Obama's flexible fix for climate change

For many years, I used to spend at least part of the summer in the gorgeous Laurentides region of Quebec, an hour north-west of Montreal.

By the mid-1980s, with each return trip, I could see a growing environmental threat to the area's beauty: more and more trees were dying. When I asked people what was happening, the answer was pluie acide or acid rain, a form of pollution caused by sulphur dioxide and nitrogen oxides that were spewing from coal-fired power plants in America.

A decade or so later, the trees had stopped dying. An environmental disaster had been averted. What had happened?

The answer was that the administration of the first president George Bush, working hand in glove with the Environmental Defence Fund, devised a market-based plan, now known as cap-and-trade, to reduce sulphur dioxide emissions. Congress passed it in 1990.

The brilliance of the scheme is that while it set emissions targets, it did not tell power companies how to meet those targets, allowing them a great deal of flexibility. It also provided a financial incentive: companies that cut their pollution beyond their caps could trade their leftover emission allowances to companies that were having trouble staying under the limit.

The coal-fired Castle Gate Power Plant in Utah was closed earlier this year in anticipation of new EPA regulations. President Obama on Monday unveiled his Clean Power Plan to cut carbon emissions from power plants. PHOTO: REUTERS

Industry officials and many state officials complained bitterly about the new system, saying it would be costly and tie companies up in regulatory knots. But that's not what happened.

"Industry had incentive to innovate," recalls Mr Fred Krupp, the president of the Environmental Defence Fund. As an interim measure, power companies began using low-sulphur coal while they worked to come up with better and more affordable scrubbers. Today, average levels of sulphur dioxide pollution are 76 per cent lower than they were in 1990. The cost has been far less than the critics feared.

On Monday afternoon, President Barack Obama unveiled his Clean Power Plan, formalising some tough new rules from the Environmental Protection Agency (EPA) that are aimed at reducing the carbon emitted by power companies.

There is no bigger source of carbon pollution; the goal is that, by 2030, carbon emissions will be reduced by 32 per cent from their 2005 level. In the fight against climate change, nothing is more important.

Once again, opponents are up in arms, forecasting calamity for the utility industry if the rules are allowed to stand, with at least a dozen states planning to sue the EPA.

The attorney-general of West Virginia, Mr Patrick Morrisey, has said that the regulations would lead to "reduced jobs, higher electricity rates" and increased stress on the power grid.

Mississippi's Republican governor Phil Bryant described the EPA plan as "burdensome".

And then there's Mr Mitch McConnell, the Senate majority leader, whose state, Kentucky, is in the heart of coal country. He has openly called on states to defy the EPA. On Monday, he described the new rules as "a triumph of blind ideology over sound policy and honest compassion".

But just as with the acid rain controversy, the opponents of the new emission-reduction rules have it exactly backwards. The EPA rules have a far greater chance of creating jobs, being less burdensome and epitomising sound public policy than the opposite.

The single most important fact about the new regulations is that they don't tell utilities how to get their emissions down. Instead, they allow the states flexibility to figure out how to lower their own emissions.

Some may choose a cap-and-trade system - as California and nine states in the north-east have already done to great effect (in California, for instance, carbon intensity - the amount of carbon pollution per million dollars of gross domestic product - is down 23 per cent from 2001, while its GDP has grown).

They can emphasise energy efficiency or renewable energy. They can offer incentives to push innovations that would make carbon capture more affordable, which would allow for the continued use of coal, still America's most plentiful energy source. Or they can do all of the above. Since many of these things are already happening, the new government policy is really just giving industry an extra shove in the right direction.

Mr Jim Rogers, the former chief executive of Duke Energy, told me that he thinks natural gas could serve as the same kind of bridge to emission-lowering technology that low-sulphur coal was in the acid rain days.

The point is, there is really no reason the Clean Power Plan won't work - except for political intransigence, which is far worse today than it was during the first Bush administration.

In his 2010 book, The Climate War, Mr Eric Pooley, the former managing editor of Fortune who has since become the Environmental Defence Fund's communication chief, notes that, the whole time officials at the fund were working on cap-and-trade to solve the acid rain problem, climate change was never far from their thoughts. They wanted to prove, with sulphur dioxide emissions, that a flexible, market-based system worked - and would work for carbon emissions as well.

It did. And it will.


A version of this article appeared in the print edition of The Straits Times on August 06, 2015, with the headline 'Obama's flexible fix for climate change'. Print Edition | Subscribe