Robert Stavins on Climate Policy

by Doug Gavel, interviewed on August 14, 2013

Attempts at crafting an international protocol to counter the effects of climate change have run into serious obstacles in recent years. Although the United Nations Framework Convention on Climate Change (UNFCCC) continues its series of Conferences of the Parties (UN-COP) aimed at identifying practical and effective solutions to global warming, little headway has been made in recent years. Robert Stavins, the Albert Pratt Professor of Business and Government and director of the Harvard Environmental Economics Program and its subsidiary Harvard Project on Climate Agreements, focuses his research on diverse areas of environmental economics and policy, and has written extensively on the promise of cap-and-trade policies to help reduce carbon emissions.

Q: Are you more or less hopeful today than ten years ago about the potential for an international agreement to address global climate change?

Stavins: I am considerably more optimistic right now than I was ten years ago regarding the outlook for a meaningful international agreement on climate change. In order to explain why, I should take you back to 1992, when the original Framework Convention on Climate Change was established among more than 190 countries. There was a very important element of that agreement, which is still in force, and that is the principle of “common but differentiated responsibilities and respective capabilities” (CBDR). What that essentially meant was that those countries who had contributed more to the problem – that is, the industrialized countries – should take more action. Subsequently, that was interpreted at the first Conference of the Parties (COP-1) in 1995 in Berlin as a dichotomous distinction – that is, the industrialized countries, called the Annex I Countries, should take on emission-reduction targets and timetables, and other countries needed to do nothing. So it was a zero-one arrangement.

That was then codified with numerical targets for the industrialized countries in the Kyoto Protocol in 1997. Today the situation is terribly out of date, and has, in fact, been counterproductive. That is because the non-participating countries account for an increasing share of the emissions; in fact, they account for more than half of global emissions. The largest emitter is now China, not the United States, for example. Furthermore, of the countries that are not included in the commitments, 50 have higher per capita income than the poorest of the countries that are included, which is Romania in Europe. So the agreement is out of date; it prevents anything meaningful from happening. That is the bad news.

On the other hand, the reason I am more optimistic today is that just two years ago at the annual Conference of the Parties, this time in Durban, South Africa, a new approach was approved by the community of nations. And that is an approach which promises that by the year 2015 to come up with an international agreement that will include all countries in the same legal framework. That breaks from this Berlin mandate, which I think has been an anchor dragging against forward movement of the ship of progress. Now, with this new commitment from the community of nations to come up with an international agreement by 2015, for implementation by 2020, in which all countries will participate, there is for the first time in decades a real opportunity for meaningful progress.

Q: Please talk more about the work that you are doing with the Harvard Project on Climate Agreements and how it is affecting thinking on this issue.

Stavins: The Harvard Project on Climate Agreements, which is a project of the Harvard Environmental Economics Program, is in my view the quintessential Harvard Kennedy School initiative. And that is because it includes elements of research and elements of engagement with the outside world, by which I mean engagement with governments, with NGOs, and with private industry, and that is really the hallmark of research and outreach efforts of Harvard Kennedy School.

So the Harvard Project on Climate Agreements is an international effort, it brings together 40 research teams, from Europe, China, India, Japan, Australia, Argentina, and the United States – so truly an international effort. Forty research teams working on different aspects of developing a future international agreement on climate change that is scientifically sound, that is economically sensible and therefore may be politically pragmatic. In addition to these research efforts, we on the Harvard Project work regularly with governments around the world, with private industry, and with NGOs. We go annually to the international negotiations; we've done work in support of those negotiations. For instance last year in Doha, Qatar, we helped the Qataris to manage the process, to put together the negotiations, and to administer them, which turned out to be successful. This year in just a few months in November, we'll be off to Warsaw, Poland again to work on the international negotiations.

Q: The Harvard Environmental Economics Program recently received a new grant from the Sloan Foundation for “Explanations of the Energy Paradox.” Please discuss the research to be funded under that grant.

Stavins: There's an interesting phenomenon which has been quite controversial and frequently discussed for many years. This phenomenon has actually led to this recent important grant from the Alfred P. Sloan Foundation to Harvard Kennedy School for research and outreach. It's focused on the so-called “energy paradox.” This paradox has been observed and discussed for decades. It refers to the observed phenomenon that some energy efficiency technologies that would be in the interest of individuals to adopt because the energy savings they would produce would more than compensate the adopter for the upfront costs, are nevertheless not adopted. People put insulation in their walls which is cheaper and not as effective as insulation that would pay for itself. That's just one example, and there are hundreds of such examples.

The question is – if this phenomenon is real – why would it happen? There has been a tremendous amount of research on different elements of this over the years, and many possible explanations. We are now partnering with Duke University (my project co-director is Duke Professor Richard Newell) under the auspices of this grant from the Sloan Foundation, in order to assemble a dream team of researchers. We are bringing together 30 researchers from across the United States. They are coming to Harvard in October 2013, and each of them will be making brief presentations, and we will be discussing some 25 different potential explanations for the energy paradox. Some explanations have to do with externalities, some have to do with behavioral economics, and some really have to do with their not being a paradox at all, rather there may be measurement and modeling errors.

The reason we're doing this is that the individual bits of research which have been done in the past are each a little “brick” in addressing the problem. But policymakers can't do anything with the bricks; they need the wall, indeed they need the whole house in order to design policy solutions. The Sloan Foundation, working with us, recognized that it would be meritorious therefore to put together the house of the research, put in place the cement to bind together the bricks, identify where there are missing bricks, and then get going on our further work. So that is the purpose of our assembly this year at Harvard. We'll produce a report from that and some publications.

We're going to follow this up in the spring of 2014, in Mannheim, Germany, when we partner with the Center for Economic Research of Europe (ZEW). We will carry out a similar workshop, but we will be bringing together the best researchers – economists, psychologists and others – from the community of scholars in Europe. In addition, making this very much a quintessential Harvard Kennedy School effort, there will be an important outreach initiative included. We're going to hold a business-government roundtable in Washington D.C. in February of 2014, bringing in people from the policy community that work on energy efficiency standards and the like in the U.S. government, private industry (from the energy services, energy generation, and energy consuming durable goods production sectors) and NGOs to gather their insights in order to further the work even more.

Q: Please tell us about the work you are doing now as one of the leaders of the Intergovernmental Panel on Climate Change.

Stavins: Climate change has been recognized as an important problem by the community of nations for decades now, going back to 1992 when the United Nations Framework on Climate Change was first established. Those same nations – as part of the U.N. process – established the Intergovernmental Panel on Climate Change (IPCC) as a forum to collect and distill scientific information that could then be of use to negotiators. The IPCC has already gone through four rounds, or Assessment Reports. I was a lead author in the Second Assessment Report and in the Third Assessment Report, and now in the Fifth Assessment Report I agreed to take on a leadership role as a coordinating lead author.

Together with my co-coordinating lead author, Zou Ji, from Beijing, China, we are leading the effort at looking at the research that's been carried out on international cooperation, institutions, and agreements. We have a team of 12 lead authors who work with us. We have been directing this process with tremendous support, I should say, from staff and graduate students here at Harvard Kennedy School. This work has been going on for the past three and a half years, and it will culminate with a final draft that we will be producing and delivering to the community of nations in the fall of 2014. The final step of the process will be a meeting with delegates from 195 countries to talk about the results, and to seek their approval of the work. This has been a very long process, sometimes a torturous process, but it is one to which we are committed.

Q: Much of your work in recent years has been directed toward climate change policy in the United States. How do you assess the progress of those efforts right now?

Stavins: Climate change policy has not moved forward as fast in the United States as many people anticipated it would five years ago, and as many people certainly hoped that it would. The reason, in my view, is not because of climate policy per se or concern of climate change per se. The reason is because of larger political forces, namely, the polarizing politics that have taken over Washington, in particular, the degree of political polarization that now exists in the Congress.

Environment and energy policy historically had been a bi-partisan issue in the U.S. Congress, going back to the first Earth Day in 1970. It had long been a regional political issue, but not a Republican versus Democrat issue. That has changed. Now the political middle has fallen out of the Congress. Moderate Democrats are increasingly scarce. What used to be called moderate Republicans are simply nonexistent. The former “country club” Republicans, or Rockefeller Republicans, these are the people, in the Nixon Administration and in the George H.W. Bush Administration, who brought us major environmental legislation. That part of the party no longer exists, and the result is that Democrats are moving further to the left, Republicans are moving further to the right, and there is virtually no one left in the middle. A casualty of that phenomenon has been sensible climate change policy, which has become a highly partisan issue.

That doesn't mean that nothing is happening, however. The Obama Administration is moving forward – as they've been doing actually for the past five years – with a number of regulatory initiatives that were started in the George W. Bush Administration, which will affect the future of coal-fired electric power generation in the United States. In addition to that, in California, there is a very ambitious climate policy under Assembly Bill 32, which is now moving forward, having started in January of this year with a cap-and-trade system which is actually more ambitious in percentage terms than the federal Waxman-Markey bill was, which was passed by the House of Representatives in 2009, but then failed in the Senate.

And finally there’s the most important factor affecting emissions and the trajectory of carbon dioxide emissions going forward in the United States, and that's the low price of natural gas. Natural gas prices have come down tremendously, and are predicted to increase only slightly but up to the levels they were previously, because of the dramatic increase in supply of so-called unconventional sources of natural gas. This is a result of two technological changes – one is horizontal drilling, and the other is fracturing of underground repositories of natural gas to free it up. This has resulted in a dramatic increase in natural gas which has resulted in a equally dramatic shift from coal to natural gas for electricity generation.

As a result of all those factors – federal regulations, California climate policy, the low price of natural gas – I think it's quite possible that the U.S. will achieve what is its official commitment in the international negotiations for the short term: a reduction of emissions to 17 percent below their 2005 level by 2020. That was the short term target in the Waxman-Markey legislation that passed the House and failed in the Senate. And we are likely to achieve it as a result of these other factors.

The long-term target, however, in that legislation, which was an 83 percent reduction by 2050, cannot conceivably be achieved in the United States without a comprehensive economy-wide carbon pricing mechanism, whether that's a carbon tax or a cap-and-trade mechanism. It simply is not going to be possible to achieve that with conventional regulations combined with state actions and low natural gas prices. Nationwide carbon pricing will be necessary.

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