Over the past few weeks, the political focus has shifted from the climate crisis to the financial crisis. It was essential that President George W. Bush and Congress take serious action to secure the economy and limit the repercussions that the failures on Wall Street have on American families. But during this upheaval we must remember that achieving energy security and slowing global warming are equally critical to our nation. Failure on either of these fronts would cause more damage than the financial meltdown.
Perhaps the strongest case for not ignoring the climate crisis while dealing with the financial crisis is the eerily equivalent risks that would come from inaction. Because of lax regulation, the federal government was forced to take aggressive action to avert financial catastrophe. After the initial bailout, legislators will have to take prudent measures to craft policy that will stave off similar economic cataclysms in the future. With climate change, however, “bailout” is not an option. Already, the effects of extreme weather events linked to global warming make it clear that unceasing “damage repair” measures will be necessary if responsible action is not taken soon.
The costs of various damage control measures will only become increasingly expensive as weather disasters grow worse. The German Institute for Economic Research asserts that annual economic damages from such extreme effects as hurricane damages, real estate losses, energy costs, and water costs could total up to $20 trillion (in 2002 dollars) by 2100. In contrast, the Institute estimates that if strong climate change policy is implemented “as rapidly as possible,” global savings of up to $12 trillion can be achieved.
Just this year, Congress authorized additional emergency federal funding to fight wildfires, bringing the total fire-fighting budget to over $2 billion. Wildfire severity has increased significantly due to the dryer conditions and reduced precipitation that some regions, notably the western United States, experience as a result of climate change. In response to the current hurricanes, climate scientist Amanda Staudt affirmed, “There’s definitely a contribution from global warming to the storm activity and the intensity of storms that we’ve seen over the last few decades and we expect to see in the coming century."
To stave off the worst damages from climate change and to revitalize the economy, an agenda specifically focused on facilitating the transition to a clean energy economy is vital. The Emergency Economic Stabilization Act of 2008 (the bailout bill) included the extension of the renewable energy tax credits that have been key to the impressive recent growth of the wind and solar energy industries. The EESA included a one-year extension for the production tax credit, which supports wind energy, and an eight-year extension for the investment tax credit, which supports solar energy. Particularly in the case of the PTC extension, this is too short a period of time to give companies the confidence to make long-term investments. The first thing that must be done is to overhaul the renewable energy tax credit system to show companies that the government is serious about supporting long-term efforts to convert to low-carbon energy.
Taking action on clean energy would also have many benefits to our economy and our national security. The United States currently relies heavily on finite resources such as petroleum and coal, which will only continue to become more expensive as time progresses. Oil hit an all-time high of $147.27 per barrel this past July. While uncertainties in the financial market have recently brought the price of oil down, energy experts worldwide agree that high oil prices are here to stay—and these put heavy pressures on large numbers of already squeezed Americans. Likewise, coal, the very dirtiest of all electricity sources, is rapidly increasing in price as well. The expansion of new domestic clean energy industries and reduced reliance on oil would bring prices down and reduce capital exports to foreign countries that are often hostile to the United States. This past July, total monthly crude oil imports cost over $42.6 billion (not seasonally adjusted).
The expansion of energy efficiency and renewable energy would also create jobs. The Center for American Progress recently published “Green Recovery,” a report which determined that an investment of $100 billion in renewable energy investments, building retrofits, mass transit expansion, and the construction of “smart” electrical grid transmission systems would create 2 million jobs nationwide in two years. This would include jobs in construction, manufacturing, and engineering, and replace some of the jobs lost due to the bursting of the housing bubble.
A clean energy economy would also lead to a massive reduction in greenhouse gas emissions by the United States and help slow global warming. A study by the management consulting firm McKinsey and Company concluded that U.S. emissions could be reduced by 3.0 to 4.5 gigatons of CO2 by 2030 through various methods. The assessment considered available and developing approaches and technologies in lower carbon energy sources, efficiency gains, and expanded carbon sinks. If the United States takes strong leadership in this field of innovation, it is extremely likely that other countries around the world will follow suit.
But promoting clean energy and efficiency is not enough. Binding greenhouse gas reductions with firm deadlines would put a price on this pollution and create more demand for energy that does not generate GHGs. Efforts to establish a federal cap-and-trade system in the United States have lagged due to opposition of President Bush. Coalitions of states have taken matters into their own hands by setting limits on GHGs from within their region. The Regional Greenhouse Gas Initiative, or RGGI, was launched by 10 northeastern states. It is the first of several proposed regional cap-and-trade efforts that are up and running. The first auction of emissions allowances took place on September 25, and $40 million was raised. To maximize reductions and generate revenue, RGGI auctioned off 100 percent of the emissions allowances. As the emissions cap gradually shrinks and allowance prices grow higher in future auctions, the indispensability of emissions limits for the abatement of climate change will be even more clear.
The costs of inaction on climate change, in terms of both human and financial devastation, cannot be overstated. While the government took steps to secure against economic ruin by addressing the problems in the financial markets, it is even more critical that the federal government address a problem that threatens to cause much more severe and irreversible damage if ignored, but whose solutions hold promise for stimulating our struggling economy.