A Plan for the Clean Power Plan

The Clean Power Plan (CCP) was put together in 2015 by the Environmental Protection Agency (EPA) to be put into action under the Clean Air Act (CAA). It establishes emissions limits for fossil fuel-powered power plants and natural gas-powered power plants and gives states multiple metrics by which to measure their emissions (predominantly mass-based methods). The plan has three primary objectives in regards to energy production: 1) guide power plants toward more efficient methods, 2) utilize new sources of power generation like wind and solar, and 3) shift from a reliance from coal to a reliance on natural gas. States will have leeway in the decision process and will be able to customize their own plan for reducing emissions based on their respective industrial and economic requirements. One way that power plants can meet their established standards is through the trading of emissions credits (see my earlier post on that here). In short, this would enable polluting institutions to pay for other industries (like agriculture or forestry) to curb or sequester emissions in an amount equal to the number of metric tons of pollutants produced by the institution. This strategy is particularly appealing because it provides a financial incentive for companies to manage and/or limit their emissions.

Many states have protested the implementation of this plan for a variety of reasons. Some claim that the EPA does not have the necessary authority to implement such a plan under the CAA, and others claim that it will have negative effects on certain industries. Several other states, though smaller in number, are pushing for the implementation of the plan for environmental reasons. The Supreme Court has made it clear that the CAA makes it legal for the government to regulate industrial emissions but has yet to make it explicitly clear that the government can regulate greenhouse gases in the same way. Opponents say that such regulation would constitute executive overreach, while supporters point to the environmental regulatory initiatives of past administrations to say that such regulation has become standard practice.

Whatever the claims may be regarding the position of the executive and the specifics of the CAA, one thing is unquestionably clear. The implementation of the Clean Power Plan and the resultant shift in the energy industry is going to require a massive shift in American society. The energy industry must move from being dependent one type of energy to another type, which requires changing and implementing all of the various systems that are necessary for the functioning of both systems. This task promises to be even harder with a former Exxon CEO (Exxon has been behind numerous instances of environmental damage (http://www.corp-research.org/exxonmobil) as Secretary of State and a climate change skeptic running the EPA (perhaps the most ironic contradiction of them all).

I believe that the CPP is a step in the right direction and is a worthy effort towards positive change in an area that desperately needs it. However, the CPP currently has no implementation strategy and has yet to be put into a practical framework. I therefore offer here a free enterprise methodology for implementing climate-smart energy and land use practices like the Clean Power Plan. I believe that a market-oriented strategy is an excellent way to stimulate growth in the energy sector and move toward mitigating climate change. As someone who cares deeply for the environment and is concerned with the effects of industrial pollution on the climate, I also believe that the Clean Power Plan is an excellent and worthy step in the right direction. I especially approve of its inclusion of an emissions credit trading component. At the same time, I realize that in a capitalist society, financial incentives have the final say. Whether we like it or not, the industries that are polluting our environment – power generation, transportation, oil extraction, large-scale agriculture – will respond best to appeals for the environment if they are coupled with proposals for financial reward. (Most of EPA’s climate-oriented initiatives have failed because of improper or insufficient incentives for those involved.) The most effective way for us to act on behalf of the environment and move toward mitigating climate change is to harness the very impetus that is driving the industries in question – the desire for profit – and use it to create positive change. The benefit of such an approach is that industries would have the flexibility to choose a path that works best for them to accomplish these goals.  I’m not saying that we can’t invest in educating the general public about climate change, build infrastructure in local communities for the adoption of clean energy sources, form internal environmental regulatory boards or commissions in companies, or any other such things.  These voluntary efforts are helpful, important, and in some cases even necessary for the protection of the environment, and I fully support and encourage their use. In fact, self-regulatory efforts through the spread of information can often lead to broader, more effective initiatives that have significant potential. However, the best way to maximize the efficiency and efficacy of our efforts in this regard is to utilize the motivations behind these polluting industries’ actions.

This can be done in one of two ways – positively or negatively. An example of a positive financial incentive for these industries to stop polluting and begin acting in the interest of the environment would be the emissions credit trading program. (I personally am a strong proponent of emissions trading programs as the ideal market-based solution for climate change). Another example would be a state or federal subsidy system that, instead of giving out subsidies based on projected need levels, provides financial rewards for certain climate-smart actions taken by the industry and limits rewards for those who do not do so. (This would, of course, have to be adjusted for agriculture, since farmers are at the mercy of unknown weather patterns). On the other hand, an example of a negative financial incentive would be (as mentioned above) the reduction of subsidies based on proposed need or the implementation of an industry-adjustable carbon tax. These strategies would, of course, be used within the framework of the CPP and states would be able to customize their own plans in order to best utilize their markets.

There are two common criticisms of this method, both of which I will seek to defend here. The first criticism states that a market-based method is unreliable because price incentives vary by industry and over time. This is true, but the flexibility of the approach allows for such adjustments in much the same way that our market economy allows for variable interest rates, etc. In addition, the broad regulatory approach advocated by others eliminates this flexibility altogether, making it even more unrealistic than the approach advocated herein. The second criticism states that a market-based method is unrealistic simply because it has been hard-wired in American culture since the Boston Tea Party to dislike taxation. However, this tax would be in place of 1) the excessive current cost to every American of the environmental damage going on already, and 2) the astronomical future cost that such damage will cost us if we do not change.

(As an aside, the CPP is another avenue for the agricultural and environmental sectors to work together, and it shows that the two camps do not have to be adversaries. Farmers are actually the perfect way to implement such a strategy, for they own and use a large percentage of the land in our country. If given the proper incentives and rewards, they could utilize land and forests to sequester carbon, reduce erosion, clean out water sources, and much more. Many of the influences in the agriculture industry right now come from input-producing companies and a system of mass-produced food that demands constant supply, so it makes sense that, on average, farmers are not incentivized to implement environmentally-smart practices.)

Here in the U.S., we tend to think we’re at the center of the world. We think that our process towards clean energy and the land preservation is the only one that exists, but we forget that most of Europe is far ahead of us in this regard. The Swiss are light years ahead of us in the effort to clean up transportation, the Germans are putting us to shame in the development of clean energy sources, and the Norwegians have been taking measures to preserve land and natural resources far longer than we have. The industries of the Industrial Revolution that have carried us to this point are running out of their required resources and will need be replaced by new sources of energy before too long. For those worried about the economic effects of such industry turnover on the working classes, this transition does not mean the elimination of our energy or power production economy – it simply means that a necessary shift to other sources of power is occurring.

Our world’s resources – water, oil, aquifers, land, etc – are being quickly depleted. In the last 30 years, Pakistan, Saudi Arabia, Yemen, and several areas of India have sucked their natural aquifers dry and now have to tax their citizens more in order to have the resources to import food. Countries in western and northern Africa are facing droughts due to the increased heat and lack of rainfall that has occurred. Russia’s 2010 heat wave that killed hundreds, tanked the economy, and destroyed an entire wheat crop is yet another warning sign that we can’t continue down this road much longer. As one of the most powerful and influential countries in the world, the United States needs to embrace its role as a leader in the climate change mitigation and environmental preservation efforts. In short, we need to use the system we have – a capitalist democracy, flawed as it may be – to create practical incentives for polluting industries to change their behavior.





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