Designing Durable Climate Policy

Designing Durable Climate Policy

The climate change policies we make today need to be effective over the long term—that's according to Associate Professor Joseph Aldy.They need to send appropriate signals to those whose activities have an impact on climate over many years and decades. 

At a Regulatory Policy Program seminar on October 15, Aldy offered a preview of the work he’s undertaking to help policymakers craft policies that have a lasting, positive impact on our climate. Aldy’s research is part of a project organized by the American Academy of Arts and Sciences to design enduring climate and energy policies, using the U.S. Clean Air Act as a case study. 

Aldy’s research focuses on the durability and flexibility of Clean Air Act standards for reformulated gasoline and renewable fuels. The Clean Air Act requires that reformulated gasoline be sold for use in areas of the United States with high pollution concentrations.  The Act also requires that a designated number of gallons of renewable fuels be brought to market on an annual basis. 

Aldy has concluded that the lack of environmental improvement may undermine the political support for and long-term durability of these policies. While the Act’s requirement to use reformulated gasoline has reduced levels of volatile organic compounds (VOCs) and oxides of nitrogen (each is an ozone precursor), those reductions have not improved ground-level ozone.

The flexibility in the reformulated gasoline standard to provide refiners the choice of what VOCs to reduce has resulted in them targeting those compounds that are less likely to produce ozone when emitted from vehicles. Industry has made a significant investment, but with little improvement in air quality.

In 2007, Congress designed the renewable fuel standard based on the assumption that in the future, gasoline consumption would grow at the same rate as in the past. But in recent years, transportation fuel consumption has been flat. Miscalculations of this sort put pressure on fuel refiners and vehicle manufacturers, who must simultaneously meet statutory requirements and market realities.    

 “Policies need to be flexible enough to respond to new scientific information that becomes available over time, as well as new economic circumstances,” Aldy said. “They must also be durable enough to offer the regulated community predictability and encourage long-term investments in clean technology."  

The solution, according to Aldy, is for policymakers to provide guidance to the regulated community about the circumstances that might trigger a policy change.  “If we’re trying to maximize the efficacy of our regulatory policy, we need to signal to our regulated community the kind of new information that might serve as the basis for adapting regulation over time,” he explained.  “That way, the regulated community can also track that information and plan accordingly.”

The seminar was part of the Regulatory Policy Program series.  Joseph Aldy is faculty chair of the program, which serves as a hub of regulation research at Harvard University.  Visit the RPP website at https://www.hks.harvard.edu/centers/mrcbg/programs/rpp.