YELLEN CAN HELP FIGHT CLIMATE CHANGE

Janet Yellen, President-elect Joe Biden’s choice to serve as Treasury secretary, is committed to tackling climate change and believes that a carbon price is critical to the success of that mission. 

“As an early backer of the Kyoto Protocol,” noted Dino Grandoni of The Washington Post, “Yellen saw climate change as a risk to the financial system back in the late 1990s, when she was a top economic adviser to President Bill Clinton.”

She is a founding member of the bipartisan Climate Leadership Council, whose top priority is passage of a carbon fee, with all proceeds returned to citizens as “dividends.” The council’s leaders include GOP icons such as James Baker and George Shultz, both former secretaries of the Treasury, and among CLC’s corporate members are Ford, ExxonMobil, and Procter & Gamble. As part of her work with CLC, Yellen led a bipartisan group of  economists to sign a letter endorsing a carbon tax. So far, 3,589 economists have signed it.

She co-chaired the Group of 30 Working Group on Climate Change and Finance, which released a report in October urging governments, regulators and financial companies to make moves that would sharply curb carbon emissions. “Carbon prices should gradually increase over time to incentivize firms and speed the shift to net zero,” she said when the report was released.

The Group of 30 is an independent global body composed of economic and financial leaders from the public and private sectors and academia. It aims to deepen understanding of global economic and financial issues.

Of course, amongst lawmakers, “tax” is a dirty word, and there are plenty of skeptics about the political prospects of a levy on carbon dioxide. Nevertheless, Yellen, in an October interview with Reuters, was “upbeat about its political chances,” Howard Gleckman wrote in a Forbes column.  “I do see Republican support, and not only Democrat support, for an approach that would involve a carbon tax with redistribution.”

One reason for optimism is Yellen herself. “Those who have known Yellen for years say that alongside her expertise, her greatest skill is her ability to build consensus,” wrote The Washington Post’s Heather Long.  On top of that, “she garnered a reputation for being the most prepared in the room.” 

But, as The Post’s Grandoni observed, Yellen wrote in a paper published last month with Mark Carney, former head of the Bank of England, that “carbon prices alone are not enough.” Grandoni pointed out that, if confirmed as treasury secretary, she would also chair the Financial Stability Oversight Council. In that role, Yellen could be persuasive in getting banks and other businesses to assess and mitigate the risk that rising temperatures pose to their bottom lines.

Yet another opportunity for Yellen to help advance a broad climate agenda derives from her influence in tax policy. During the campaign, Biden promised to end subsidies for oil, gas and coal companies. Yellen would be able to reassess those tax breaks and weigh in on incentives for wind and solar power projects.

Though some in the climate action community consider Yellen’s views too moderate, environmental economist Matthew Kahn of Johns Hopkins University told E&E News’ Avery Ellfeldt that Yellen could be "more effective" on climate change than her more progressive peers. "There are ways to change our tax code to be pro-environment, and pro-economic growth, and pro-labor and pro-capital accumulation," he said, which could create a "self-fulfilling prophecy" as businesses invest in a greener economy.

GHG emissions from food production are headed up

Most of the debate about what’s driving climate change--and the best ways to minimize the damage--focuses on transportation, power plants, and buildings. But a study published recently in the journal Science found that rising emissions from worldwide food production will make it extremely difficult to limit global warming to the Paris targets, even if emissions from fossil-fuel burning were halted immediately.

Food production results in emissions of carbon dioxide, methane, and other planet-warming gases in many ways, The New York Times’ Henry Fountain noted. They include land clearing and deforestation for agriculture and grazing, digestion by cattle and other livestock, production and use of fertilizers, and the cultivation of rice in flooded paddies. 

Overall emissions from 2012 to 2017 were equivalent to about 16 billion metric tons of carbon dioxide a year, or about 30 percent of total global emissions. Those figures are headed higher, the researchers found, as world population grows and diets and consumption patterns change as some countries become more affluent.

Brent Loken, the World Wildlife Fund’s global lead scientist, who was not involved in the research, told Fountain, “It’s really less about where the food system is today, and more about where it’s heading.” The study determined that, if left unchanged, future greenhouse gas emissions from food production would alone lead to the world warming by 1.5°C by 2050 and by 2°C by the end of the century compared to pre-industrial levels.

What’s the solution? Michael Clark, the lead author, said the study showed clearly that all of the world’s increasing population could be fed a healthy diet while meeting the Paris goals, as long as concerted action was taken to reform the global food production system. He is a researcher in the Nuffield Department of Population Health at the University of Oxford in England.

He and others are trying to determine what policies and behavioral changes it may be possible to implement. “Maybe it’s a combination of nudges at grocery stores, and top-down policies from governments,” he told The Times. “It could be very bureaucratic or individualistic. Every person has a role to play; every corporation as well. Through collective action and political will, we can actually do this pretty rapidly.”

“There are at least five different changes that would allow us to prevent this agriculturally-driven climate change,” said University of Minnesota Professor David Tilman, who helped produce the study. “These are farming more efficiently, helping farmers in low-income countries increase their yields, eating healthier foods, avoiding overeating and wasting less food. Even partially adopting several of these five changes would solve this problem as long as we start right now.”

The paper cited research showing that all five strategies are readily achievable and have many benefits beyond controlling climate change, such as improving human health, reducing water pollution, improving air quality, preventing species extinctions and improving farm profitability.

Clark told The Guardian that diets in wealthy countries should change if we are to have a shot at reducing emissions from food production to safe levels. “These countries are primarily those that are middle or high income where dietary intake and consumption of meat, dairy and eggs is on average well above [health] recommendations,” said Clark, citing the UK, the U.S., Australia, Europe, Brazil and Argentina, and countries such as China where meat consumption is high and increasing.

If you think you’re going to be asked to adopt a vegan diet, relax. Clark does not believe that is necessary. 

Changing cows’ diets appears to be one promising approach. Mixing seaweed into their feed has cut methane emissions in half in a California study. Improving soil management is another worthy idea. For example, covering the soil with a protective blanket of crops during the winter can keep the earth from washing away.

Like all other sectors that are causing the planet to heat up, food production could move more rapidly toward lower emissions if there were an honest price on carbon dioxide emissions. The next Congress should make carbon pricing a high priority.  

Signs of progress within the oil industry

There are signs that the oil and gas industry may be undergoing a historic transformation. Or is this history being made only on the other side of the Atlantic?

BP has generated headlines recently with efforts “to reinvent itself as an energy company in the age of climate change,” as The Washington Post’s Steven Mufson put it. “The company is shrinking its oil and gas business, revving up offshore wind power and developing solar and battery storage. It is even considering installing electric car charging kiosks at its gas stations, part of a drive to eliminate or offset its carbon emissions to a net zero level by 2050.”

BP's plan will "start with a five-year sprint to dramatically boost wind and solar power," according to Bloomberg. By 2025, the company intends to have approved more than 20 gigawatts of renewable energy projects, an eightfold increase from 2019.

In its annual outlook paper, the company’s new CEO, Bernard Looney, said that “the world is on an unsustainable path and its carbon budget is running out.”

Royal Dutch Shell is planning similar steps. As Reuters’ Ron Boussa reported, “the review, which company sources say is the largest in Shell’s modern history, is expected to be completed by the end of 2020, when Shell wants to announce a major restructuring. Other European-based giants--Eni of Italy, Total of France, Repsol of Spain and Equinor of Norway--are also on the bandwagon. 

“European oil executives have said that the age of fossil fuels is dimming and that they are planning to leave many of their reserves buried forever,” The New York Times’ Clifford Krauss wrote. “They also argue that they must protect their shareholders by preparing for a future in which governments enact tougher environmental policies.”

You may recall that BP tried a transition in the late 1990s and early 2000s under the leadership of John Browne, then chief executive. But financial results from renewables were disappointing, and the company eventually dropped its moniker “Beyond Petroleum.”

In an interview with The Post’s Mufson, Browne said this time would be different. “There are many more voices now,” he said, adding that the Paris agreement was a watershed, the economics of renewables have improved, and investor pressure was building.

U.S.-based oil and gas majors take a different view, however. They publicly agree with their European counterparts that climate change is a threat and that they must play a role in the kind of energy transition the world last saw during the industrial revolution. But the urgency with which the companies are planning to transform their businesses could not be more different, Krauss wrote.

A key factor for the majors as they assess the urgency of shifting focus is the trajectory of demand for oil. Daniel Yergin, whose newest book is The New Map: Energy, Climate, and the Clash of Nations, believes that the world won’t reach peak oil demand for another 10 to 12 years. “Then when we hit the peak it's not a plummet and collapse, it just starts to decline,” he told Politico’s Ben Lefebvre. “Just one number to keep in mind is that the average car in the United States now stays on the road for 12 years, so those cars aren't going away. But it is a time of uncertainty. A big uncertainty is how the world will change when Covid is behind us.”

Chevron and Exxon Mobil, Krauss reported, “are doubling down on oil and natural gas and investing what amounts to pocket change in innovative climate-oriented efforts like small nuclear power plants and (carbon capture technology).”

“Despite rising emissions and societal demand for climate action, U.S. oil majors are betting on a long-term future for oil and gas, while the European majors are gambling on a future as electricity providers,”  David Goldwyn, a top State Department energy official in the Obama administration, told Krauss. “The way the market reacts to their strategies and the 2020 election results will determine whether either strategy works.”

Maybe it’s time for ExxonMobil and its American brethren to think more creatively. This summer the energy sector became the smallest component (just 2.3 percent) of the S&P 500-stock index, and ExxonMobil, once the world's biggest publicly traded company, was dumped from the Dow Jones industrial average. The oil giant’s market value is now about a third of what it was in 2008. 

 Concerned about the financial threats that climate change poses, the Commodity Futures Trading Commission (CFTC) conducted research to determine how such risks could be met and issued its findings September 9. “Financial markets today are not pricing climate risk,” wrote Bob Litterman, a leading national authority on risk management and chairman of the subcommittee that produced the report. (He is a member of our Advisory Board.) 

One promising way to accelerate the transformation of the oil industry is to put an honest price on carbon dioxide emissions. The CFTC report recommended that Congress take such action, and in its annual outlook paper, BP wrote that “a rapid and sustained fall in carbon emissions is likely to require a series of policy measures, led by a significant increase in carbon prices.” Without tax-driven increases in carbon prices, oil and gas use will continue to rise, the report said. “Delaying these policies,” BP observed, “may lead to significant economic costs and disruption.”

THE OIL INDUSTRY IS EVOLVING

The oil industry is evolving. Royal Dutch Shell intends to build a vast wind farm off the coast of the Netherlands. Meantime, the oil giant has decided to delay new fields in the Gulf of Mexico and the North Sea.

BP’s CEO, Bernard Looney, said this month that he planned to increase investment in low-emission businesses like renewable energy by tenfold in the next decade to $5 billion a year, while cutting back oil and gas production by 40 percent. By 2030, BP aims to generate renewable electricity comparable to a few dozen large offshore wind farms. “What the world wants from energy is changing,” Looney said, “so we need to change, quite frankly, what we offer the world.”

Investors applauded BP’s latest moves. The afternoon of Looney’s announcement, his company’s shares jumped more than 7.8 percent, outpacing smaller gains among other oil companies.

 “Prodded by governments and investors to address climate change concerns about their products,” The New York Times’ Stanley Reed reported, “Europe’s oil companies are accelerating their production of cleaner energy — usually electricity, sometimes hydrogen — and promoting natural gas, which they argue can be a cleaner transition fuel from coal and oil to renewables.”

For some executives, Reed wrote, “the sudden plunge in demand for oil caused by the pandemic — and the accompanying collapse in earnings — is another warning that unless they change the composition of their businesses, they risk being dinosaurs headed for extinction. This evolving vision is more striking because it is shared by many longtime veterans of the oil business.”

Reed suggested that “the bet is that electricity will be the prime means of delivering cleaner energy in the future and, therefore, will grow rapidly.” He wrote that this could be the year that oil giants, especially in Europe, “start looking more like electric companies.” Claudio Descalzi, the CEO of the Italian oil company Eni, said he wants to build a business increasingly based on green energy rather than oil. “We want to stay away from the volatility and the uncertainty,” he told The Times.

All of Europe’s large oil companies have now set targets to reduce the carbon emissions that contribute to climate change. Most have set a ”net-zero” ambition by 2050, a goal also embraced by governments like the European Union and Britain. American oil companies have moved more slowly, partly because they face less government and investor pressure.  

Environmentalists and analysts described Looney’s statement that BP’s oil and gas production would decline in the future as a breakthrough that would put pressure on other companies to follow.

BP’s move “clearly differentiates them from peers,” said Andrew Grant, an analyst at Carbon Tracker, a London nonprofit. He noted that most other oil companies had so far been unwilling to confront “the prospect of producing less fossil fuels.”

“To make a switch from a global economy that depends on fossil fuels for 80 percent of its energy to something else is a very, very big job,” said Daniel Yergin, the energy historian who has a forthcoming book, The New Map, on the transition now occurring in energy. But he noted, “These companies are really good at big, complex engineering management that will be required for a transition of that scale.”

Oswald Clint, an analyst at Bernstein, forecast that the large oil companies would expand their renewable-energy businesses like wind, solar and hydrogen by around 25 percent or more each year over the next decade.

Americans, especially younger ones, increasingly see the industry in a negative light, Rebecca Elliott reported in The Wall Street Journal. One result: A career in oil and gas was unappealing to 44 percent of 20- to 35-year-olds, according to a 2017 survey by Ernst & Young LLP. An even greater portion of 16- to 19-year-olds, nearly two-thirds, held that sentiment.

“There’s a mentality out there that oil and gas is finished,” said Jeff Spath, who leads Texas A&M University’s petroleum-engineering department, adding that there is “a growing disdain” for the industry. To reverse this trend, U.S.-based oil giants must speed their transition to clean energy. Putting an honest price on carbon dioxide emissions would be one sure way to prod them.

Future flooding likely to surge beyond coastal communities

If your house sits along a coastline, you know you are in harm’s way and that, thanks to climate change, the odds against your home’s survival are growing by the day.

But if your property is inland, don’t think you’re entitled to be smug. As The New York Times’ Brad Plumer reported recently, a study published July 30 found that as oceans rise, powerful coastal storms, crashing waves and extreme high tides will be able to reach farther inland, putting tens of millions more people and trillions of dollars in assets worldwide at risk of periodic flooding.

If the world’s nations keep emitting greenhouse gases, and sea levels rise just 1 to 2 more feet, the amount of coastal land at risk of flooding would increase by roughly one-third, the research said. In 2050, up to 204 million people currently living along the coasts would face flooding risks. 

“Even though average sea levels rise relatively slowly, we found that these other flooding risks like high tides, storm surge and breaking waves will become much more frequent and more intense,” said Ebru Kirezci, a doctoral candidate at the University of Melbourne in Australia and lead author of the study. “Those are important to consider.”

USA Today’s Doyle Rice wrote: “Floods that occur once every 100 years could now occur once every 10 years in 2100, the research showed, mainly as a result of sea-level rise.” The study was published in the journal Scientific Reports.

Areas at highest risk, CNBC reported, include southeast China, Australia’s Northern Territory, Bangladesh, West Bengal, Gujurat in India, and the U.K. In our country, the threat is particularly acute for North Carolina, Virginia, and Maryland.

This flooding could cause serious economic damage, Plumer wrote. The study found that people currently living in areas at risk from a 3-foot rise in sea levels owned $14 trillion in assets in 2011, an amount equal to 20 percent of global G.D.P. that year.

There are already signs that periodic flooding is wreaking havoc along coastlines. A July analysis from the National Oceanic and Atmospheric Administration (NOAA) found that high-tide flooding in cities along the Atlantic and Gulf Coast has increased fivefold since 2000, a shift that is damaging homes, imperiling drinking-water supplies and inundating roads.

Plumer pointed out that the new study’s authors acknowledge that theirs is a highly imperfect estimate of the potential costs of sea-level rise. For one, they don’t factor in the likelihood that communities will take action to protect themselves, such as elevating their homes, building sea walls or retreating inland. Nor did they account for any valuable infrastructure, such as roads or factories, that is at risk. A fuller economic accounting would require further research, Kireczi said.

The research is the latest evidence that forceful national action by our federal government makes economic sense. The likely losses are staggering. Most economists say that a tax on carbon emissions is the fastest, most efficient, and least expensive way to slow climate change. Please join us in urging Congress to take such action.