Monday, June 2, 2014, was a big day in the United States. The Environmental Protection Agency, acting under the Clean Air Act, announced new rules to reduce carbon pollution from the power sector. Under the plan, President Obama aims to reduce the carbon dioxide emissions of the power sector by 30 percent from a 2005 baseline by 2030.
There is also an interim target of 25 percent by 2020. Since carbon dioxide emissions from the power sector have already decreased by more than 15 percent between 2005 and 2012, the 2005 baseline means that the actual abatement requirement is about half of the nominal, 30-percent goal. The rules leave individual states with a lot of flexibility in how to meet their own goals. That’s economically smart because flexibility reduces costs.
While these rules do not make a major dent into global greenhouse gas emissions — the power sector is but one part of America’s greenhouse gas portfolio, and America is but one part of the world — they are nonetheless very important. One reason is that Obama’s willingness to act sends a signal to the rest of the world that the United States can do something about climate change.
The United States has a dismal historical record in mitigating climate change, but improved fuel efficiency, reduced reliance on coal, and Obama’s new rules give the United States an opportunity to reduce emissions. Only a day after the EPA announcement, China pledged to cap carbon emissions. That’s a major move, given that China is the world’s largest emitter of carbon dioxide.
At the same time, it’s important to remember the limitations of Obama’s strategy. Since the regulations are executive action based on the Clean Air Act, there’s not a lot of mileage left. A fundamental political shift notwithstanding, the Congress will not pass new domestic legislation — something that would be needed to cap or tax all emissions across the American economy.
Other countries are sufficiently aware of the intricacies of American politics to understand this logic. Future administrations may be able to make the new regulations more stringent especially during the 2020-2030 period, but that’s about it. Any major climate deal to meet, say, a 2 degree Celsius target would require much more ambitious action. For that, we need bipartisan action.
The new carbon regulations may facilitate such action. Even though they seemingly increase polarization, the reality is that the regulations will prompt a substitution of renewable energy, energy conservation, and natural gas for coal. As the use of coal in the power sector decreases, the most vocal industry against climate action becomes weaker and weaker. That could cause a profound political shift in the future, if conservatives break free of the stranglehold of the fossil fuel industry.
This brings me to my final point. I may sound like a broken record now, but I cannot emphasize enough the need to limit coal exports from the United States. If the coal mines start to export their product to Asia — or maybe Africa in the future — emissions reductions in America will be partially offset. More importantly, the coal industry’s political clout does not decrease because the profits from coal exports fuel extravagant lobbying, campaign contributions, and other perversities of the American political system.
Obama’s new regulations are a great move, and I consider myself an Obama fan again. To advance climate protection, we now need to make sure that the regulations truly reduce coal production in America and turn the power sector in favor of decarbonization. That’s where the real game-changer could be.