Carbon rules are coming...and they will be easy to meet

Today, the President Obama and the EPA – bolstered by recent court rulings - will announce rules for carbon dioxide emissions targets.  Reports vary from 20% reduction by 2020 to a 30% reduction by 2030.  Regardless of the actual target chosen, we should all remember one thing…

We will beat that target easily.

Politics, we should all remember, has as its foundation the “art of the possible”.  Most everyone in industry, except for those whose commodities will have less value because of reduced demand for carbon-based fuels, recognizes that energy efficiency and renewable energy have a better economic trajectory than fossil fuels or even nuclear.  In setting this goal, the current administration simply identifies where industry easily thinks they can get.  Just as they did with the automobile efficiency standards, they have put in place a benchmark that we will meet far before the target date.

Lest pure political analysis prove unpersuasive, consider the economic argument.  For years, analysts claimed that we needed to tax fossil fuels in order to capture externalities and make renewable energy more competitive.  What we got instead was an energy market that remained depressed by a combination of stagnant demand and temporarily increased supply.  That should have spelled a death knell for renewable energy.  Instead, we have seen wind and solar have their most successful years economically in a time when low energy prices should push them out of the market.  Recent long-term contracts and court rulings in the Midwest have bolstered this fact that even as of today, renewable energy-based electricity generation betters coal and nuclear, and competes with natural gas.

On the technology front, current building codes currently restrict energy use in new buildings to levels about half of what they were a decade ago.  Over the next ten years, we will see this decline even further, and that will carry over into the existing building marketplace.  We will see even more efficient use of energy in buildings (a sector that uses about 1/3 of the energy in the economy), and continued reduction in vehicle emissions.  Industrial use (the final 1/3) already has stagnated as industry continues to find excellent investments in efficient ways to update equipment and processes to use less energy.  Our economic growth no longer relies on increased energy use, and in fact, we may see the opposite hold true for decades to come.

On an even more important front, most politicians recognize that energy efficiency and renewable energy technologies create more jobs per dollar than the fossil fuel industry.  Few groups take the “sky is falling” approach to carbon regulation, but the some continue to flap their wings and claim that regulating carbon will cause economic collapse.  Thankfully, most recognize that pollution limits actually create jobs by shifting capital (human and financial) from extractive industry to productive ones.  Spending money on new wind turbines, smart-grid technology, weatherization of homes, or pollution capture technology…these all put people to work and shift expenses from one sector to another, but it does not threaten the economy as a whole.

One need look no further than the acid rain policies of the 80s and 90s to see a parallel.  Back then we sought to reduce sulfur and nitrogen oxide emissions from power plants because these reacted with the atmosphere to produce rain that damaged crops, buildings, and communities.  Industry predicted it would create a $1,500 per ton drag on the economy.  What happened instead was that it cost only $250 per ton, and the savings from increased property value, reduced medical expenses, and job creation more than paid for the investment.

For years, we have had to choose between the more economically stable sector and the higher-priced, but better-for-us sector.  Especially in tough economic times, asking anyone to make that choice is tough.  Now, we have reached a tipping point where we do not have to sacrifice anyone’s quality of life in order to cost-effectively provide the energy that supports our lives.  Challenges lie ahead, but we should take solace in the fact that the Obama administration is taking this step today.  If there’s one thing we know about politicians….

They rarely stick their necks out unless they’re certain of the outcome.