Is Obama's Climate Change Policy Doomed to Fail? Maybe Not.

Until an obvious, sudden and perhaps cataclysmic event attributed to climate change occurs, the odds would seem to be stacked heavily against climate change legislation in the United States, says Harvard's Rob Stavins. But the picture is not nearly so dark as one might think. Photo by KEENPRESS/Getty Images.

A Note from Paul Solman: A professor of environmental economics at Harvard's Kennedy School of Government, Rob Stavins is one of the country's leading thinkers on climate policy. Climate wonks regularly read his blog, One Economist's Perspective on Environmental and Natural Resource Policy, as do I.

In the wake of President Obama's strong push for action on climate change during his second term, I asked Rob to comment for a broader audience here at the Business Desk. He was kind enough to do so.

Rob Stavins: In his 2013 inaugural address, President Obama surprised many people, including me, by the intensity and the length of his comments on global climate change. Since then, there has been a great deal of discussion about what climate policy initiatives will be forthcoming from the administration in its second term.

Although I was surprised by the strength and length of what the president said, it did not change my thinking about what we should expect from the second term. I would say the same about the president's State of the Union address.

What are the top priorities for environmental policy during the second term?

The Obama administration needs to find balance among four competing forces:

Demands from some constituencies for more aggressive environmental policies, including on climate change; Demands from other constituencies -- principally in the Congress -- for progress on so called "energy security"; Recognition that nothing meaningful is likely to happen if the country's economic problems are not addressed; The reality that a set of other policy initiatives outside of the environmental realm are considered to be more important than climate change both by the administration and by the population at large, including immigration reform and gun control, not to mention the dozen other areas the President highlighted in his State of the Union address.

What are the roadblocks that would prevent the president from addressing these priorities?

The key challenge is the unprecedented degree of political polarization that has paralyzed both houses of Congress. The numbers are dramatic. When the Clean Air Act Amendments of 1990, which established the landmark sulfur dioxide (SO2) allowance trading system, were being considered in the Congress, political support was not divided on partisan lines. Indeed, environmental and energy debates from the 1970s through much of the 1990s typically broke along geographic lines.

The Clean Air Act Amendments of 1990 passed the U.S. Senate by a vote of 89-11, with affirmative votes from 91 percent of Democratic members and 87 percent of Republicans, and the legislation passed the House of Representatives by a vote of 401-21 with affirmative votes from 96 percent of Democrats and 87 percent of Republicans.

But, 20 years later, when climate change legislation was receiving serious consideration in Washington, environmental politics had changed dramatically, with Congressional support for environmental legislation coming mainly to reflect partisan divisions.

In 2009, the House of Representatives passed the American Clean Energy and Security Act, the "Waxman-Markey Bill," which included an economy wide cap and trade system to cut carbon dioxide emissions. That bill passed by a narrow margin of 219-212, with support from 83 percent of Democrats, but only 4 percent of Republicans.

Can we expect political polarization to be reversed over the next four years?

My answer is no: I predict we will continue to see partisan politics and politicians.

The following four structural factors are the reasons for my pessimism.

First, there's the increasing importance of the primary election system, a consequence of the "democratization" of the nomination process that began in the 1970s. A small share of the electorate votes in primaries, namely those with the strongest political preferences: the most conservative Republicans and the most liberal Democrats. This self-selection favors candidates from the extremes.

Second, decades of redistricting have produced more districts that are dominated by either Republican or Democratic voters, which further increases the importance of primary elections.

Third, geographic sorting of like-minded households has furthered this trend.

Fourth, the increasing cost of electoral campaigns greatly favors incumbents, with the ratio of average incumbent to challenger financing now exceeding 10 to 1. This makes districts relatively safe for the party that controls the seat, thereby further increasing the importance of primary elections.

The Great Recession of the past several years, like the Great Depression of the 1930s, has undoubtedly increased the ideological divide. We can hope that better economic times will reduce the pace of polarization. But in the face of the four structural factors, which themselves are not about to be reversed, it is difficult to be optimistic about a reversal of Congressional polarization.

Will there be openings for compromise and progress on climate change policy in President Obama's second term?

Some policy wonks have been saying that the time for a national carbon tax is at hand. Does the defeat of cap and trade in the Congress, combined with the virtual unwillingness over the past 18 months of the White House to utter the phrase "cap and trade" in public, together presage serious political consideration of a carbon tax?

The good news perhaps is that a carbon tax is not "cap and trade." That presumably would help with the political messaging. But if conservatives were able to tarnish cap and trade as "cap and tax," it surely will be considerably easier to label a tax as a tax.

Also, note that President Obama's silence extends beyond disdain for cap and trade. Rather, it covers all carbon pricing regimes. This was not contradicted by the president in his State of the Union. He said: "I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago."

I am reminded of the infamous trial of Oscar Wilde more than 100 years ago when his supposed sexual sins were famously characterized as "the love that dare not speak its name." In Washington, cap-and-trade has become "the policy that dare not speak its name."

A more promising possibility -- though still unlikely -- is that if Republicans and Democrats join to cooperate with the Obama White House to work constructively to address the short term and long term budgetary deficits, and if they decide to include not only cuts in government expenditures, but also some significant "revenue enhancements," and if (I know, this is getting to be a lot of ifs) it turns out to be easier politically to avoid increases in taxes on labor and investment and turn instead to taxes on consumption, then there could be a political opening for new energy taxes, even a carbon tax.

Those who recall the 1993 failure of the Clinton administration's BTU tax proposal, with a much less polarized and much more cooperative Congress than today's, will not be sanguine.

What's the prognosis for action on climate change?

This may sound like an exceptionally poor prognosis for meaningful action. But in fact, I am confident that there will be climate policy action. Note that in his State of the Union address, immediately after urging that Congress take action on a market-based solution like the one Sens. John McCain and Joe Lieberman worked on a few years ago, the president stated "but if Congress won't act soon ... I will ... with executive actions." A more accurate statement by the president would have been: "but since Congress hasn't and will not act, ... I already have ... and I will continue to do so."

What remains most likely to happen over the next four years is what I've been saying for at least the last three years, namely that despite the apparent inaction by the federal government, the official U.S. international commitment -- a 17 percent reduction of carbon dioxide emissions below 2005 levels by 2020 -- may well be achieved!

The reason is the combination of positive factors.

First, there are the carbon dioxide emissions regulations which are now nearly in place for new sources, and will need to be put in place for existing sources, brought about by the Supreme Court decision that freed the Environmental Protection Agency to treat CO2 like localized pollutants under the Clean Air Act, together with new fuel and energy efficiency standards.

Moreover, there are five other rules making their way through the regulatory pipeline on sulfur oxide, nitrogen oxide, coal fly ash, particulates and cooling water withdrawals, all of which will have profound effects on retirement of existing coal-fired electrical generation capacity, investment in new coal, and dispatch of such electricity.

And Assembly Bill 32 in the state of California includes a carbon dioxide cap and trade system that is more ambitious than the Waxman-Markey Bill was at the national level.

Add to that the economic downturn, which reduced emissions, and, finally, the development of new, unconventional sources of natural gas in the United States, and impacts on the supply, price, and price trajectory of natural gas, and the consequent movement that has occurred from coal to natural gas for generating electricity.

In other words, there will be actions having significant implications for U.S. CO2 emissions. The big difference is that most will not be called "climate policy" and virtually all will be within the regulatory and executive-order domain, not new legislation. Will this set of actions and developments put the U.S. on a path to the long-term Waxman-Markey target of an 83 percent reduction below 2005 by 2050? Of course not. For that, a meaningful legislated, economy-wide, national carbon pricing regime will be necessary.

Are there lessons from history that could inform the construction of climate policy over the next four years?

Nearly all our major environmental laws were enacted over the past 40 years in the wake of highly publicized environmental events, including the spontaneous combustion of the Cuyahoga River in Cleveland in 1969 and the discovery of toxic substances at Love Canal in Niagara Falls, N.Y., in the mid-1970s.

But note that the day after the Cuyahoga River caught fire, no article in The Cleveland Plain Dealer commented that the cause was uncertain, that rivers periodically catch on fire from natural causes. On the contrary, it was immediately apparent that the cause was waste dumped into the river by adjacent industries. A direct consequence of the observed disaster was the Clean Water Act of 1972.

Climate change is distinctly different. Unlike the environmental threats addressed successfully by past U.S. legislation, climate change is essentially unobservable to the general population. We observe the weather, not the climate. And as Sen. Mark Rubio, R-Fla., stated with conviction and a smile in his response to the president's State of the Union address, "Our government can't control the weather."

So, notwithstanding last year's experience with superstorm Sandy, and despite some minor changes in polling numbers on climate change, it remains the case that until there is an obvious, sudden, and perhaps cataclysmic event, such as a loss of part of the Antarctic ice sheet leading to a dramatic sea level rise, it is unlikely that public opinion in the United States will provide the tremendous bottom up demand that led to Congressional environmental action in the past.

Because of the degree of political polarization, the magnitude of a perceived threat needed to force bipartisan Congressional action is now much greater than it was before.

That need not mean that there can be no truly meaningful, economy-wide climate policy -- such as carbon pricing -- until disaster has struck. But it does mean that bottom up, popular demand may not come in time, and that instead what will be required is inspired leadership at the highest level that can somehow begin to bridge the debilitating partisan political divide.

Robert N. Stavins is a professor of business and government at the John F. Kennedy School of Government, Harvard University, co-editor of the "Review of Environmental Economics and Policy," and a member of the Board of Academic Advisors of the Regulatory Markets Center.

This entry is cross-posted on the Rundown -- NewsHour's blog of news and insight. Follow @PaulSolman