A Federalist U.S. Approach to Remaining in the Paris Climate Accord

A version of this blog was originally published at The Hill website. Guest blogger Daniel Scheitrum, assistant professor, Department of Agriculture and Resource Economics, University of Arizona, contributed as co-author to this blog in collaboration with CFR David M. Rubenstein Senior Fellow for Energy and the Environment Amy Myers Jaffe.   

Last week, the U.S. House of Representatives passed a bill requiring the Trump administration to find a way to remain in the global Paris climate accords. The bill is not expected to find approval in the U.S. Senate.  However, it does reflect a subtle shift in U.S. elective politics. Even among Republican politicians, recognizing the popularity of renewable energy and other climate friendly goals is becoming politically expedient.

Members of the U.S. Congress, the U.S. Department of Defense, and corporate leaders are calling for a stronger legislative response to climate change with increased regularity. There is also growing concern on both sides of the aisle that the United States needs to be more proactive in countering China’s embrace of advanced clean tech and artificial intelligence assisted energy and transport systems as a major plank of Beijing’s aggressive China 2025 industrial policy. 

Energy innovation is a vital U.S. national interest. It is a pivotal factor to ensuring the U.S. military and space program maintain a critical technological edge over geopolitical rivals. Moreover, energy innovation supports U.S. global competitiveness by spurring new industries and successful technology companies and by boosting manufacturing productivity. Sadly, as U.S. federal spending on energy research and development has shrunk, many American innovation companies have turned to China as a source of more patient capital instead of tapping limited U.S. venture capital markets. The Trump administration would like to address this exodus of jobs and technology in its trade war with China but misses the boat by ignoring the link between U.S. energy innovation and the vast future market for goods and services related to climate change mitigation and adaptation that will come to dominate global export trade in the coming years.  By dropping out of the Paris agreement, the United States runs the risk that China or the European Union could use the U.S. absence from official global climate working groups to set energy standards and other carbon-related rules that could harm U.S. exports and the U.S. economy.

It might seem counter intuitive, but progress made in global climate talks at Katowice, Poland, laid the groundwork for the U.S. to stick with the Paris accord framework. That’s because countries attending the talks, including the United States, which cannot formally withdraw from the accord until 2020, agreed upon uniform rules for measuring and tracking their own performance in cutting emissions. Climate negotiators also agreed to continue intensive discussions this year in Chile on how to connect emissions reductions efforts across regions, countries and sub-national entities so that regions can exchange credits for emissions reductions. The finalization of such rules offers an opportunity for the U.S. to rethink its posture on the Paris Accords and to take better advantage of economic opportunities to participate in international carbon credit markets where they exist.

The U.S. economy can generate roughly 65 percent of the emissions reductions required to meet the 2015 U.S. Paris pledge from existing regulations and market trends. To make up the remainder, Congress should authorize the U.S. Environmental Protection Agency (EPA) to issue a national call for states and localities to volunteer projects that will cut the emissions of heat-trapping gases. Such a federalist voluntary national tender would create a coalition of the willing while avoiding a legal fight with the few remaining states that oppose participating in clean energy programs. The most successful voluntary programs could prove out policies that might someday be passed as more broadly mandated regulations. 

The Paris Agreement requires nationally verified processes, and the proposed national voluntary tender system would accomplish that. It would also facilitate exchange of credits already taking place on the sub-national level. A federal system for promoting and tracking voluntary contributions would allow the United States to use local initiatives that have proved popular around many parts of the country to bring the country back into the Paris accord. This proposed tender program could be administered by the EPA, which has the authority to regulate carbon pollution.

A national tender would let states and localities decide whether they want to volunteer contributions to the Paris Agreement. The United States would in turn get the general national benefits of remaining in the Paris Agreement without burdening voters in states and cities that do not wish to take part. Aggressive climate policies such as renewable portfolio standards are popular in many sections of the country, including states that initially opposed the Obama administration’s Clean Power Plan (CPP) and the Paris Agreement: for example, Texas is home to some of the country’s largest wind farms and ranks third in the nation for new solar capacity. Other states that opposed the CPP—like Georgia, and Michigan—are now embracing renewable energy, given its popularity among corporations and cities: New Jersey originally joined the group of states suing the EPA to stop the CPP in 2015, but it has now rejoined the U.S. East Coast carbon market. In U.S. midterm elections, several newly elected governors—in Colorado, Connecticut, Nevada, Maine, Oregon, and Wisconsin—pledged to pursue 100 percent renewable energy state mandates, mirroring policies recently passed in California and Hawaii.

The Math of Verifiable U.S. Contributions to the Paris Pledge

Under the Paris Agreement, the United States pledged to reduce its greenhouse gas emissions over the coming decade by 26 to 28 percent of 2005 levels. This equates to a reduction of 1,737 million metric tons (MMT) of carbon-dioxide equivalent (CDE). Achieving this reduction target via federal policies was daunting even for the Barack Obama administration, which proposed the Clean Power Plan (CPP) as a pillar of its climate initiatives. That plan would have regulated the U.S. power sector and required each state to reduce its greenhouse gas emissions significantly by 2030. The Trump administration is repealing the CPP. In August the administration unveiled its vision for a new rule, Affordable Clean Energy (ACE), that will focus greenhouse gas policies more narrowly in each state’s power sector on individual facility–level emissions rather than more ambitious state-wide comprehensive approaches.

Based on official U.S. government statistics, modeling, and methods (as would also be the federal government’s basis), the United States could reduce its total greenhouse gas emissions by 1,150 MMT of CDE by 2025, or roughly 65 percent of what the U.S. Paris pledge requires, based on market trends and current policies. The U.S. Department of Energy (DOE) projects in its 2018 “high-resource scenario” -- which assumes falling U.S. prices for natural gas and solar energy -- that market forces and existing localized clean energy legislation will generate roughly 805 MMT of CDE reduction in the power sector by 2025. This projection represents a greater reduction than the 670 MMT of CDE that the Obama administration projected in 2015 that the CPP would achieve by 2025, according to the Federal Register. Official EPA calculations for emissions trends by 2025 under the proposed ACE mirror many of the assumptions of the DOE’s high-resource scenario. Market uncertainties and projected modeling differences weigh more heavily beyond 2025, when the politics of U.S. climate policy could be different than today’s.

U.S. corporate average fuel economy (CAFE) standards, mandated by Congress in 2007 and to remain in place at least through 2022, are expected to eliminate roughly 270 MMT of CDE by 2025 as compared with 2005 levels. The U.S. Department of Agriculture estimates that reforestation and other voluntary agricultural programs will save up to 60 MMT of CDE. That leaves a gap of roughly 600 MMT of CDE reductions to be met in other ways. 

The Proposal

The United States can generate the remaining emissions savings by organizing a nationally verifiable record of voluntary state and local action, by launching a program structured as a national tender. Willing states and localities would volunteer projects to be combined into the official U.S. nationally determined contribution based on their verifiability, scale, and capacity to create jobs.

The Paris Agreement requires nationally verified processes, and the tender system would accomplish that. The administration could work with governors, tapping state and local efforts to meet the U.S. Paris pledge in a manner that promotes some of Trump’s other economic and foreign policy goals including ensuring economic competitiveness with China. A federal system for promoting and tracking voluntary contributions would allow the United States to use local initiatives that have proved popular around many parts of the country to bring the country back into the Paris accord.

The proposed verification system for voluntary action builds on policies, like the newly proposed ACE, that require the EPA to work with each state on individual compliance plans that include evaluating state actions and targets and verifying emissions reductions. Those federal resources could be reconfigured to oversee a tender for states to contribute the remaining carbon reductions needed to meet the Paris pledge. The cost could be relatively low and similar to the approximately $50 million the EPA requested in fiscal year 2016–2017 to develop tools and work with each of the fifty states on the (now defunct) CPP.

As DOE forecasts show, emissions from smaller states that strongly oppose the CPP, like Kentucky and West Virginia, are relatively small (in 2015 West Virginia’s were half of those of New York and one-sixth of Texas’s) and unlikely to increase on a scale that would counter reductions elsewhere. Many large carbon-intensive industries have substantial capital assets that would make it highly expensive to relocate just to avoid regulation, but the EPA would need to evaluate any distortions from emissions shuffling in calculating the national pledge.

Roughly 70 percent of Americans say the United States should lead on climate change solutions. Many states have already acted, alone or in regional coalitions to reduce emissions, including by carrying out their original CPP plans. Additional urban policies such as car-free pedestrian regions, expanded public transit, and energy-efficiency programs for buildings, trucking, and businesses could be substantive enough to achieve the remaining reductions needed to meet the U.S. Paris pledge commitment. To name a few examples, California, which has already cut carbon emissions by over 60 MMT since 2005 even as the state’s economy grew 41 percent, is accelerating its push for renewable energy, which is expected to reach 50 percent by 2020, ten years ahead of schedule. New York City is working on a plan to reduce emissions by 10 MMT by 2030; the plan includes a 20 percent drop in energy use for buildings and increased use of battery storage. The popularity of 100 percent renewable energy state mandates is growing.  Washington state is the latest U.S. state to announce a more comprehensive clean energy program. Moreover, a recent scientific paper also postulates that as much as 21% of annual U.S. carbon emissions could be offset via comprehensive natural climate solutions such as reforestation and restoration of grasslands, wetlands and seagrass, as well as other methods, such as use of biochar, improved management of plantations, cover crops, and manure management. Policies like these being considered around the country could approach the 600 MMT needed to stay in Paris, if the political signal of a national program were to create momentum.

Revisiting Federal Energy and Environmental Policies That Benefit U.S. Competitiveness

The Congress could choose to supplement the tender plan with other policies that would reduce emissions without undermining U.S. competitiveness and jobs. For example, Congress should revisit the Trump administration’s rollbacks of regulations on fugitive oil and gas methane emissions. While some oil-sector representatives argue that methane leakage regulations harm the industry, the opposite is true: implementation of these standards in California, Colorado, and Wyoming have spurred new technologies, jobs, and exportable U.S. products and services. Many large U.S. oil and gas producers have already pledged to address methane leakage from their operations. Using new monitoring and capture technologies to reduce methane leakage is vital to ensure that U.S. energy exports meet the future requirements of global investors and customers in Asia and Europe, who are increasingly focused on the relative carbon content of their fuels, as well as carbon pricing and other carbon-related regulations. Other countries would also purchase these new technologies to reduce methane leakage in their own industries. Revisiting U.S. rules for fugitive emissions could contribute up to 100 MMT of CDE of additional reductions of methane and other volatile organic compound emissions toward the Paris pledge.

Congress should press the Trump administration to reconsider its approach to California’s stricter vehicle emissions standards by passing its own new bill to promote the manufacturing of advanced clean vehicles in the United States to meet competition from China. California’s policy to implement additional greenhouse gas emissions standards for automobiles from 2023 to 2025 is in limbo after the EPA proposed reversing an Obama-era executive order to align federal rules with these specific California vehicle carbon emissions restrictions. The proposed reversal would not affect greenhouse gas reductions that will come from congressionally mandated federal corporate average automobile efficiency standards that remain in effect. Still, a Trump administration decision to sue California to block these 2023–2025 greenhouse gas emissions vehicle standards, if implemented, would decrease the likelihood that the United States will set global standards for the next generation of vehicles. The aggressive California policy was a lever to press American carmakers to produce more electric and advanced vehicles. The U.S. Congress should revisit this topic. China has said it may ban sales of traditional internal combustion engine cars by 2040; France and the United Kingdom have already announced similar bans. Higher standards push U.S. carmakers to produce non-gasoline vehicles as fast as possible. U.S. cars need to remain competitive, which means retaining or strengthening current automobile standards, not weakening them. Capping the growth of U.S. domestic motor fuel use by improving automobile standards is a key lever that allows the United States to become a larger net energy exporter, thereby reducing the U.S. trade deficit. Congress should also consider improving fuel economy for U.S. trucks. Such a policy would enhance U.S. supply-chain competitiveness.

Conclusion

The national tender approach would allow the United States to remain in the Paris Agreement and continue a leadership role in climate negotiations that was allowing the United States to promote its global economic dominance in energy and automotive technologies. The United States needs to have a voice in the process to protect exports from border tariffs or taxes on greenhouse gas emissions embedded in U.S. goods and services. Under the Paris terms, the United States has until 2020 before a final decision can be implemented. Remaining in the agreement through a national tender would be a win-win scenario: it would allow unified verification for those states and municipalities that adopt climate-friendly policies, while those that do not choose to act on climate change would still gain all the trade and economic benefits of staying within the Paris accord, for the good of the United States as a whole. Remaining in the agreement is particularly important in light of a recent scientific report that suggests that the speed and scale of the direct consequences of global warming are more dire than previously thought.