Joseph Aldy on Climate Policy

Interviewed by Doug Gavel on July 26, 2011

The challenges posed by global warming are multiple and daunting. They are economic, political and scientific. Joseph Aldy is assistant professor of public policy at the John F. Kennedy School of Government whose research focuses on climate change policy, energy policy, and mortality risk valuation. From 2009-10, he served as the Special Assistant to the President for Energy and Environment, reporting through both the National Economic Council and the Office of Energy and Climate Change at the White House.

Q: Please discuss your perspectives on the types and scale of action necessary to confront the greenhouse gas problem on an international basis.

Aldy: Climate change may well be the most complicated and challenging of all public good problems. Emitting a ton of CO2 in Boston has an impact on the entire global population, not just today and tomorrow but for generations to come. So what this suggests is the need and the value of a global effort, engaging developed and developing countries alike, to confront climate change. In fact, there’s a risk that if you have some countries that are proactive and take serious actions to mitigate their emissions while others lag behind, you may end up driving carbon intensive manufacturing from those leader countries to the lagging countries, thereby undermining the environmental benefits of the global effort to confront climate change.

The real challenge in this case is in enticing all countries to work together to confront the problem of greenhouse gas emissions. We have an international system that’s based on its deference to sovereign nations, and so we need to find ways to coordinate our actions, as opposed to compel actions among nations. I’m encouraged by the negotiations that took place in Copenhagen in 2009 and in Cancun in 2010, and I believe they can help serve as a basis for a more robust and inclusive international architecture.

What we’ve seen is that if countries come forward—developed and emerging countries alike—in announcing their emission targets and policies and actions, and in a transparent matter that is subject to review, then that at the end of the day will allow us to figure out what policies work well and which ones don’t. And this will provide the credibility and build the trust that countries need in trying to make a global effort in confronting climate change. So in a sense what we see here then is the value of a system that can build this kind of confidence that will allow countries to move in tandem in a more effective way forward than what we’ve seen under the traditional approach, such as under the Kyoto Protocol.

There are a number of advocates and scientists who have called for very aggressive reductions in global greenhouse gas emissions and, given the lack of effort over the last decade, I think there’s concern whether or not we’ll be able to realize some of the goals that have been established by those in the advocacy community. In light of this, there’s a question as to whether or not we should explore more than just efforts to mitigate our emissions but also ways to adapt to climate change, and even ways to “fix” climate change, through so called geo-engineering options. I think there are fundamental differences in the economic incentives that countries face for geo-engineering as opposed to emission mitigation. This suggests that there’s real value in coordinating both the research and development and the norms for the potential use of geo-engineering by nations. But I think it’s important for us to actually explore this option because if we end up doing too little to mitigate our emissions or if we find out in the future that climate change is much worse than we currently think, then we will regret not having undertaken these efforts in the interim and having available this last insurance policy.

Q: What are the most significant challenges you see in terms of the implementation of climate policy, and what are the ways in which they may be overcome?

Aldy: I have to admit that I’m frustrated by the question I hear frequently, “do you believe in climate change?” It’s not really a question of belief; it’s really a scientific question and we have a very robust scientific record that has assessed past climate change and that has informed our understanding of potential climate change in the future. And so part of the challenge in trying to mobilize efforts to implement climate policy lies in our ability to communicate the best science to the general public so they can understand what the benefits would be.

In addition to the need to communicate on the science, I think we need to do a more effective job communicating the economic impacts of climate policy. When one looks at what a reasonable climate change policy would do in the United States, it would have a very modest impact on the average American household; a variety of analyses undertaken over the past few years suggests something on the order of maybe a $100 a year cost. In addition to that, and what's important to the policy debate, is that you have a small number of industries that are very concentrated, that would bear more substantial costs. And they've been effective in lobbying efforts against implementing climate change policy. So I think there is a lot of value in trying to improve our ability to communicate on the economics of climate change policy to build broader support among the American public.

And finally, I would note that I think there is a potential opportunity in the context of the current discussions about long term fiscal and tax reform, to actually marry climate policy with tax policy. There is clearly a need to both simplify the tax code. There are some who have talked about the need to raise revenues through the tax code while simplifying other elements of it. And whether it's a carbon tax or a cap and trade program that auctions off emissions allowances, one could raise revenues through a climate policy that could enable the lowering of rates on payrolls or the rates of tax on income. So I think there is a potential opportunity here that one could try to tap in this fiscal and tax debate to advance our interests on climate policy.

Q: You worked in the Obama White House until last year. How does this president and his administration view the climate change issue? Are he and his team prepared to work with Congress on finding a way forward?

Aldy: The issues of energy and climate change were first tier for the president dating back to the campaign in 2008. One of the first significant actions taken by the president was signing the Recovery Act, the stimulus bill signed back in 2009, and that included a clean energy package in excess of $90 billion to drive the deployment of low and zero-carbon technologies in the U.S. energy system. In addition to that in the international sphere in 2009, the president engaged other world leaders in bilateral meetings at the U.N. in New York, at the Major Economies Forum that the president chaired in Italy that year, and at the Copenhagen negotiations at the end of 2009 to develop a way forward in addressing this issue internationally. Earlier this year the president proposed a so-called Clean Energy Standard to drive low and zero-carbon technologies in the American power sector. This is actually very similar to an idea that three Republican Senators proposed in 2010, in what they called a diverse energy standard. So I think there is a bipartisan interest for such an approach. The question is whether or not there will be sufficient activity and interest in the current Congress —in the House and the Senate—to work with the president on what he's proposed on a way to try to promote a variety of different renewable energy sources, nuclear, natural gas, and even fossil fuel technologies that use carbon, capture and storage technology in the power sector.

Q: Please discuss the ways in which energy policy fits into this discussion? How can and should a national and international energy strategy impact the global warming debate?

Aldy: I think there's a real range of clean energy technologies, some of which are available off the shelf right now, and others that will require additional work, both in terms of research and development and efforts to try to commercialize new ideas that could really be breakthrough technologies in the not so distant future.

Some of the simple off the shelf technologies would be to take advantage of the significant increase in domestic natural gas reserves to power the electricity sector. We actually have more natural gas generating capacity in the U.S. electricity system than we have coal. We just run our coal plants a lot more than our natural gas plants. So there is this opportunity to take advantage of these new shale gas finds to power the electricity sector in America that can also significantly reduce our CO2 emissions, since a kilowatt of electricity from a gas plant has less half the emissions of greenhouse gases than a kilowatt of electricity from a coal plant.

Some of the more advanced technologies that advanced research and development could enable the commercialization of include batteries. This is important not just for improving the ability of electric vehicles to penetrate the car market. It's also important when we think about the prospect for renewable technologies in the power sector. If we are able to store electricity on a large scale, that addresses some of the concerns that people have about wind or solar power. So I think there is a variety of technologies available, and it really shows the need to continue our support for R-and-D. I think there are a lot of significant social returns if we are able to promote this R-and-D by the government and use it as an important complement to the commercialization activities driven by that the private sector.

Q: How best can American policymakers overcome the polarized perceptive and debate over climate change science?

Aldy: Well I think one of the challenges that we face in communicating the science in the United States lies in the fact that I think there are correlated economic factors that actually influence how people think about the science. So when times are tough, and we have gone through quite tough times with the recession over the past three years, it makes it more difficult for policymakers to convince citizens to support measures that will increase short-term costs to secure long-term gains.

I think there's also a question and a contrast when one looks at the nature of American industry versus European industry. We actually produce a lot more oil in the United States than in most European nations. The oil industry has, I think, a more important role in the discussion and deliberation over policy in the United States than in Europe, and I think that gives pause for those who are trying to engage on this issue when they recognize that long-term climate policy may be counter to the economic interest of those in that industry. So I think this is part of what may help explain this debate over the climate science.

The real question I think is can we actually develop a story that is rigorously based in the science and is easy for the lay-American to understand. I think we were successful in doing that in addressing acid rain; I think we were successful in doing that in addressing stratospheric ozone depletion. So I think we need to find a way to develop a rigorous narrative to explain the risks posed by climate change and the benefits of policies to mitigate greenhouse gas emissions.

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