An Idea Whose Time Has Come

Before President Obama vowed to address climate change in his inaugural address, U.S. climate policy was so dead in people’s minds that skeptics of global warming had crept, unmolested, into the mainstream. Not only do important Republicans still question the merits of climate science and the wisdom of a U.S. climate policy, but terms like "environmental alarmism" and climate "propaganda" are now apparently part of the centrist vernacular. The recession, one might be tempted to conclude, killed climate policy for good.

But Obama’s speech, in which he promised to lead the transition to sustainable energy, was not the first indication that progress can be made on climate policy. While a comprehensive federal response to global warming may yet be out of reach, a number of states and localities are taking action independently — as is much of the rest of the world. Moreover, the president’s nomination of Sen. John Kerry (D-MA) as the next secretary of state elevates a staunch advocate of climate policy at the same time as a growing list of American allies are looking for increased cooperation on that front.

Officials around the globe are exploring the future of sustainability, especially in massive megacities, giving the United States a unique chance to engage. The European Union, Canada, and Australia are moving forward with major carbon-saving initiatives. Even China, is aggressively seeking reductions in carbon and oil imports with mammoth investments in renewable energy, restrictions on car purchases and use, incentives for electric vehicles, and even pilot carbon trading programs.  

In the coming years, then, the United States may well be able to capitalize on these diverse efforts to marshal support for coordinated measures to slow climate change. The trick, as international relations scholar David Victor has noted, may be to limit ambition and start with realistic goals that can build credibility.

The United States should begin by creating international partnerships on low-carbon transport fuels, which have the potential to eliminate 2.6 gigatons of carbon by 2035 through efficiency gains and fuel switching, according to the International Energy Agency. Alternative fuels not only help reduce greenhouse gas emissions, they also enhance global energy security and lessen the burden of high oil bills around the world. For these reasons, many countries are converting vehicles to run on natural gas, while many others are beginning to invest in electric vehicles, biofuels, and even hydrogen fuel cell technology. Countries with important vehicle-exporting industries — including Japan, China, the European Union, and Brazil — are taking an especially strong interest in alternatives to petroleum.

Given this nearly-universal interest in alternative fuels, it may be possible to agree on global testing protocols for vehicle efficiency and life-cycle — steps that would go a long way toward creating global performance standards. The United States could further advance global dialogue by addressing low-hanging fruit such as methane flaring, land use, and deforestation — starting within its own borders. By starting small and sidestepping controversial issues like universal carbon caps, the United States might find that significant progress is within reach.

The fact that the United States is embarking on an oil and gas renaissance should not hamper such efforts. Australia, for example, adopted rigorous climate change policies despite a recent natural gas boom of its own. It instituted a carbon tax that applies to oil and gas development, and is now phasing in a cap-and-trade system that will link up to the European Union and perhaps California, which itself launched a cap-and-trade program in 2012. Canada, the world’s 5th-largest energy producer, also passed laws to phase out coal plants and institute a carbon tax in both British Columbia and Alberta; Quebec is launching a cap and trade program that links with California.

Nor should the patchwork nature of these initiatives be taken as an argument against U.S. participation. The future of greenhouse gas diplomacy will inevitably rest with an amalgamation of governments, non-governmental organizations, and private actors responding to both emerging technology opportunities and public sentiment. Already, major oil companies like ExxonMobil, Chevron, and Shell are taking concrete steps at introducing carbon management targets and practices, and most are quietly factoring in the future price of carbon in their long-range strategic planning. Investor Warren Buffet, who previously bought oil and gas pipelines and railroads, just placed a $2.5 billion bet on solar energy.

Even companies investing in the controversial Canadian oil sands are working to reduce emissions by improving energy efficiency, using low-carbon fuels for processing and transport, and even capturing and sequestering carbon. In our private discussions with oil executives, virtually all have acknowledged that climate policies — such as cap and trade and California’s low-carbon fuel standard — are inevitable in the long run. In some cases, such policies could benefit the companies themselves, even beyond energy efficiency savings. As Carbontracker.org, a website dedicated to aligning capital market and climate change objectives, has rightly pointed out, mining and resource companies that book long-range reserves often have assets on their balance sheets that will never be commercialized, meaning that their shares are overvalued. These companies, which make investment decisions on a 20-year time horizon, will become increasingly eager to formalize climate policies to reduce risk and uncertainty and maintain value for shareholders.

The prospect of environmental activists and policymakers blocking — or even delaying — multi-billion-dollar investments in Arctic or other complex pre-salt deep sea resources that might take 15-plus years to bring on line could be disastrous for these companies. Should tighter restrictions on carbon be instituted in the next two decades, returns might be higher on investments in low-carbon natural gas and other cleaner alternatives. Shell’s current predicament is a case in point: Should it sink even more dollars into technically and politically troubled offshore exploration in Alaska, or should it focus future spending on unconventional natural gas production and transportation in the lower 48 states?

In January 2012, the chairman of state oil behemoth Saudi Aramco went on record saying, "Greenhouse gas emissions and global warming are among humanity’s most pressing concerns. Societal expectations on climate change are real, and our industry is expected to take a leadership role." If the world’s oil superpower is willing to accept responsibility, certainly the United States can afford to take a more forward diplomatic stance. By starting with programs that revolve around transportation and standards like those underway in California, the United States might find it can build trust and the will for progress on the global climate change agenda. The Obama administration can leverage emerging successes at the state and local level into a credible global dialogue on climate and transportation policy. That would elevate the standing of the United States to a position of global environmental leadership — and allow the president to make good on the promise he laid out in his inaugural address.