Why the Current Approach to Environmental Policy Needs to Change

Mention the name Richard Nixon to the average American citizen and the first images that pop into their mind will undoubtedly be those of Watergate. The scandal changed how the country viewed the Presidency and forever redefined a man, eclipsing his other achievements almost entirely.

One of these achievements was the formation of the Environmental Protection Agency, which consolidated existing efforts to combat human activity’s effect on the Earth’s climate. Since 1970 the Agency has grown in size and scope, using its current annual budget of $7.9 billion to “protect human health and the environment.” That mission is regrettably unfulfilled — 45 years since the EPA’s inception, the nation is still struggling to cobble together an effective approach to energy and climate change policy.

The latest iteration of the National Climate Assessment, a report compiled by 300 scientific experts and overseen by a Federal Advisory Committee, has only further confirmed the fact that climate change needs to be dealt with effectively now. Since the 1970s the planet’s average temperature in Fahrenheit has experienced an increase of approximately one to two degrees. At first glance, that might not seem like a large increase, but it has made the past decade the warmest on record, accelerated the melting of Antarctic ice shelves, increased the mean level of precipitation across the United States and contributed to rising global sea levels.

The reason for the lack of progress lies in the approach the current orthodoxy on environmental policy takes. The emphasis is placed on regulatory standards imposed, often arbitrarily, on existing industries ranging from automobile manufacturers to electrical companies in an attempt to curtail carbon footprints. While the political capital spent by environmental lobbies does produce new legislation, the tangible results of new regulatory standards are negatively eclipsed by developing nations like China. For example, the EPA trumpets the fact that its Renewable Fuel Standard Program will reduce greenhouse gas emissions by 138 million metric tons by 2022. In the year 2013 alone, China’s carbon footprint was just over 10 billion metric tons, or 29 percent of the entire global carbon footprint.

What the EPA does less of is partner with the private sector. Its existing initiatives are voluntary programs, like ENERGY STAR or GreenChill, that mostly seek to encourage the promotion of green products or incorporate existing alternative energy sources into a business’ operation. While these are valuable programs, the extent to which they create substantial change on environmental impact is minimal. The Green Power Partnership program, with its membership of over 1,300 businesses across the country, generates over 28 billion kWh of green energy, or the equivalent of three million American households utilizing traditional energy. If an average of five members per household is assumed (far above the actual national average of 2.63), that means the GPP program generates enough green energy to satisfy the needs of 15 million people. With a national population of almost 319 million, according to the Census Bureau, this leaves the energy needs of around 304 million people being attended to by traditional carbon-rich energy sources.  

The disparity between production and need is evident.

This reality reflects the current approach to environmental policy that focuses on regulating existing industries into compliance and incorporating existing green technology as a complement to existing business practices. What is needed is radical technological innovation and a policy environment that is conducive to that brand of progress. This means that instead of imposing arbitrary production standards on industries, the purpose of regulation should be shifted to focus on incentivizing businesses with profit-margin motivation. Policy models that make this shift, such as the carbon tax or emissions trading, have been vastly more effective at both reducing carbon levels and ensuring robust economic growth.

A cap-and-trade system, something John McCain advocated for in his 2008 bid for the White House, imposes a scientifically set “cap” on emissions produced by businesses that will be predictably lowered over time. The system also establishes a marketplace in which carbon allowances may be bought and sold. This allows businesses that have a long way to go before becoming carbon-friendly the ability to purchase additional carbon allowances, giving them the flexibility to innovate before compliance becomes cost-prohibitive. If a business is able to reduce its carbon footprint easily it can end up with extra allowances—which could then be sold for money. Since the total number of allowances in the marketplace would not exceed the emissions cap, the hard limit on pollution is still reached by the overall reduction in emissions.

An example of the successful implementation of pricing carbon is California’s Global Warming Solutions Act of 2006, which implemented an emissions trading style solution in 2013. After two years the program has had positive results, with California’s GDP growing by two percent while capped emissions fell by four percent. The Environmental Defense Fund’s analysis of the program’s results so far also attributed much of the growth in GDP to the accelerated adoption of green technologies. It’s also no coincidence that Elon Musk’s innovative Tesla Motors is based in Palo Alto, California. Musk’s company hopes to fully unveil an electric sedan with a range of 200 miles by 2016. The car, known as the Model 3, is projected to have a starting price of $35,000 USD before government rebates. On an international level, the European Union’s emission trading market system has allowed the EU to  be ranked below the United States in terms of percentage contributed to the total global carbon footprint.

It is essential that the United States place a price on carbon and incentivize the private sector with a profit-margin motive. It is time to shift the focus away from ineffective regulatory standards and instead, towards an approach to climate change that allows American ingenuity to shine and lets its citizens do what they do best: innovate.

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