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2022 Earth Day Brings Grim News On Climate Policy: What Is The Way Forward?

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The 2022 Earth Day should give us a pause and motivate us to ask a simple question: what went wrong in climate policy in the last 12 months, and how can it be fixed?

Recall that 2021 Earth Day was full of optimism about climate progress. Fast forward to 2022. Now the climate policy trajectory is wobbly, although the need for quick and drastic climate action could not be more pressing. Countries and firms are backtracking on climate pledges even as they continue to proclaim their net-zero commitments. The disconnect between talk and action is shocking. The U.N. Secretary-General Antonio Guterres described a recent IPCC report as “cataloguing the empty pledges that put us firmly on track toward an unlivable world.”

Consider these issues:

· Are the Paris commitments holding up?

No. In the 2015 Paris Accord, countries pledged to implement policies to keep “global temperature rise this century well below 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit the temperature increase even further to 1.5 degrees Celsius.” By and large, countries are falling behind their pledges. Not surprisingly, by 2021, temperatures have already increased by over 1.1 Celsius (2 Fahrenheit) and if current emission trajectories continue, temperatures will probably rise beyond 2.0 degrees Celsius by the end of the century.

· What is driving emission increases?

Coal has played an important role. According to the US Energy Information Administration, in 2021 the share of electricity generated from coal increased for the first time since 2014. The International Energy Agency reports that global coal consumption increased in 2021, exceeding even the pre-pandemic 2019 levels. Further, more than 600 new coal-fired power plants are planned in Asia. Recall, coal was supposed to be on its deathbed. Indeed, the climate movement after waging a successful campaign against coal, was calling for an end to natural gas.

· Is then natural gas in decline?

No; on the contrary, natural gas is experiencing a revival. By 2022, the U.S. will become the leading exporter of LNG (liquified natural gas). For reference, it was the third-largest in 2019, behind Australia and Qatar. Both the US and the EU countries (such as Germany, Latvia, Estonia, Greece, and Italy) will be building new LNG terminals, which cost billions of dollars. EU countries with North Sea gas fields, such as Denmark, are stepping up gas production to replace Russian gas (Europe annually imports 40% of its gas from Russia; its imports bill for oil and gas stood at $850 million per day). It seems the natural gas boom is affecting countries in North Africa (such as Algeria) and the Middle East (such as Qatar). In spite of the net-zero rhetoric, banks continue to finance fossil fuel projects, thereby creating even greater economic and political hurdles for energy transition.

· Are governments intervening to make fossil fuel less attractive?

Many are not. Instead of maintaining some sort of carbon tax to keep the price of fuel high (and the demand low), some countries are reducing gas/fuel taxes. President Biden has released oil from the Strategic Oil Reserves, has asked the oil industry to pump more, and is contemplating suspending the 18.4 cents per gallon federal gas tax. Many democratic governors seek to suspend state-level gas taxes. California’s Governor Newsom, an ostensible climate champion, wants to give $400 (the average annual amount Californians pay in state gasoline excise tax) to car owners while at the same time has announced that California will ban the sale of new internal combustion engine cars and pickups by 2035. Some disconnect here!

· Is Biden holding firm on climate issues?

On some issues, the Biden administration continues with a pro-climate agenda. But it is backtracking on some policies. It has reneged on its campaign promise to ban new oil and gas drilling leases on public land. It is even seeking oil from Venezuela, a country under U.S. sanctions. Domestic climate policy Czarina, Gina McCarthy might be stepping down because of the slow pace of policy progress.

Declining Political Salience of Climate Policy

Why the backtracking on climate policy? One factor is its declining political salience. Opinion polls report high levels of public support for climate action; take a look at the numerous climate-focused polls Pew reports on its website. But there is a catch here. Climate issues do well when polled in isolation. But when the public is asked about their most important policy concerns, climate issues do not make it to the top 4 or 5. Not surprisingly, politicians want to invest their political capital in say fighting inflation, improving the economy, and reducing crime, as opposed to climate policy.

Consider two recent examples:

· President Biden’s 2022 State of the Union mentioned climate change only twice. He devoted just 35 words to climate change in his 6,518 words speech (0.53%). Contrast this with the 2021 State of the Union speech, where he mentioned climate change 6 times, devoting 480 words in his 7,921 words speech (6%).

· Senator Elizabeth Warren, a noted climate champion, recently wrote an Op-ed, Democrats Can Avoid Disaster in November. In her 1,064-word essay, she devoted 5 words to climate issues!

What Went Wrong and Can it be Fixed?

In tactical terms, the Ukraine crisis is probably the most critical factor derailing climate progress. It has disrupted the global oil and gas markets. Coal is staging a comeback because it is now competitive with gas. Governments are issuing regulatory permits and companies are investing in new oil and gas fields, and transportation hubs. And more misery is on its way. Because Russia and Ukraine are major wheat exporters (and natural gas is a feedstock for fertilizers), food prices are rising. Inflation is creating political unrest (as in Sri Lanka and Pakistan), leading governments to backtrack on climate policy.

But there is more to the story, at least in the U.S. At the strategic level, the climate movement probably has shown a lack of willingness to compromise. Think of the Build Back Better bill which is now stalled in the Senate. Senator Manchin has indicated his willingness to support a slimmer bill which focuses on climate issues only. But the climate movement and its Senate and House supporters have adopted an “all or nothing” approach. This is perplexing because with the impending Republican takeover of the House in November midterm elections, the legislative window for climate action will be shut. Moreover, the Supreme Court may also impede executive action on climate issues.

One might argue that there is a clear momentum behind decarbonizing electricity sector and electrification of the automobile industry. Hence, the Ukraine-induced policy reversal is temporary and decarbonization will return to its original trajectory. This is probably true, but it is less clear how long the current pause in climate policy will last, and in the absence of aggressive federal support, what the new policy trajectory might look like.

In sum, climate issues tend to lose if they are viewed as encouraging inflation or hurting the economy. Therefore, a messaging correction is needed. The moral framing of climate goals, which tends to deemphasize their economic impact, should probably take a back seat. Could the climate movement transform itself to become more humble and stick to the decarbonization message? Would it? Only time will tell.