BIDEN URGED TO SET UP NATIONAL CLIMATE COUNCIL

For those of us convinced that the United States must take immediate and strong actions to counter climate change, help is on the way. President-elect Joe Biden has nominated a number of leaders with climate expertise, and the selections indicate that he wants to take a whole-of-government approach to this central challenge.

Biden appears to have taken cues from a 300-page blueprint laying out a holistic approach to the climate. Drawn up by the Climate 21 Project, it took a year and a half to develop, and its recommendations, The Washington Post reported, include creating a White House National Climate Council that is “co-equal” to the Domestic Policy Council and National Economic Council.

Creating a well-structured National Climate Council (NCC), the report maintained, “would publicly elevate climate change as an issue of sustained national importance in the next Administration and beyond. Establishing an NCC would also make it unequivocally clear to the Cabinet, the Congress, business leaders, activists, and the general public who within the White House is principally responsible for organizing and executing on climate change policy.”

As envisioned by the Climate 21 Project, an assistant to the president for climate change would direct the NCC, while a deputy would be principally responsible for mitigation policy. In addition there would be three special assistants overseeing: 1) international policy; 2) policies related to the clean energy transition, the energy workforce, and tax and financial-sector issues; and 3) coordination with the Council on Environmental Quality (CEQ). 

One of our co-founders, former Idaho Congressman Walt Minnick (D), endorses such an approach. Back in 1971, he served as staff director of the Cabinet Committee on International Narcotics Control, established by President Richard Nixon to tackle the emerging global crisis involving heroin and other illicit drugs. The committee formulated new federal policies designed to curtail the flow of these drugs into the United States, creating the Drug Enforcement Administration and new federal drug treatment agencies. Its members included appropriate Cabinet members, agency heads and senior White House staff. “The problem was so serious and so broad,” said Minnick, “that you needed to directly engage the president and enlist the heads of a broad range of federal departments and agencies to solve it. A like approach and priority is essential to deal with a challenge as enormous as climate change.”

The most striking aspect of Biden’s approach is his determination to incorporate climate in his economic policies. “Climate change is going to touch every part of our economy, and climate change policy is going to require us to change the way we power and fuel every part of our economy,” said Joseph E. Aldy, a Harvard University economist who served as special assistant to President Barack Obama on energy and environment.

Officials at the U.S. Chamber of Commerce urged Biden and Congress to include clean energy components in an infrastructure package in a news briefing earlier this year. “That could be a big piece in the stimulus negotiations,” said Tim Profeta, director of Duke University’s Nicholas Institute for Environmental Policy Solutions and a co-author of the Climate 21 Project’s blueprint.

“Our economic understanding of climate action has evolved over the past decade,” Andrew Steer, president of World Resources Institute, wrote in a Fortune magazine op-ed. “We have strong evidence that climate policies promote strong and equitable economic growth. Smart action on climate change will increase economic efficiency, drive innovation and new technologies, and reduce investment risks. This is why Biden said on the campaign trail that when he thinks of climate change, he sees jobs. And it’s why many labor unions and manufacturers have gotten behind Biden’s proposed climate plans.” 

Former New York mayor Mike Bloomber is also advocating a whole-of-government approach. He recently published an op-ed arguing that some of the most important steps the new administration could take “have nothing to do with the Environmental Protection Agency” and involve measures like incorporating climate impacts into the Housing and Urban Development’s building standards and the Securities and Exchange Commission’s disclosure requirements. 

The Department of Agriculture is yet another agency that can play a major role in climate, in part because it oversees the 193 million-acre National Forest System. "The agriculture sector accounts for about 10% of current overall U.S. emissions, while U.S forests sequester the equivalent of about 15% of carbon dioxide emissions from combustion of U.S. fossil fuels annually," according to the Climate 21 Project. 

Biden sent an immediate signal that he is ambitious about tackling climate when he named former Secretary of State John Kerry as the nation’s international climate czar. “Climate change is the national security, public health, environmental, and moral issue of our time, and there is no one better suited to coordinate a bold international response to this crisis than John Kerry,” said Senator Ed Markey (D-MA). 

Biden said that Kerry “will be matched with a high-level White House climate policy coordinator and policymaking structure...that will lead efforts here in the United States to combat the climate crisis and mobilize action to meet the existential threat that we face.”

We continue to believe, as do most leading economists, that a price on carbon is the most efficient and quickest way to make progress on the climate front. We will be carrying that message to Capitol Hill and the new administration.

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.