Now that Sen. Hillary Clinton has unveiled her energy policy, all leading Democratic presidential candidates are on the record and their plans are remarkably similar in broad outline in seeking to reduce greenhouse gases 80 percent by 2050.
The core of all these plans is the imposition of a new cost for carbon emissions – either through a tax, a cap-and-trade system or some combination of the two – in to facilitate a relatively rapid overhaul of our entire energy system.
To critics, the Democrats plan is wildly unrealistic and very likely harmful for the economy.
“We hear these presidential candidates speaking and they are detached from the realities of how you run an economy,” William Kovacs, vice president of environment, technology and regulatory affairs for the U.S. Chamber of Commerce, which is more adamantly opposed to the 80 percent target than other business groups.
Pros And Cons
But if Democrats are sugarcoating coming economic pain they say their critics lack the imagination to see the economic opportunities and are courting even greater economic damage by delaying changes that are inevitably needed to slow down climate change.
In particular, Democrats insist there is a waiting jobs bonanza, if the country embraces the challenge like the U.S. did in the Kennedy-era Apollo Project, which put American astronauts on the moon, leapfrogging the Soviet’s space initiative.
The plans unveiled by Sens. Barack Obama of Illinois and Clinton both call for spending $150 billion over the next ten years to develop and deploy climate friendly technologies, which they say will create millions of new stable jobs.
Former senator John Edwards and Sen. Christopher Dodd (D-CT) have also called for 80% reductions while New Mexico Governor and former Energy Secretary Bill Richardson is calling for a cut in emissions of 90% by the same target date of 2050. Most favor a cap-and-trade system. Dodd has added what he calls a corporate carbon tax, which he expects to generate $50 billion annually, to be used to research, develop and deploy clean technologies.
“Our generation must be the one that builds the New Energy Economy,” said Edwards when he unveiled his plan, well ahead of the other candidates. “It won’t be easy, but it is time to ask the American people to be patriotic about something other than war.”
The goal of this Democratic position is to dramatically reduce new carbon emissions, by 80 percent of their 1990 levels, in order to stabilize concentrations of greenhouse gases in atmosphere at a level twice what they were thought to be before the Industrial Age. Unlike other forms of pollution greenhouses accumulate in the atmosphere and dissipate only very slowly.
“This is will require huge changes in the energy system we currently have, because we rely on fossil fuels for over 80 percent of our energy use and you are going to change the vast majority of that in less than 40 years – the problem is the current options for reducing greenhouse gas options to that extent are limited,” says Richard Newell, a Duke University energy economist.
“That’s why we have been focused almost obsessively on the need to develop the technology, because if certain technologies can’t work, you just can’t do it,” adds Kovacs.
Both note that one critical technology is at least a decade away from being proven and commercially viable; that is the ability to capture carbon emissions from coal plants, which generate more than half of our electricity and 40 percent of our greenhouse gases, before it is pumped into underground storage, in a process known as sequestration.
Nuclear power, which emits no carbon, could be a huge help but it remains very controversial because of its waste disposal problem and subsidized cost. Democrats tend to fudge the role of nuclear in their future energy plans or not mention it at all.
For all the attention and increasing amount of money going into renewable energy, it is still a bit player in the global energy drama. The International Energy Agency in Paris has projected they at best it may account for 8 percent by 2030, up from about 6 percent currently.
Still, economists say the sooner we start this transition to a low-carbon, high efficiency, economy the better.
“To deal with climate change we are going to need to raise the price of fossil fuels quite significantly and we need to tell households and businesses that the price of energy is going to be rising in real terms, year after year, into the infinite future,” explains Marc Levinson, a JP Morgan industrial economist, who contributed to a recent National Petroleum Council energy study.
“The economy is best off if we do that (raise prices) gradually over a long time horizon and the sooner we start, the more gradual we can do it, and if we can do it that way the economy will adjust well and we can deal with this with minimal economic pains,” adds Levinson.
Congress is already considering several bills that would impose costs on carbon emissions (used as shorthand for all greenhouse gases). On Nov. 1, a Senate panel for the first time voted for mandatory limits on emissions and the creation of a trading scheme to allow businesses flexibility in implementing carbon caps.
Still, complying with the new system will cost businesses covered by the cap – mainly heavy industry and utilities -- hundred of billions of dollars, which will be presumably be passed on to consumers and voters..
For this reason critics complain it is a hidden tax. It is also the reason it is more politically feasible than a carbon tax, which many economists favor for its relative simplicity and easier enforcement. The trading scheme allows better targeting for actual reductions, one reason it is favored by environmentalists.
The Lieberman-Warner bill calls for a 3% reduction in carbon emissions every year, to meet its 65% reduction, by 2050, target. That is more than twice the 1.3% carbon reduction the U.S. economy achieved last year – the best record to date.
With a 7% increase in the U.S. population expected between 2005 and 2012 the mandatory caps would require a threefold improvement in emission reductions, says Margo Thorning, chief economist of the American Council of Capital Formation, a broad-based business advocacy group. She worries that meeting this demand could reduce GDP by one percent to two percent by 2012, which could translate into 750,000 fewer jobs.
But there are other economic arguments in favor. “My sense is that industry badly wants regulation here - most business people have figured out that there is going to be regulations one way or another and they are really just crying ‘please just tell us what it is going to be – we’ll make decisions, we’ll handle it, but please just give us the basic rules,’ “ says Levinson, who notes the uncertainty has created an “enormous backlog of investment” especially in the power sector.
That’s a concern for Jim Rogers, the CEO of Duke Energy, who has been a leading power sector advocate for regulatory clarity in the form of “a national, economy-wide greenhouse gas mandatory program as soon as possible.”
“Eighty percent is the right target – that’s very aggressive but it has to be, it’s not a matter of discretionary thinking, it’s simply mandatory given climatic science,” argues Congressman Jay Inslee (D-Washington), who is co-chair of Sen. Clinton’s energy advisory committee.