Eric Olson, Senior Vice President, Advisory Services, BSR

Better Policy

Note: This is part two of a two-part series looking at U.S. President Obama’s climate plan through the lens of BSR’s Future of Fuels Initiative. Read part one here.

In my second piece examining U.S. President Obama’s new climate plan through the lens of BSR’s work on the Future of Fuels—which is highlighting collaborative approaches to promoting more sustainable transportation fuels and supply chains—I turn to the question of which policies are needed to support a transition to long-term, sustainable energy.

My first piece focused on a first principle of our work in Future of Fuels that is also reflected in the administration’s plan: We must find ways both to reduce the climate impacts of the fossil-based fuels that will remain a significant part of the mix for at least the next few decades, and we must accelerate the development and deployment of commercially viable low-carbon alternatives.

Asking how policy can help brings me to:

Principle No. 2: There is an urgent need for business and government to work together more effectively to develop a long-term, sustainable energy policy.

In our work on the Future of Fuels, three key elements of such a policy have risen head and shoulders above all others:

1. The creation of mechanisms and incentives to drive radical efficiency gains.

The efficiency opportunity offers a clear and compelling benefit to all, as it promises to reduce overall demand (and hence cost), as well as all related sustainability impacts. While leading companies—including those involved in the Future of Fuels—have already invested in and achieved significant progress in this area, there is a lot more that can be done if business, government, and other stakeholders work together.

The president’s climate plan addresses the efficiency opportunity primarily through a call to strengthen heavy-duty vehicle efficiency standards after 2018. While this sends a strong signal to the market, it begs the question of a carbon price.

2. The establishment of an effective price on carbon.

Despite the disappointment created by our collective failure to enact meaningful climate legislation globally, a growing number of voices—ranging from leading climate advocates to the heads of major energy companies—have concluded that by far the most effective and efficient mechanism for accelerating our transition to a low-carbon economy would be the establishment of a carbon tax. In the absence of this, success in energy efficiency may simply result in cheap hydrocarbons and an increasingly desperate and dysfunctional reach for more prescriptive and less effective “top-down” regulation aimed at reducing greenhouse gas emissions.

3. Platforms for global action.

This is another crucial element of any comprehensive climate solution, as the world’s rapidly developing economies will simply be unable to do their share without large-scale technology transfer and appropriate financing mechanisms.

The president’s plan contains a general commitment to provide leadership in efforts to address climate change through international negotiations as well as through a number of regional and bilateral initiatives with China, India, and other major emitting countries. Importantly, the plan calls for the expansion of renewable, clean, and efficient energy sources and technologies worldwide through financing and regulatory support. The United States will also work via the World Trade Organization to establish global free trade in “environmental goods,” including clean energy technologies such as solar, wind, hydro, and geothermal. The plan also renews earlier calls to phase out fossil fuel subsidies globally, including the elimination of U.S. fossil fuel tax subsidies in Obama’s fiscal year 2014 budget.

In the area of transportation, Obama’s plan specifically mentions the need to exchange “lessons learned with our international partners on responsible development of natural gas resources” and the adoption of heavy-duty natural gas vehicles. Just days later, the U.S. and China agreed to work together to reduce emissions from heavy-duty trucks and other vehicles by raising fuel-efficiency standards and introducing cleaner fuels. (In a future blog, BSR’s Edward Cameron will tell you more about U.S.-China collaboration on climate and how BSR is playing a role.)

While these are all important ideas, the plan does not include any specific new resource commitments or timetables, and it is therefore not clear whether they will add up to the level of global action needed to help developing countries reduce their greenhouse gas emissions while growing their economies.

Overall, the Obama climate plan stands as an important transitional measure made necessary by the failure of Congress to enact more meaningful and effective legislation. While we can’t afford to wait for all the stars to align to take action on climate change, we also can’t afford to give up on some of these necessary policies—especially establishing an effective market price on carbon.

The private sector has a real stake in the outcome, and through the Future of Fuels, BSR will be working to mobilize companies and other stakeholders to get a carbon price and other critical measures back on the policy agenda.