Each week, we’re compiling the most relevant news stories from diverse sources online, connecting the latest environmental and energy economics research to global current events, real-time public discourse, and policy decisions. Here are some questions we’re asking and addressing with our research chops this week:
Climate change was especially salient at this week’s Democratic debate, but many environmental policy issues were not discussed. How can voters keep track of nuances among the presidential candidates’ climate platforms?
This week, six Democratic candidates for president convened in Des Moines for the final presidential primary debate before the Iowa caucuses on February 3. Environmental policy issues were key throughout the debate, as Senator Amy Klobuchar endorsed carbon pricing; Tom Steyer referenced the Australian wildfires and justified his previous investments in oil companies; and Senator Bernie Sanders criticized a new trade agreement between the United States, Canada, and Mexico for not directly referencing climate change. The salience of climate change in the debate was no surprise: a Pew survey released late last year found that Democrats rated climate change as “a very big problem” more than any other policy issue, second only to the affordability of healthcare. But even as voters increasingly prioritize the environment, and Democratic candidates increasingly attempt to include climate change in the discussion, the two-hour debate spanning a variety of issues left plenty of uncertainty about the environmental policy positions of many candidates.
The RFF Candidate Tracker can help. In its own attempt to offer research-based insights on the track records and environmental positions of each of the candidates, Resources for the Future (RFF) developed the Candidate Tracker to help voters make sense of these complicated policy issues. As Senior Director for Research and Policy Engagement Kristin Hayes noted in a blog post announcing the tool and explaining its relevance to the election, “Candidates’ words are typically presented in the context of campaigning, where policy specifics are not always warranted.” In other words, environmental issues might be referenced in debates, but not with the specificity that many voters need to assess the differences among the candidates’ positions. Thus, drawing on past statements, recent interviews, and formally announced plans, RFF’s Candidate Tracker compares and contrasts where presidential candidates from both parties stand on a range of climate, energy, and natural resource issues—from carbon pricing to clean power to CAFE standards. See it for yourself here.
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Will China’s proposed emissions trading system do enough to reduce emissions?
After several years of running pilot programs, China has made clear that it is preparing to implement a nationwide carbon dioxide emissions trading system this year, in what will be the largest system of its kind in the world. The program will first be implemented solely in China’s power sector before expanding to other manufacturing sectors, and the potential impacts are substantial. China produces more greenhouse gases than any other nation, and its coal and natural gas–fired power plants are responsible for about 40 percent of the country’s emissions. Notably, China will adopt a tradable performance standard (TPS) to reduce emissions, rather than the more widely used cap-and-trade approach. Under cap and trade, compliance requires that a facility’s absolute emissions not exceed the amount of emissions allowances it holds, but under a TPS, compliance requires that a facility’s emissions-output ratio not exceed some limit. Although both systems allow emissions allowances to be traded, these key differences have important environmental and economic implications.
The world is now keen to understand the potential outcomes of using a TPS system for a national policy of this magnitude. In this context, RFF this week published a comprehensive working paper assessing the far-reaching impacts of China’s proposed emissions trading system. Senior Fellow Richard D. Morgenstern and University Fellow Lawrence H. Goulder find that, while a TPS scheme is less cost effective than a theoretical cap-and-trade program, there are significant benefits to China’s approach. Namely, China’s TPS model adjusts naturally to changes in the business cycle, and by better controlling the cost of electricity, the approach likely would cause less emissions leakage. Most importantly, the study estimates that the environmental benefits of a TPS policy to limit emissions in China—a country with more people and more carbon pollution than any other—far exceed the costs. As Goulder explains, “We emphasize that this is really a major step forward.”
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If carbon pricing is unlikely in today’s political climate, what other market-based alternatives are possible?
Democrats in the House Energy and Commerce Committee released a new climate policy framework that notably excludes any mention of carbon pricing as a possible market-based mechanism to cut down on carbon emissions. Rather, the Democrats opted for a clean energy standard to decarbonize power generation, which would utilize market forces by giving energy suppliers the option to purchase clean energy credits auctioned by other companies. RFF’s Kevin Rennert suggests that, while cap and trade would place increasingly stringent limits on greenhouse gas emissions, a clean electricity standard simply boosts the production of low-carbon energy. The new framework has the potential to make headway in decarbonizing the electricity sector, but it has also drawn criticism—including from those who want even stricter regulation of fossil fuels, those who oppose any market interference for climate considerations, and some economists.
Last week, Carolyn Fischer, an RFF senior fellow, made news with her own approach to a market-based carbon tax alternative, proposing sector-specific performance standards that would grant companies tradable credits that could eventually merge into a nationwide carbon price. Like the majority of economists, Fischer views a carbon pricing mechanism as an efficient way to reduce emissions; however, she’s seeking an achievable (and second-best) short-term solution. “The idea here,” Fischer said of her policy proposal published in October by the Brookings Institution, “is to bridge the divide between the economists and the people, because there are ways that you can start with standards … but then you can design them in ways that are more market based, and then you can use them to build up toward more broad-based carbon pricing.” The case of carbon pricing is a familiar conundrum in environmental policymaking: the most economically efficient policy solutions are not always the most politically viable solutions.
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