Regardless of the United States’ official intention to back out of the Paris Climate Accord, it’s a solid bet that at some point in the future the country will return to the global agreement, or something very much like it. The assertion is rooted in widespread efforts from states and local communities to uphold Paris commitments, and by recent polling that shows that a strong majority of Americans favor government actionto address climate change.
The Center for Climate and Energy Solutions, a nonpartisan think tank, has released a report defining scenarios under which the U.S. could reach it’s Paris goal to cut net greenhouse gas emissions 80% by the year 2050. Climate action scenarios are nothing new, but the center’s approach is unique in examining the sources of leadership that will drive down U.S. emissions.
Matthew Binsted, a report author with the Pacific Northwest National and Brad Townsend, Innovation Director for the Center for Climate and Energy Solutions look at how the federal government, the states, and consumers might each take the lead in catalyzing aggressive carbon reductions. The path taken may have implications for America’s global economic competitiveness, and domestic economic and social equity.
Andy Stone: Welcome to the Energy Policy Now podcast from the Kleinman Center for Energy Policy at the University of Pennsylvania, I’m Andy Stone. Regardless of the United States official intention to back out of the Paris Climate accord, it’s a solid bet that at some point in the future, the country will return to the global agreement or something very much like it. The assertion is rooted in widespread efforts from states and local communities to uphold Paris commitments, and by recent polling that shows that a strong majority of Americans favor government action to address climate change.
Recently, the Center for Climate and Energy Solutions, a nonpartisan Think Tank released the report offering scenarios under which the U.S. could reach its Paris goal to cut net greenhouse gas emissions 80% by the year 2050. Climate action scenarios are nothing new. But the Center’s approach is unique in examining the sources of leadership that will drive emissions down. The report authors from the RAND Corporation and the joint Global Change Research Institute looked at how the federal government, the states, and consumers might each take the lead in catalyzing aggressive carbon reductions. The researchers found that the path taken could impact America’s global economic competitiveness, and domestic economic and social equity.
On the line to discuss the scenarios are today’s guests. Matthew Binstead is with the Pacific Northwest National Laboratory and is one of the report’s authors. Brad Townsend is Innovation Director with the Center for Climate and Energy Solutions. Matt and Brad, welcome to the podcast.
Brad Townsend: Glad to be here.
Matthew Binstead: Thanks for having me.
Stone: Brad, I wonder if we could start with you. Could you tell us about the genesis of the pathways to 2015 report?
Townsend: Sure, the Center for Climate Energy Solutions, works across a range of different sort of policy areas and specifically takes a market based approach to climate energy policy. One of the anchors of our work is actually a Business Council that we will call the business Environmental Leadership Council, which is 34, mostly Fortune 500 companies from every sector in the economy, but especially those with real skin in the game. So these are the oil and gas companies, the power companies, the mining and industrial companies that have you know, emissions that are that are the target of emissions reductions plan. So couched within that we launched the program last year called Climate Innovation 2050 that is really designed to work with those companies, as well as some other non-Business Council companies to identify and articulate a pathway towards midcentury decarbonization goals.
Stone: Now, there’s a fair amount of climate action modeling out there today, notably from the IEA, the International Energy Agency, and from corporations such as BP, which publishes an Annual Energy Outlook. What new insights did you aim to gain through your research?
Townsend: Well, I think the interesting thing is that what we were aiming for, was actually less interesting than what we found. You know, a lot of those other efforts have not, obviously, you know, BP is engaging the business community. But I think in terms of taking a comprehensive, sort of multi-sectoral approach to this kind of an exercise. That’s certainly something that really hasn’t been done before and was our sort of chief aim and engaging with the companies in this project, to get their sense of how plausible some of these scenarios might be. As well as to try to identify some of the unintended consequences of you know, taking a particular route, such that we could, again, leverage that towards, you know, the articulation of a decarbonization strategy down the road.
Stone: So Brad, could you give a high level overview of the three scenarios you developed in? Why did you choose to develop the scenarios as you did, where the drivers at the federal state and consumer levels ultimately took the lead in reducing greenhouse gas emissions?
Townsend: Sure. So I think the reason that we focused on, you know, the sort of social, economic, and political context are that those are the institutions within which decisions are going to be made, that will directly impact our ability to decarbonize. I think that actually, interestingly points to one of the takeaways from the reports that maybe should be obvious, but it’s worth stating, which is that everyone has to act. And so, despite you know, in each, each sector having a different actors sort of taking a leadership role in the end, everyone has a part to play.
So, the first scenario, which we refer to as a competitive climate, because if you’re going to do scenarios work, half the fun is coming up with some catchy scenario titles. And so, in this particular scenario, we imagine that international trade is really the sort of catalyst for a more aggressive response here in the U.S. toward reducing carbon emissions. So, this looks like things like carbon tariffs. And really the U.S. response to that international trade pressure being sort of a clean energy dominance, economic nationalism, sort of a an approach that really creates a close collaboration between the federal government and the private sector, to the capture export opportunities around clean,
Stone: Clean energy technology, in those times would be on U.S. exports, is that right?
Townsend: Yeah, so, so thinking about technologies, whether it’s, you know, obviously, China is famously, you know, exporting a lot of solar panels around the globe today. It’s sort of identifying, whether it’s batteries, or, you know, small modular nuclear reactors, etc. really trying to identify those kinds of export opportunities and to capitalize on them. And if we’re going to, we’re going to be forced to participate in the clean energy race, and then we’re going to dominate it is this sort of general mindset, in that in that scenario.
In the second scenario, climate federalism, this is a more of a state centric scenario. Where climate impacts and economic opportunity are really the two drivers. Obviously, we’re already seeing a lot of impacts around the country related to climate change, but also there are a lot of states that are capitalizing on domestic clean energy resources. So, you know, when throughout the plain states, solar and you know, the southwest, etc. And so, states are sort of looking to capitalize on those kinds of opportunities. And ultimately, the emerging patchwork of state level policy triggers the private sector to demand a federal response, that could harmonize the playing field and make it make it a bit easier for them to actually conduct business, which, of course, has some important climate benefits as well.
The third scenario, which I think is certainly the least conventional of the scenarios, we call low carbon lifestyles. So, this scenario is really driven by urbanization, and technology, specifically software, as well as a changing sort of market. And business model approach that includes things like ride sharing distributed energy, there’s a tremendous amount of efficiencies that can be gained through urban density. But it’s also looking at things like autonomous vehicles, and also importantly, transparency and the supply chain that allows consumers to be able to sort of vote with their wallets. When it comes to the choosing a lowest carbon option of a variety of different products.
Stone: It’s interesting on that last one on the low carbon lifestyles, there was no or there is no carbon price in that, no formal carbon price, whereas in the other two scenarios, there are Is that correct?
Townsend: So there’s no federal price, but there are state level pricing in place. And some of that is sort of based around what exists today. So, the California market, we’d imagine expanding a bit. Likewise, in the northeast, the Regional Greenhouse Gas initiative, or RGGI, is currently an electricity market pricing regime. We imagine that expanding to economy wide, and both of those picking up states that have large urban centers. So for example, Illinois would join RGGI, by virtue of the fact that the city of Chicago and it’s sort of growth in urbanization, would increase the political power within the city of Chicago and the residents of Chicago would demand that the state of Illinois join RGGI and so that you see a little bit of an increase in an expansion in state level markets. And in that scenario.
Stone: Now, you mentioned a little bit earlier that one of the key findings here was the whole country top to bottom really has to be involved in this effort to reach the 80% greenhouse gas reduction by midcentury. But in broad terms, what are the other key findings that came out of this?
Townsend: Some reinforced the existing literature on key strategies, and some are new, for example, technological innovation is really important towards decarbonize, but without policy, it’s not sufficient. We also found that that decarbonization requires that everyone, as you mentioned, sort of plays their part, but also that that action needs to accelerate. And then, you know, I think a really interesting thing about this particular report was that we found that the success of any pathway ultimately is going to hinge on high levels of public support. And each of the scenarios really just looked at a different way in which that public support might manifest.
Stone: You know, Matt, I’d like to turn to you here for a moment. So you had these different outcomes, the three different scenarios in what key ways to the actual outcomes diverged between those three scenarios?
Binstead: While the outcomes of the scenario modeling were acutely tied to the narrative storylines, that Brad just articulated for the three scenarios, which influenced the different input assumptions that we use in the modeling and therefore, the model output. An example is in the power sector, we find, as have many other studies, in this vein, that decarbonizing the power sector is a key strategy to reducing economy wide emissions and the low carbon lifestyle scenario. 90% emissions reduction in the power sector actually has the smallest emissions reduction in that sector with the other two pushing closer to 100% emissions reductions.
But the way that that decarbonization of electricity generation is achieved varies substantially across scenarios. For example, in a competitive climate, we have lower cost carbon capture and storage and nuclear technologies. This is driven in part by these strong federal leadership roles. These are kind of large, expensive technologies that require big capital investments and have significant regulatory hurdles that the federal government could help clear for these technologies. And so, CCS and nuclear are an important component in decarbonizing power in a competitive climate.
Conversely, in low carbon lifestyles, we see a lot larger role for distributed renewable energy, wind and solar. Another way in which the outcomes diverge across these scenarios has to do with the transportation sector. We see substantial emissions reductions in that sector across all the scenarios but a competitive climate leans on advanced biofuels as a key enabling technology, whereas climate federalism has an advanced fuel cell electric vehicle that plays an important role. And in low carbon lifestyles, we have a large advancements in battery electric vehicles and electrification of transportation, as well as increased use of public transportation in these increasingly dense urban areas.
A final point has to do with the role of negative emissions, we find that across the scenarios. It’s important to have negative emissions that are able to offset emissions from certain sectors that are difficult to squeeze out, for example, agriculture, some industrial emissions. And in a competitive climate, we see deployment of bioenergy plus carbon capture and sequestration, the bioenergy when it’s grown, sequestered carbon out of the atmosphere, and then when it’s used largely in biorefineries to create liquid biofuels. The carbon emissions are captured, stored underground, and this effectively removes carbon dioxide from the atmosphere. Conversely, in low carbon lifestyles, again, with this theme of urbanization, we have greater opportunity for land sector sequestration. And the land system plays a bigger role with a forestation and helping remove carbon dioxide from the atmosphere to offset some of these more difficult to remove emissions
Stone: Is that because the population is more concentrated in urban areas, so there’s, I guess, more rural area to develop these other technologies?
Binstead: Yes, that’s certainly part of the storyline. And there’s also incentives and incentives for land sector sequestration that we’ve implemented in the model that that lead to a forestation of marginal lands.
Stone: So Brad, in the climate federalism scenario, which is the state driven scenario, many of the technologies that we would be relying upon to lower carbon emissions, particularly from the energy sector, such as distributed solar batteries, etc. would actually be imported because as I understood it, due to the lack of a kind of a cohesive or overarching national policy and R&D effort on those areas the U.S. kind of falls behind in some we have to rely on those technologies has to come from other places. Is that accurate?
Townsend: Yeah, that I think also has to do with just a decreased amount of federal expenditure in the R&D side, as well it being less coordinated. I think, interestingly, you know, the some of the technologies that you did see emerge on the domestic side in in that scenario, such as nuclear, such as fuel cells and hydrogen, were technologies that are that either have in the case of nuclear, some security issues, right? You’re not going to import nuclear technology from other countries, and certainly much, much less likely to do so.
Conversely, hydrogen by virtue of the infrastructure needs and specifically thinking about pipelines, and shipping costs, etc. is much more likely to thrive, given that you have a sort of domestic supply of hydrogen and a network for distributing it. So it was a definitely a different set of technology outcomes in that scenario, which I think was an interesting part of this exercise broadly, which was to think about how leadership from an individual actor might play out on the technology side.
Stone: So Matt, the first time you ran the scenarios, they actually didn’t work, you didn’t achieve the target 80% reduction in carbon emissions. What assumptions were you using?
Binstead: You’re absolutely right, the initial set of simulations only got about halfway to the 80% emissions reduction target. I think one of the biggest limitations with those initial scenarios was over reliance on a single actor to pull the whole country the whole economy. Towards decarbonization, we had a scenario that was federally-led, state led or market-led. And we largely relied on that one actor and policies that at those particular levels to drive the decarbonization outcomes.
In the revised scenarios, we focus much more on every actor having a role to play across the three scenarios. And there’s a figure in the report, which articulates this zone of transition in the near term where, where a particular actor might take the lead in driving emissions reduction efforts. But really, when we get to 2030/2035, the modeling is telling us that we need action across all actors and all sectors of the economy if we’re, if we want to achieve these types of emissions reductions.
I would also say that some of the, the policy mechanisms that we deployed were just slightly less ambitious. I think our carbon price in that initial iteration topped out somewhere just over $100, where we were closer to $300 in the final scenarios that so combination of focusing too much on a single actor and policies that weren’t stringent enough clean energy standards that were lower, inclusive of less states, etc.
Stone: You just mentioned that $300 topping out of the carbon price, one of the assumptions that you actually used in the final three scenarios. I think, also with the competitive climate, the federally driven scenario was that you started out with a carbon price of $40, and then raised it pretty aggressively and that started early next decade. Tell us about the carbon pricing and some of the other assumptions that went into the successful scenarios.
Binstead: Well, he said we have in competitive climate, we have assumed an economy wide carbon price that begins early next decade and rises fairly steadily towards just about $300 in 2050. But that’s complemented by a lot of other policies at different levels of government and in different sectors.
For example, we have clean energy standards across a number of states that help create additional incentives for decarbonization of the power sector. We have building standards that drive efficiency improvements in the building sector. And then obviously, we have technology innovation, assumptions about technology innovation, that are also incorporated. Like the carbon capture and storage or CCS and nuclear that I mentioned in the power sector, advanced biofuel cost reductions in the transportation sector, which help make helped that carbon tax drive emissions reductions because of the associated cost decreases in those technologies.
Stone: So Matt, costs didn’t figure heavily in your analysis. Why is that?
Binstead: There are a couple of reasons why we didn’t focus too heavily on cost and the analysis for one gross domestic product is in exogenous input to the tool we’re using, the global change assessment model. There’s no endogenous or built in representation of the macro economy. So, the tool is very useful for capturing cross sectoral impacts, making sure that our accounting for our emissions reductions is rigid and consistent across sectors.
But it’s the version of the model we’re using at least is less adept at capturing macroeconomic impacts. Another thing I think is important to reiterate, is that one of the innovative parts of this whole exercise was the formulation of thinking about these scenarios in terms of key drivers and the way that society might structure itself in order to try to achieve deep emissions reductions. And the model was used as a tool to understand whether or not these three very different types of worlds were indeed plausible.
Stone: Brad, the three scenarios bring their own implications for how the United States will evolve. As its economy goes low carbon, it seems that strong federal policy could lead to a more even distribution of economic benefits than the low carbon lifestyle scenario with for example, can you can you go on to why this is?
Townsend: Well, so I think, you know, that that may, in fact, be the case, wasn’t really something that we specifically looked at in this exercise. But I think a point that Matt just made is instructive in thinking about this, which is really about leakage. And so, having a federal response, allow for more uniform distribution of costs, and you end up avoiding the game of whack a mole, when it comes to emissions. I think that has implications in economic considerations, as well as we think about the economic benefits that accrue to certain areas as a result of climate policy, making sure that those are accumulating broadly, I think is a key part of the question to be asked going forward.
Stone: So that brings up a related point. In the report, you point out that carbon revenue to the federal government peaks at around $350 billion per year at some point in the 2040s. And that’s in the federal the federally driven scenario. In other scenarios, that carbon revenue doesn’t go to the federal government so much as it goes to state governments in certain state governments, which would result in less national equity, because there wouldn’t be a federal government, redistributing some of those carbon revenues for various projects. Can you comment on that?
Townsend: We didn’t explicitly model what would be done with those with those dollars generated by the federal price or state prices explicitly. We did include in the narrative, certain elements like those dollars being funneled towards increased R&D efforts, equity issues, as well as resilience and those types of things. But those were all sort of qualitative and narrative elements with the exception of you know, state level revenues in low carbon lifestyles, which were directed explicitly towards land incentives, you know, for a forestation, etc. And I think, Matt, correct me if I’m wrong, but I think that was actually the case across all three scenarios on the land, landscape restoration side, but I think that may have been the only revenue use that we were able to include in the model.
Stone: So Brad, do you see any of these scenarios mirrored in U.S. today and if so, which ones?
Townsend: So I think the interesting thing about this, besides that there are seeds of the sort of current dynamic here in the U.S. in every one of these scenarios. So, in a competitive climate, the issue, the idea of trade as a significant issue is certainly not something that I think is alien to the current political dynamic. In the second scenario, climate federalism, we’re already seeing a lot of climate impacts, as well as states moving to capitalize on economic opportunities that that can grow out of clean energy technology development. And then low carbon lifestyles, we are already seeing increases in urbanization, the emergence of ride sharing growth in distributed energy resources, like rooftop solar, and wind, etc. And so I think, you know, in many respects, each of them were built around, you know, pieces of the current landscape, you know, to have some measure of profitability embedded within them.
Stone: Let me ask you a final question here. As a next step, you’ll be working on policy recommendations to move to actually move toward the 80% carbon reduction by midcentury. Give us a preview of where those recommendations might lead.
Townsend: Sure. So, we at CTS are working to translate the scenario exercise and the takeaways and insights from that exercise and the comparison across scenarios. And using those insights. We’re going to be developing sector by sector outlines and, you know, sort of identifying priority policy actions at the federal level at the state level, but also, you know, within companies sort of best management practices, as well as identifying in key places where consumers really have a role to play in helping the economy move towards decarbonization. We’ll also take a look at some cross cutting issues like finance and innovation, and how those factor across the entire economy and so we’ll be working with the companies to flesh those details out over the course of the year and plan to release that report before the end of 2019.
Stone: Matt, Brad, thanks for talking.
Townsend: Thanks so much.
Binstead: Thank you.
Stone: Today’s guests have been Matthew Binstead with the Pacific Northwest National Laboratory and Brad Townsend innovation director with the Center for Climate and Energy Solutions. Visit the Kleinman Center’s website for our archive of Energy Policy Now episodes and for the latest research from the center. Our web address is kleinmanenergy.upenn.edu. And keep up with the center news via our Twitter feed @kleinmanenergy. Thanks for listening to the podcast and have a great day.