Last week, new United States Secretary of State John Kerry said, “climate change is coming back … as a serious international issue because people are experiencing it firsthand”. The re-elected Obama administration is signalling it wants to act on climate — but a report by The Climate Institute out today shows the US is not currently well-placed to prosper economically in a low-carbon world. What can the US do to turn around the tide?
The unrelenting nature of climate change is one of the key trends The Climate Institute identified in its annual Global Climate Leadership Review. Just last year, the US suffered extraordinary heatwaves in March. By September nearly two-thirds of the contiguous US was considered to be in moderate to exceptional drought conditions, which are estimated to have affected 164 million people and resulted in multibillion-dollar agricultural losses. Hurricane Sandy hit during the presidential election campaign, and climate change has been on the political agenda in the US ever since.
President Barack Obama has challenged Congress to present him with a market-based mechanism to price and limit pollution. “But if Congress won’t act soon to protect future generations, I will,” the President said.
For the US to meet its goal of at least an 80% reductions in emissions by 2050, a national legislated cap on emissions is likely to be required. However, in the short term, the stronger money is on the President intervening directly to further reduce emissions, rather than relying on a market-based scheme which he would struggle to get through Congress.
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One of the abiding myths about American climate policy is that climate action is frozen due to congressional inaction. Some don’t realise the Obama administration is using powers through laws like the Clean Air Act to control emissions. (This does not include state policies such as California’s and the north-east emissions trading schemes, and many state-based renewable energy targets.)
Last year the Obama administration passed laws to double the fuel economy of passenger vehicles and light trucks (on 2010 levels) by 2025. The US Environmental Protection Agency estimates this rule change will save nearly 2 billion tonnes of emissions over the life of the program.
American emissions from the energy sector have fallen compared with 2005 on the back of these kinds of rules, combined with low energy demand and the rise of gas and renewable energy electricity generation, However, this is not the full story, given emissions from other sources, such as natural gas systems, refrigerants and landfills, are rising.
Projections of total national emissions suggest that to meet the targets, extra action must be taken. Obama has the power to do this. Analysis by respected groups such as the World Resources Institute and the National Resources Defence Council show that with the executive powers available to him, the President can act.
The EPA has already proposed emission standards for new electricity generation that would effectively ban investments in conventional coal plants. Extending these kinds of regulations to existing power stations, industrial facilities, gas systems and other major sources of pollution can significantly reduce emissions. For example, World Resources Institute estimates that regulations could deliver half a billion tonnes of emission reductions to 2020 and nearly 1.8 billion tonnes of reductions by 2035 in the power sector alone.
For the US, the economic stakes in in reducing emissions are particularly high. As UK climate adviser Lord Nicolas Stern states in his introduction to The Climate Institute’s Global Climate Leadership Review:
“The key message … is important and clear: a great competitive margin in the world is going to be over carbon and energy productivity. Countries that slip behind … are going to damage themselves and their competitiveness and prosperity in the coming years.”
The Climate Institute/GE Low-Carbon Competitiveness Index, released today in Sydney, measures the ability of G20 nations to provide prosperity in the face of this reality. This year’s update highlights the risks the US confronts.
China has leapt up in the index to break into the top five countries best placed to prosper in a low-emissions world, thanks to its increase in clean energy investment and high technology exports. In 2010, China alone accounted for just under half of all new public equity raised in clean energy. It now earns as much from exports of solar panels (US$36 billion in 2011) as it does from shoes.
China’s rise is mirrored by the fall of the US’s low-carbon competitiveness. Previous improvements in the US’ carbon competitiveness have been cancelled out by a drastic decline since 2008. In 2010 investment in new private clean energy fell to less than half its 2008 level, the price of fuel remains relatively low, and its share of high technology exports fell by than any other G20 country.
On the back of some good economic indicators and some modest improvements in energy efficiency, Australia slightly improved its absolute score and reversed its declining carbon competitiveness. Australia’s improvement, however, rests on a fragile base. Our nation’s highly polluting power sector, emission-intensive exports and extraction of natural capital will be economic liabilities as the world moves to limit pollution.
In the face of an ascending Chinese clean energy superpower, the economic stakes in debate have never been higher.