A key attribute of climate change policy is the large gap between practical near-term steps and the scale of action needed to address the challenge. How can we tell if current efforts towards eliminating greenhouse gas emissions will prove sustainable over the long-term?
The new proposed Environmental Protection Agency rules aimed at reducing emissions from existing coal plants represent one of the most significant federal actions on climate change to date. If successful, these rules will help the United States meet its goal of reducing greenhouse gas emissions by 17 percent below 2005 levels by 2020.
That is a worthy goal, but stopping climate change will require the United States and the rest of the world to virtually eliminate emissions over the course of the 21st century. Getting anywhere close to zero emissions demands sustained political and public support, driven by an energy production sector given enough incentives to make carbon reduction succeed.
Political scientists speak of policy sustainability. Imagine a policy put into place with great effort at a time of significant public attention. Once the hoopla dies down, the hard work of implementation begins. Some policies succeed over time, but others wilt. Those that succeed have several important characteristics; in particular, they create constituencies that favor their continuation.
Airlines vigorously opposed deregulation in the late 1970s, but once they had invested in the new hub-and-spoke system incentivized by the new rules, they became advocates for keeping those rules in place. In contrast, efforts at reforming the tax code have had only temporary effects. Once public attention waned, there was no countervailing group with a similar stake to prevent special interests from whittling away at reforms.
Thus, an important criterion for the new EPA plan is the extent to which it promotes significant constituencies that support its continuation and acceleration. Recent RAND work has looked at the political sustainability of greenhouse gas emissions policies. It finds that policies that reward firms based on market share create incentives to invest in carbon-reducing technology, generate a commercial interest in continued reductions and thus enhance the sustainability of carbon-reducing policies.
How might this dynamic affect the success of the new EPA rules? Climate change policy faces a challenge: costs are localized while the benefits are broader. Coal-producing states fear the direct impact of rules to shift the United States away from coal. Residents of Miami and New York may not notice if these rules reduce flooding in their communities.
Over the next year EPA will collect public comments to determine exactly how these new rules will be implemented. Such details may matter more over the longer term than the particular emission reduction goals set out in the regulations. Among the ways this might happen:
• Flexible rules creating opportunities for lower emission technologies to gain market share and boost companies with a strong interest in continuing the rules.
• Innovation in technologies – such as renewable energy, smart grids, and carbon capture and storage – that create opportunities for firms to develop business models around lower emissions.
• Cap-and-trade systems or carbon taxes – partially returned as incentives – to both lower the overall cost of the program and shift the burden from lower to higher emitting firms.
This dynamic may have already begun at the state level. A California initiative in 2010 asked voters whether they wanted to repeal the state’s greenhouse gas regulations. Some oil companies lobbied for the repeal. But green energy entrepreneurs in Silicon Valley, who had invested in new emission-reducing technologies, sought to retain the rules. The voters sided with the entrepreneurs. And these nascent industries may now prove to be a (profit-generating) engine for implementing the change EPA would like to see spread throughout the country.
Robert Lempert is a senior scientist at the RAND Corp. and director of the Frederick S. Pardee Center for Longer Range Global Policy and the Future Human Condition. Steven W. Popper is a RAND senior economist and professor of science and technology policy at the Pardee RAND Graduate School.