Carbon: Where Clinton, Trump Can Agree

 
With Hillary Clinton and Donald Trump now on track to square off with each other for the White House, a rare opportunity exists to challenge status quo policy and chip away at the gridlock plaguing Washington in recent years. On climate policy, the next administration should consider a strategy that is predictable, flexible and environmentally powerful -- qualities not offered by the current approach. After the last major US climate bill failed in Congress in 2009, President Barack Obama's administration unleashed a process of regulating carbon pollution sector by sector, especially through the flagship Clean Power Plan. But this is a dangerous road: Now that the administration has targeted electricity, it is required to move onto other emitters (NE May5'16). If this continues, a patchwork of regulation would inflate to unmanageable proportions -- something pro-business real estate magnate Trump would want to avoid. For Clinton, an environmentalist and former secretary of state, regulations aren't powerful enough for the US to uphold its end of the Paris climate agreement in the long run. Both can agree, for different reasons, that a firm carbon law would better serve the economy and be a more powerful weapon against global warming.

In recent years, the US Environmental Protection Agency (EPA) has begun regulating greenhouse gases under the Clean Air Act in response to a 2007 Supreme Court order and cues from Obama (NE May9'13). EPA regulation has certainly served its purpose for a few years, sending an investment signal against coal-fired power and forming a cornerstone of the US' Paris climate pledge. But the Clean Air Act -- last updated in 1990 -- was never designed to regulate greenhouse gases. It's a weak, inflexible way to cut pollution across multiple sectors. It's also time-consuming: The Clean Power Plan, for instance, took more than three years to develop and is now suspended under a Supreme Court injunction. For these reasons, most environmentalists regarded it from the start as a temporary solution in the absence of legislation from Congress. Yet the EPA isn't allowed to single out greenhouse gases from power plants -- the Clean Air Act requires it to do the same for oil refineries, factories and other polluters (NE Aug.7'14). Environmental groups have initiated lawsuits to ensure that the EPA doesn't forget these other emitters.

Carbon legislation, on the other hand, could set clear legal terms for curbing greenhouse gases and stop the EPA climate program from becoming even more cumbersome. From the pro-business standpoint of Republicans, a carbon price would be more flexible, allowing market-based solutions to find the lowest-cost reductions. Also, a carbon price doesn't need to act as a tax hike if the funds are distributed back to the economy or offset with a tax cut elsewhere (NE May2'13). British Columbia has successfully enforced a "revenue-neutral" carbon tax along these lines since 2008. Trump would want to stop overreach by the EPA, an agency he has characterized as "a disgrace," but he has also said that climate change isn't a major problem and hasn't released a comprehensive energy or climate platform.

Of course, Trump may simply try to unwind the EPA regulations and avoid any climate policies, but this would place him at odds with much of the electorate. A Yale University and George Mason University joint survey released this week found that just over 50% of Republican voters would be more likely to vote for a candidate who supports strong action on climate change, and would support a carbon tax if matched with a tax cut elsewhere. A higher share of Democrats, who Trump will also be courting, said the same. Expect more details from Trump as the campaign season heats up this summer -- either with details from his campaign, illuminating answers during debates with Clinton, or clues from his vice presidential pick.

For Clinton, carbon legislation would be a way to deliver greater emissions reductions in the fight against global warming and prop up US leadership in renewable energy sectors, a key pillar of her campaign. She has promised to defend and implement the Clean Power Plan, but in practice, given the requirement to extend this to other pollution sources, she will likely face pressure to work toward a formal carbon law. Experts say that regulations will only go so far, with a stronger signal needed after 2025-30 to continue driving down emissions levels. Legislation could send this signal, and would also be immune from Supreme Court overhaul by leaving little to interpretation (NE Feb.11'16).

So what are the options? Cap-and-trade legislation would let the market decide a carbon price and be ripe for international partnerships, but after years of failed cap-and-trade bills from 2003-09, it's time to try a new approach. Carbon taxation would be a better sell in Washington this time around (NE Dec.6'12). A revenue-neutral carbon tax could rise steadily and predictably, allowing energy companies to work it into their long-term strategies fairly smoothly. It could also be woven into comprehensive US tax reform -- a pursuit shared by both major political parties, especially with the US corporate tax rate now the highest among OECD countries (OD Dec.17'12). Another option is a clean energy standard, which would align with the renewable portfolio and low-carbon fuel standards already enforced by a number of states (NE Feb.25'16).

For climate legislation to take the place of EPA regulation, the next president will need to make it a priority area for cooperation with Congress -- much like Obama did with health care and financial reforms in his early years (OD Apr.20'10). In all of this, policymakers shouldn't forget that the aim of climate legislation should be to encourage technological solutions, not punish business. Microsoft co-founder Bill Gates recently told MIT Technology Review that more "supply side" solutions should be sought to focus on making energy in smarter ways: "On the demand side, rich nations have invested literally hundreds of billions, but on the supply side, if you put aside China, nobody's really substantially increased their energy research and development budget over these last 15 years." Just as solar photovoltaic prices have dropped significantly, investments in science and technology would continue to bring down the cost of electric car batteries, wind power, fuel cells and other breakthroughs. Fossil fuel companies must be invited to that transformation -- lending their expertise and financial muscle -- not pushed to the sidelines.

Lauren Craft is the editor of EI New Energy, Energy Intelligence's publication on the clean energy transition, and a former Washington policy correspondent.