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Climate Change: The Greening of America

Posted January 30, 2007 by

Jan. 25, 2007, from

The Economist

How America is likely to take over leadership of the fight against climate change; and how it can get it right.

A country with a presidential system tends to get identified with its leader. So, for the rest of the world, America is George Bush’s America right now. It is the country that has mismanaged the Iraq war; holds prisoners without trial at Guantánamo Bay; restricts funding for stem-cell research because of fundamentalist religious beliefs; and destroyed the chance of a global climate-change deal based on the Kyoto protocol.

But to simplify thus is to misunderstand–—especially in the case of huge, federal America. One of its great strengths is the diversity of its political, economic and cultural life. While the White House dug its heels in on global warming, much of the rest of the country was moving (see article). That’s what forced the president’s concession to greens in the state-of-the-union address on January 23rd. His poll ratings sinking under the weight of Iraq, Mr. Bush is grasping for popular issues to keep him afloat; and global warming has evidently become such an issue. Albeit in the context of energy security, a now familiar concern of his, Mr. Bush spoke for the first time to Congress of “the serious challenge of global climate change” and proposed measures designed, in part, to combat it.

Hot for the time of year

It’s the weather, appropriately, that has turned public opinion—–starting with Hurricane Katrina. Scientists had been warning Americans for years that the risk of “extreme weather events” would probably increase as a result of climate change. But scientific papers do not drive messages home as convincingly as the destruction of a city. And the heatwave that torched America’s west coast last year, accompanied by a constant drip of new research on melting glaciers and dying polar bears, has only strengthened the belief that something must be done.

Business is changing its mind too. Five years ago corporate America was solidly against carbon controls. But the threat of a patchwork of state regulations, combined with the opportunity to profit from new technologies, began to shift business attitudes. And that movement has gained momentum, because companies that saw their competitors espouse carbon controls began to fear that, once the government got down to designing regulations, they would be left out of the discussion if they did not jump on the bandwagon. So now the loudest voices are not resisting change but arguing for it.
Support for carbon controls has also grown among some unlikely groups: security hawks (who want to reduce America’s dependence on Middle Eastern oil); farmers (who like subsidies for growing the raw material for ethanol); and evangelicals (who worry that man should be looking after the Earth God gave him a little better). This alliance has helped persuade politicians to move. Arnold Schwarzenegger, California’s Republican governor, has led the advance, with muscular measures legislating Kyoto-style curbs in his state. His popularity has rebounded as a result. And now there is movement too at the federal level, which is where it really matters. Since the Democrats took control of Congress after the November mid-term elections, bills to tackle climate change have proliferated. And three of the serious candidates for the presidency in 2008–—John McCain, Hillary Clinton and Barack Obama–—are all pushing for federal measures.

Europe’s good, and bad, example

Unfortunately, Mr Bush’s new-found interest in climate change is coupled with, and distorted by, his focus on energy security. Reducing America’s petrol consumption by 20% by 2017, a target he announced in the state-of-the-union address, would certainly diminish the country’s dependence on Middle Eastern oil, but the way he plans to go about it may not be either efficient or clean. Increasing fuel-economy standards for cars and trucks will go part of the way, but for most of the switch America will have to rely on a greater use of alternative fuels. That means ethanol (inefficient because of heavy subsidies and high tariffs on imports of foreign ethanol) or liquefied coal (filthy because of high carbon emissions).

The measure of Mr Bush’s failure to tackle this issue seriously is his continued rejection of the only two clean and efficient solutions to climate change. One is a carbon tax, which this paper has long advocated. The second is a cap-and-trade system of the sort Europe introduced to meet the Kyoto targets. It would limit companies’ emissions while allowing them to buy and sell permits to pollute. Either system should, by setting a price on carbon, discourage its emission; and, in doing so, encourage the development and use of cleaner-energy technologies. Just as America’s adoption of catalytic converters led eventually to the world’s conversion to lead-free petrol, so its drive to clean-energy technologies will ensure that these too spread.

A tax is unlikely because of America’s aversion to that three-letter word. Given that, it should go for a tough cap-and-trade system. In doing so, it can usefully learn from Europe’s experience. First, get good data. Europe failed to do so: companies were given too many permits, and emissions have therefore not fallen. Second, auction permits (which are, in effect, money) rather than giving them away free. Europe gave them away, which allowed polluters to make windfall profits. This will be a huge fight; for, if the federal government did what the Europeans did, it would hand out $40 billion-50 billion in permits. Third, set a long time-horizon. Europeans do not know whether carbon emissions will still be constrained after 2012, when Kyoto runs out. Since most clean-energy projects have a payback period of more than five years, the system thus fails to encourage green investment.
One of America’s most admirable characteristics is its belief that it has a duty of moral leadership. At present, however, it’s not doing too well on that score. Global warming could change that. By tackling the issue now it could regain the high moral ground (at the same time as forging ahead in the clean-energy business, which Europe might otherwise dominate). And it looks as though it will; for even if the Toxic Texan continues to evade the issue, his successor will grasp it.