Josephine V. Yam

Time to Confront Climate Change

The New York Times editorial “Time to Confront Climate Change” recalls that during his first term, President Obama described climate change as one of humanity’s most pressing challenges. He pledged an all-out effort to pass a cap-and-trade bill that would limit greenhouse gas (GHG) emissions. Unfortunately, during that period, many political obstacles blocked Mr. Obama’s administration from successfully passing a cap-and-trade bill.

Since his re-election in November 2012, President Obama identified climate change as one of his top priorities in his second term. In his interview for TIME’s Person of the Year award, he cited the economy, immigration, climate change and energy at the top of his agenda for the next four years.

The article then raised a very important question: Will President Obama bring the powers of the presidency to bear on the climate change problem?

President Obama has strategic “weapons” within his reach to tackle climate change and reduce emissions while reasserting America’s global leadership, the article notes.

One weapon he has is to ensure that natural gas, which is hugely abundant in the U.S., is extracted without risk to drinking water or the atmosphere. Indeed, the U.S. has natural gas in abundance, a boon considering that it emits only half the GHG emissions as coal does. This can be undertaken by the Obama administration through national legislation to replace the inconsistent, patch-work requirements of various state regulations.

Another weapon President Obama has is to enact and implement policies both in well-known clean energy technologies (i.e. wind power and solar power) as well as in basic research, next-generation nuclear plants and promising technologies that could lead to a low-carbon economy.

Moreover, another weapon within President Obama’s arsenal is to call on the Environmental Protection Agency (EPA)’s authority under the Clean Air Act to limit emissions from stationary sources, mainly coal-fired power plants. The EPA has already proposed strict emission standards for new power plants that can only be built when they have installed carbon capture and sequestration technologies. The problem that the EPA will need to deal with is what to do with existing coal-fired power plants, which still generate about 40% of U.S. electricity power.

At the Copenhagen climate meeting back in 2009, President Obama committed that the U.S. would reduce its GHG emissions by 17% below 2005 levels by 2020. With the abundant supply and strong demand for cheap natural gas as well as the EPA’s newly established fuel standards and mercury rules, among others, the U.S. is now on its way to achieving a 10% GHG reduction by 2020.

Thus, it appears that reaching President Obama’s 17% goal is within the realm of the possible after all. That is, if he courageously uses the powers of his presidency to wield the strategic weapons he has to tackle climate change.

A Case for Clean Subsidies

In his Harvard Business Review article entitled “The Case for Clean Subsidies”, James Bacchus argues that the rules of the World Trade Organization (WTO) should be amended to create an exemption for green energy. These type of exemptions are not new. Many years ago, exemptions that helped achieve ”new environmental requirements” were agreed upon during the Uruguay Round of trade negotiations for subsidies. Unfortunately, these exemptions expired in 2000.

Due to the proliferation of governmental subsidies for clean energy worldwide, Bacchus notes that international trade disputes over green energy have been noticeably accelerating at the WTO. This is because these type of subsidies “distort trade by lowering costs for local manufacturers, thus reducing access to local markets for foreign companies and giving local manufacturers an unfair advantage in exporting to other markets.”

Yet, because fossil fuels are so much cheaper than renewable energy and and because greenhouse gas (GHG) emissions from fossil fuels are accelerating climate change, market forces cannot be relied upon to determine the world’s future energy use. Verily, there is far more at stake than a simple price tag.

While imposing a carbon tax that puts a price on carbon could be effective, such initiative could be politically unworkable. Thus, he proposes that “the only practical political alternative for producing renewable energy competitively seems to be subsidies” because they “ease the necessary shift to low-carbon economies”. However, these subsidies cannot succeed so long as the WTO rules make them illegal under international law. Consequently, amending the WTO rules to make an exemption for green subsidies appears imperative in order to successfully address climate change.