would require states to get more energy from renewables. Some 30 U.S. states have them, China has them — why shouldn't the U.S.? The administration should also encourage private capital to invest in low-carbon energy. This means getting state public utility commissions and regional power market operators to remove barriers to investments in efficiency and renewables. The emerging, interactive "smart grid" can also be a green grid, encouraging distributed power generation and demand response that reduces the need for baseload generation. It's not sexy, but it is hugely important. Obama should own it in his second term, and every business owner who would prefer to sell solar power to her local utility, instead of buying power from it, should get on board.
4. Use the Clean Air Act. As it began to do in its first term, the Obama administration should use the Clean Air Act to reduce greenhouse gas emissions, under authority confirmed by the U.S. Supreme Court in Massachusetts v. EPA. This means vigorously defending the clean-air rules the Obama Administrations already put in place, including the historic higher fuel economy standards for new cars and trucks and restrictions on the emission of mercury and other toxic air pollution for power plants. Keeping these rules in place will stop millions of tons of carbon pollution from entering the atmosphere in the future. The Obama Administration should also set CO2 emission standards for new and existing power plants through flexible and economically efficient approaches, including emissions trading and averaging, so power companies can meet standards across their fleet of plants and not at individual facilities. The EPA should design these standards in a way that rewards states that devise their own emissions reduction programs, as California and the Northeastern states have done. And it is time for business leaders who understand that climate change imposes real costs to accept that climate action has some manageable costs as well, and that we no longer have the luxury of ducking them.
5. Put a price on carbon. Economists from across the political spectrum, including N. Gregory Mankiw, Douglas Holtz-Eakin, and Arthur Laffer on the right, agree that the most economically efficient way to cut carbon pollution is by imposing a price via a cap or tax. Either would be a powerful incentive to produce cleaner power and could be accompanied by lower taxes on labor or capital, easing the impact on working families and business. As we move toward the fiscal cliff, there is plenty of discussion in Washington, from stakeholders on both sides of the aisle, about raising revenue through a carbon fee as part of a grand bargain on the budget. A carbon tax starting at $20 per metric and rising at 6% a year could raise $154 billion by 2021, according to HSBC analyst Nick Robins. "Applied to the Congressional Budget Office's 2012 baseline, this would halve the fiscal deficit by 2022," he wrote in a note to clients.
Such a proposal would surely encounter fierce opposition, and one White House official has already signaled that Obama isn't proposing one now. But we will never solve the problem unless our leaders begin to talk openly about it and include all costs in the discussion: the cost of climate action, the cost of climate inaction, and the cost of climate resilience. Sandy focused attention on the need to harden our shorelines and communities against storm surges; sea gates to protect New York Harbor from the next big one could cost at least $10 billion. If that turns out to be the best course of action, who is going to pay for it? Addressing such vulnerabilities is essential, but it amounts to treating one potentially fatal symptom of the problem. If we raise the necessary funds via a carbon price, then we are addressing the cause as well as a symptom. And no amount of infrastructure hardening will protect our cities unless we also reduce emissions. That's the kind of grown-up conversation we need to have, and there's no one better suited to lead it than the president.
Eric Pooley is senior vice president for strategy and communications at the Environmental Defense Fund, and author of The Climate War: True Believers, Power Brokers, and the Fight to Save the Earth. An award-winning journalist, Eric has served as deputy editor of Bloomberg Businessweek, managing editor of Fortune, editor of Time Europe, and national editor, chief political correspondent, and White House correspondent for Time.