This piece was first published in Forbes on May 30, 2019. It is reprinted with their permission.
The Center for Climate and Energy Solutions (C2ES), a nonpartisan Washington, D.C. climate think tank, just released the results of a one-year effort to model pathways that will drive the U.S. toward its Paris Climate target of an 80% reduction in carbon emissions by 2050.
What’s unique, and particularly revealing about the effort is that it shows how the 80% goal can be met under three very different scenarios, with the federal government, the states and consumers each taking the lead in driving change across the energy system and industry. While all scenarios rely on some sort of carbon price, in the consumer-led pathway emissions reductions derive from the power of the pocketbook and the creation of an informal “shadow” carbon price where formal policy drivers are absent.
C2ES’ approach in its Pathways to 2050 report diverges from that used by the IEA in its World Energy Outlook, where scenarios lead to varying levels of CO2 reduction, ranging from business as usual to ambitious. C2ES instead targets the 80% goal and then looks at scenarios by which the U.S. can get there.
The project researchers, from the RAND Corporation the Joint Global Change Research Institute, worked with input from 20 corporate participants including BP and National Grid . They found that reaching the emissions target will be a challenge. In fact, “the first time through it didn’t work; we didn’t reach the 80% goal,” said RAND’s Benjamin Preston at the May 28 release event in Washington D.C.
The first scenarios they modeled “were too focused on any single actor” to force CO2 emissions reductions. For example, a federal carbon tax would not reap required results if states didn’t move on their own complementary policies. The group went back to the drawing board to emphasize more broad-based approaches whereby forces at community, state and federal levels worked together to drive carbon reduction, albeit with one of these levels as the main driver of change.
“The scenarios are plausible ways that the future may play out,” said Preston, an author of the report. He added the caveat that “they aren’t necessarily likely.” Reflecting the uncertainty inherent in such modeling Bob Stout, BP’s head of regulatory advocacy and policy, noted that BP’s annual World Energy Outlook “no longer has a most likely scenario.”
C2ES’ three scenarios are:
- A Competitive Climate. The federal government takes the lead in reducing CO2 emissions as climate pressure mounts from other countries, notably in the form of carbon tariffs on U.S. exports. Washington also acknowledges that the U.S. is falling behind in the development and implementation of competitive low-carbon technologies. Key federal actions include the establishment of a national carbon price of $40 per ton in 2024 that rises 8% per year thereafter, and strong vehicle emissions standards.
The government invests a chunk of its $350 billion in annual carbon revenue by 2040 into clean energy R&D—including advanced nuclear and carbon capture. States complement federal actions by pushing energy efficiency and clean energy standards. Industry, looking for regulatory consistency and tariff relief, gets behind uniform national climate policy.
- Climate Federalism. Washington fails to come up with a coherent and forceful climate action plan so the states lead the charge with substantial yet fragmented policies—not unlike the situation in the U.S. today. Driven by concern over increasingly obvious climate impacts, states move ahead with efficiency and clean energy requirements. By 2025 the bulk of the nation’s population lives within the boundaries of a carbon market that’s likely linked to the East’s Regional Greenhouse Gas Initiative (RGGI) or California’s cap-and-trade market.
The U.S. becomes a fertile laboratory for climate policies and technological innovation to meet regional demands. Yet, lacking focused national investment in R&D, key low-carbon technologies like solar, storage and EVs come from overseas. Domestic industry, burdened by the patchwork of standards, joins in the push for unified federal climate policy and by the 2030s Uncle Sam wakes up, implementing a $50 per ton carbon price.
- Low-Carbon Lifestyles. When all else fails, rely on consumers to do the right thing. As consumers become more urbanized, they favor battery-powered vehicles and public transit—including software-enabled innovations like ride sharing. Climate concerns firmly in sight, consumers don’t mind paying a bit more for a proliferation of low-carbon services and products, such as fast-food veggie burgers (beef consumption falls by half). Utilities voluntarily reduce CO2 emissions by 90%, aided by the falling cost of clean energy. Improvements in carbon accounting, artificial intelligence and 3D printing combine to make it easier to design and deliver low-carbon goods.
Yet not all is rosy. Lacking federal leadership, exporting companies are burdened by carbon tariffs abroad while domestic transportation emissions remain high. Social and economic divides between urban and rural America widen, with the federal government torn to inaction. Carbon market revenues, peaking at $100 billion per year, accrue to those regions with carbon pricing systems. The federal government, lacking its own CO2 revenue stream, has less to spend to promote equity among the country’s diverse regions.
Pathways to 2050 points out that, lacking supporting policies, the deployment of clean technologies, from wind to advanced nuclear to battery storage, lags. Likewise, “sectoral responses are highly interdependent,” says the report. “The pathway chosen by one sector may enhance or constrain the decarbonization options of others.” Cars and buildings can decarbonize with the help of cleanly generated electricity and, as these sectors electrify, demand for electricity in turn grows. Coordinated policy helps everyone adapt, and can address challenges like emissions leakage.
The overall implications of the Pathways to 2050 report are pretty clear. While all the scenarios it models succeed in achieving targeted carbon emissions reductions, the outcomes aren’t equal when it comes to the competitive, social and broader economic impacts on the country. Where benefits appear most equitably distributed, federal policy guides the country along, with local constituencies and industry acting as essential partners.
And, while the climate outcomes for all scenarios are similarly positive, the toll on the nation is not. To fully succeed, the effort must be broad and inclusive rather than exclusive to certain populations or regions.