What’s all the buzz about climate change?
by Brent Sohngen, Professor of Environmental and Natural Resource Economics, Ohio State University
There has been an avalanche of news about climate change. President Biden hosted a bunch of heads of state at a climate conference, and announced a pledge to achieve a jaw dropping 50-52% reduction in US greenhouse gas emissions by 2030. This substantial commitment, known as ambition in international climate negotiation lingo, is an important statement about where the current administration wants to take the US economy.
As the rest of the country catches up, it’s useful to ask what this announcement is and what it means. The announcement is the basis our NDC, or Nationally Determined Contribution (you can find the official US NDC here if you want to have a look). A NDC is the official document the US will submit to the United Nations expressing how much and by what measures we as a country will reduce our carbon emissions in the coming years. The NDC will be our official pledge to the Paris Agreement.
Because the Paris Agreement is only an agreement, and not a binding treaty, the NDC does not by itself force us to do anything different. But in making the pledge to reduce emissions by 50-52%, the Biden administration clearly had in mind a set of steps that could be undertaken by the US to make this reduction possible. Some of these steps will be new regulations that the administration can implement under existing law. Some of the steps will be new programs the administration can implement by paying for things (e.g., green infrastructure) or subsidizing some sectors. Some of the steps will be to encourage states, local governments, private business and individuals to do more on their own. And finally, Congress may pass some new laws specifically to address climate change, although I imagine this will be a last resort.
So here are some things that seem to be part of the direction the US plans to go:
1) Making the electricity sector carbon “free” by 2035.
This one seems like a fairly big challenge. Many electricity companies, including the ones based on Ohio, have already committed to reducing carbon emissions significantly, but this time table seems quicker than what they have suggested. To do this, the US will need to invest significantly more in renewable energy than we already have, capture carbon from the emissions of natural gas or coal burning electric plants, and bury it underground. The US will also have to increase electricity production with forests, which is carbon neutral because the emissions are ultimately taken out of the atmosphere when forests regrow.
The big issue here is less whether we can do it, and more how we do it. Unfortunately, because the key economic policies, such as cap and trade or pollution taxes, are likely off the table, this ambition may be hard to meet.
2) Reducing carbon emissions in transportation
Well, this one is also a big challenge. Transportation is more than a third of our carbon emissions. There is lots of excitement, rightfully so, about electric cars. But given that the average age of cars in Ohio is 11-12 years old, that transition can only go so fast. A fraction of the cars we’re buying these days are electric, so the strategy here will be to push the manufacturers to continue transitioning towards electric cars and to more fuel efficient cars. Some of this push will occur through traditional fuel efficiency standards, which could be further tightened, and some will occur through tax incentives to companies and consumers. Funding for research and development could also be increased because some of the limitations here require innovation and commercialization break throughs that are not already apparent (e.g., better batteries, faster charging, more charging stations, grid improvements, etc.).
3) Reduce emissions and increase carbon storage in forests and agriculture
Land use is a mixed bag on carbon emissions in the US (and globally as well). The agricultural sector is about 10% of total US greenhouse gas emissions. These emissions can be reduced, although most estimates suggest that the practices farmers can use to reduce their emissions are pretty costly. These costs are high in part due to the complications associated with fundamentally changing production across a large number of landowners and a large amount of space. Further, food is inelastically demanded, so small changes in food production can have big impacts on prices. This means that the costs of climate mitigation may be substantially, and inequitably, born by food consumers.
In contrast, the forest sector, which manages over 800 million acres of forests and woodlands in the US, already reduces the net US emission by more than 10% by annually sequestering 700-800 million tons of CO2 in forests and wood products (e.g., your house). Estimates suggest that this can be increased substantially in the coming years to reduce our net emissions. Unlike in agriculture, where reducing net carbon emissions may mean lower food production and higher prices, increasing carbon in forests means increased supply of wood products and lower prices. So there are opportunities in this sector for the proverbial win-win. And if anyone has been paying attention to lumber prices in recent months, they realize that some extra carbon storage on the landscape in the form of trees can ultimately lower these prices.
These are just some of the ideas being discussed to meet the ambitious goals the current administration has set out. My recommendation is to hold onto your hat because the next several months are going to see a level of engagement on climate change at the federal level (from the White House, to agencies, to Congress) that we haven’t witnessed in a very long time, or perhaps, ever.