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2014-05-22

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June 2, 2014 - 9:59pm

Policy Matters: Do you want coal with that?

BY PAUL SHERMAN

“We actually see this … as the Super Bowl of climate politics.”

This is what Peter Altman of the Natural Resources Defense Council said with regards to President Barack Obama’s new climate change plans.

According to reports, President Obama is planning to cut carbon emissions by as much as 30 percent through new regulations unveiled earlier this week.

But, the question remains is it really the “Super Bowl”?

For Americans, this may seem like the Super Bowl. In reality, President Obama and the United States the US are playing a game of catch-up, as governments around the world have implemented similar programs for years. This is a step forward, but key components of climate change reform are not being considered, which must be resolved before it’s too late.

Firstly, the Obama Administration’s plan is limited in scope, as it only addresses carbon dioxide emissions. While carbon dioxide lasts in the atmosphere for a longer period of time, other greenhouse gases such as methane and nitrous oxide are better than carbon dioxide at trapping heat, meaning that they can have a larger impact on the climate in the short-term. The Environmental Protection Agency estimates that “the comparative impact of CH4 [methane] on climate change is over 20 times greater than CO2 over a 100-year period.” Until these gases are included, the Obama administration may not be able to effectively mitigate the negative impacts of greenhouse gases.

Furthermore, this move may make alternative energies appear more attractive going forward. However, certain types of energy sources have n’ot been proven to be reliable commodities. Along with the cost of production and maintenance, intermittency is always an issue for alternative energy sources such as solar since one cannot control the supply of sunlight. Adequate storage is n’tot available, particularly for solar, which can create imbalances for the electricity grid and possible voltage fluctuations, as Rob Wile of Business Insider explains.

And of course, there will be short-term economic consequences. Coal companies have said that new carbon emissions standards will negatively impact job growth and the ability to provide affordable electricity, which can happen in the short-term. The U.S. Chamber of Commerce found in a report that GDP could decrease by 50 billion dollars annually in addition to the loss of 224,000 jobs. Additionally, technologies such as carbon capture and sequestration are expensive for companies to implement in the short-term. Before we do anything, we must find ways to fill in the gaps in the short-term.

As Christina Romer mentioned in an article in The New York Times from 2012, this economic loss may call for government intervention to help mitigate some of the short-term costs:

“Today, we face a profound shortfall of demand [in terms of jobs]. That truly is a terrible market failure, and it warrants government intervention. But we need actions that raise overall demand — like a tax cut for households so they have more take-home pay to spend, more aid to troubled state and local governments, and public investments in infrastructure. These are all things that President Obama has advocated.”

Having this money to spend will help create jobs in other sectors of the economy, thus reducing the impact of the reduction in carbon emissions.

In addition to these solutions, Obama’s plan includes the development of a cap-and-trade system, which attempts to allow companies to buy and sell permits to pollute. If you look at cap-and-trade programs, such as the European Trading System (ETS) from around the world, some of them have only seen varying degrees of success. The main issue with this is to find a cap on pollution that will still allow firms to produce at levels in which the cost of reducing pollution less painful economically. And as the cap shrinks, companies and the U.S. economy as a whole will need to make sure that such a system will not hinder investment and economic growth.

The bottom line is that we still have a long way to go to create environmental policies that can adequately handle the economic challenges that the U.S. is currently facing.

Paul Sherman can be reached at pausherm@umich.edu.


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