Just over a week ago, on June 2, US President Barack Obama revealed the details of his administration's plans to use regulatory powers under the Clean Air Act of 1970 to regulate emissions from existing electricity generation plants. The announcement takes the form of a draft proposal for public comment, resulting in a formal rule probably over the next year and action thereafter. The current announcement followed regulatory action earlier this year to limit carbon emissions from new coal (and gas) power plants. Both actions are intended to help the United States reduce its carbon emissions from power generation by 30 per cent by 2030. While this move is part of a sequence of actions taken by the Obama administration to address carbon emissions, it is arguably the most significant. As such, it is likely to have a powerful influence on the US role in negotiations on global climate change.
Power plant emissions are the largest source of US greenhouse gas emissions, ahead of vehicular sources. They currently account for 40 per cent of such emissions. Once implemented, the measures will undoubtedly reinforce the shift away from coal in power generation in the US. This shift was already under way in response to the availability of cheap natural gas extracted from shale. Coal now provides 37 per cent of US electricity compared to around half in 2000, while the share of gas rose from 16 per cent in 2000 to 30 per cent in 2012. Wind, solar, nuclear and hydro make up the remainder.
The president resorted to executive action primarily because of the gridlock in the US Congress, which makes the prospect of legislative action during the remainder of his term highly unlikely. These measures will undoubtedly be challenged in the courts and could be overturned by subsequent legislation should the Republicans gain control of the Senate in the forthcoming mid-term elections.
The Obama administration's actions are, however, supported by an existing ruling by the US Supreme Court, which in 2007 determined that greenhouse gases could be considered pollutants under the Clean Air Act if they were found to endanger human health and welfare. Such a determination was thereafter duly made by the federal Environmental Protection Agency and has been the trigger for vehicle fuel economy standards as well as these regulations for new and existing power plants.
The actual form of regulation announced is also of interest; it provides an indication of the kinds of innovation that the new rules might stimulate. As noted in the Financial Times, the targets for existing power plants have been framed at the level of individual states, taking into account circumstances and capacity. While existing coal plants (currently numbering around 600) will undoubtedly face the major burden of adjustment, the rule is intended to stimulate state-level emissions trading schemes as well as greater deployment of carbon capture and storage, a technology wherein carbon emissions are diverted back into long-term underground storage.
This move by the administration not only reflects powerful domestic imperatives, it also comes at a strategic moment for the US role in global negotiations on countering global warming. As agreed at Durban in 2011, new binding emissions targets under the United Nations Framework Convention on Climate Change (UNFCCC) are to be agreed at the 2015 Conference of the Parties meeting in Paris, with implementation after 2020. This is intended to replace the current system of voluntary commitments made by participating states.
The run-up to Paris has already begun with the publication of the working group reports of the Fifth Assessment Report of the Intergovernmental Panel on Climate Change over the past six months. During the summer, we can expect the report to the UN Secretary-General of the Calderon commission on the new climate economy. The meeting of the General Assembly in New York in September is likely to be an important moment for reviewing the level of ambition of country commitments prior to a formal meeting of the Conference of the Parties of the UNFCCC in Lima, Peru, in December.
The international climate change negotiations have been deadlocked since Copenhagen by the unwillingness of the US to agree to deep emissions cuts without similar ambition being displayed by India and China. In turn, that view has been rejected by those two countries on grounds of historic responsibility and current equity. Important American commentators such as Paul Krugman and Thomas L Friedman have seized on this latest announcement by the Obama administration as a way for the US to demonstrate leadership to break the deadlock.
In a recent blog, Professor Krugman sketches a path by which the US could use trade measures compatible with the World Trade Organisation (WTO) to extend its own actions to other countries. To quote him, "if and when wealthy countries take serious action to limit greenhouse gas emissions, they're very likely to start imposing 'carbon tariffs' on goods imported from countries that aren't taking similar action. Such tariffs should be legal under existing trade rules - the World Trade Organisation would probably declare that carbon limits are effectively a tax on consumers, which can be levied on imports as well as domestic production. Furthermore, trade rules give special consideration to environmental protection."
As is his custom, Professor Krugman is no doubt stretching a point for effect. While I would not tangle with a Nobel Prize-winning trade theorist, my own limited understanding of WTO jurisprudence on this matter does not suggest that matters will be as simple as Professor Krugman would have us believe. In any case, India has any number of experts to draw upon with respect to the WTO should matters take that turn.
Dealing with this complex of issues in a way that paints India as a constructive global player will, however, require coordination between the ministries of coal and renewable energy, commerce, external affairs and the environment in a way that the Indian system has not typically found very easy. India's position is distinctive among the major emitters in a number of respects: low per capita income, energy poverty, and low existing carbon footprint. Equally, as is often acknowledged, India stands to suffer more than most countries from the ravages of climate change, and has a strong interest in global action. Dealing effectively with this cluster of issues will be a major challenge for the new prime minister and his team.
The writer is group chief economist, Royal Dutch Shell.
These views are personal
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