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U.S. Leadership Needed to Fight Climate Change

Noah Smith

(Bloomberg Opinion) -- As it becomes more apparent that climate change is a true worldwide emergency, there's a mounting need for a big policy push to curb greenhouse emissions. But that leaves the question of which policy steps would be most effective.

Despite having high per-capita emissions, the U.S. is actually responsible for only about a seventh of the global total carbon output. U.S. emissions from power-generation are falling as the country transitions away from coal, even as China adds more coal-fired plants. Meanwhile, poor countries are eager to begin or accelerate their own industrialization. For the U.S. to help fix this global problem, it will need to employ solutions that have a worldwide impact -- researching and disseminating new technologies, subsidizing companies to scale up these technologies and make them cost-effective, paying other countries to use renewable energy and taxing the products of those nations that increase their use of dirty fuels.

But the U.S. needs to clean its own house. If the U.S. doesn’t curb its own emissions substantially, it will look like a hypocrite for trying to get the rest of the world to do so. That would make it much harder to conclude future global climate agreements and will make competitors reluctant to switch from fossil fuels for fear of forfeiting competitive advantage.

The good news is that U.S. emissions from electricity generation are already going down, leading to an estimated 2.1% decline in total emissions in 2019. The startling and consistent decline in the price of solar energy means that this trend is almost certain to continue.

The bad news is that electricity represents less than a third of all U.S. emissions. And the other big categories -- transportation, industry, commercial and residential buildings -- are all either unchanged or rising:

To keep the emissions decline going, transportation, industry and buildings must be addressed. And here’s where policy comes in.

The first task is simply to sustain the decline in electricity emissions. Electricity is the key to all other categories of emissions reduction because the more the grid runs on renewables, the more reductions can be achieved by hooking everything else up to the grid. This means shutting every coal-fired power plant in the country as quickly as possible. It also means continuing to subsidize solar adoption. And it means not making the mistake of banning nuclear power or fracking to extract natural gas.

For transportation -- now the biggest emissions source -- the key policy is to replace internal-combustion vehicles with battery-powered electric ones. Fortunately, batteries, like solar, are rapidly falling in price. But if there aren’t enough places to charge electric cars, trucks and buses, people and companies will be reluctant to switch because of fear of getting stranded. Governments need a big push to make charging infrastructure ubiquitous in homes and workplaces and to create charging stations for trucking and road trips. This will cost relatively little as government spending goes -- perhaps a few tens of billions of dollars nationwide -- but coordination across states will be an issue. The federal government must step in to make sure every state does its part. In addition, the government should keep subsidizing batteries to drive down costs through scale and industrial learning. Cheaper batteries will also help eliminate carbon from the electrical grid because batteries can store solar power for use when the sun isn’t shining.

Emissions from buildings, both commercial and residential, also are a solvable problem. Many buildings now use gas for heating and cooking; reducing emissions means replacing gas with electricity wherever possible. There are also various ways buildings can be constructed to make them more energy-efficient. Changing rules for new buildings and retrofitting old ones would both require new regulation. But it would also require lots of tax incentives and direct public spending to keep these new requirements from depressing new construction.

Industry will be the hardest problem. Lots of manufacturing now requires intense heat, and the only economically feasible way to get that heat is to burn natural gas or other fossil fuels. In addition, some widespread and economically essential products such as steel and cement release lots of carbon when they’re made.

Unlike in the case of vehicles or buildings, there’s no technological silver bullet. Electricity can solve the heating problem in some cases, but it’s often much more expensive, and for some applications it simply doesn’t get hot enough. Ultimately the fix will involve a hodgepodge of solutions such as biofuel and hydrogen. And in many cases, the most economical option will probably be simply to capture and store the carbon from industrial fossil fuel use.

The lack of a perfect answer means that the best way the government can encourage each industry to find its own optimal solution is with a carbon tax. In general, carbon taxes are regressive, falling hardest on the poor and middle class. But a carbon tax specifically on industrial processes would probably fall more on corporate owners than consumers and workers, and it would create an incentive for a thousand specialized technological solutions to emerge.

Although the battle against catastrophic climate change ultimately depends on many countries, the U.S. can do its part. Switching to electric vehicles and buildings, continuing to turn to renewables and implementing a carbon tax on industry will help the planet at relatively modest cost to the economy.

To contact the author of this story: Noah Smith at nsmith150@bloomberg.net

To contact the editor responsible for this story: James Greiff at jgreiff@bloomberg.net

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.

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