States Take the Lead on Climate

With the Bush administration and Congress failing to act, many states are devising sweeping climate and energy policies that could be a blueprint for a future national climate policy.

The federal government in the Bush era has done little to tackle our most pressing environmental problem — climate change. Yet there is one bright side amid Washington’s inaction: Many states have been stepping into the void and adopting comprehensive climate change policies that can be a model for the coming federal legislation to slow global warming.

The leadership of states such as California, Arizona, Connecticut, New Jersey, and Florida is crucial not only because it provides a template for federal climate legislation that will no doubt be adopted under the next presidential administration. State action is also vital because among the top 75 emitters of greenhouse gases worldwide, half are U.S. states.

Individually, the size of many of these state economies rivals those of most countries. State climate policy initiatives — though not yet implemented on a national scale — are collectively among the most advanced anywhere in the world. They provide a profound but largely unrecognized platform for national action, and for a potential reassertion of global environmental leadership by the United States. Indeed, state climate initiatives have provided hope to those in the global community who have waited patiently for the United States to engage meaningfully in international climate efforts.

The decisive action of many states — 27 currently have or are developing comprehensive climate action plans — is taking on added importance for another reason: Innovative state climate and energy policies are showing skeptics in this country and in Congress that, rather than being a burden, ground-breaking energy conservation and renewable energy programs can create economic opportunity. Many of the more than 300 climate policies and mechanisms devised by various states will provide new business opportunities, as all sectors of society — housing, industry, commerce, energy, agriculture, forestry, transportation, waste management — adopt greater energy efficiencies and move to alternative sources of energy.

Against the backdrop of inaction by the Bush administration and Congress, the states have moved farther and more rapidly than most people realize. Indeed, this September, ten mid-Atlantic and Northeastern states will begin implementing a cornerstone of effective national or global climate policy: A so-called “cap-and-trade” system under which emitters of greenhouse gases — in this case, power plants — must begin steadily reducing carbon emissions and can sell a portion of their emissions allotment once they begin implementing efficiencies. Power plants that fail to meet their emissions targets could buy allotments from more efficient utilities.

As heartening as such moves are, the fact remains that the United States still needs a comprehensive national climate policy that will set national carbon reduction targets, put a national price on greenhouse gas emissions — either through a cap-and-trade system or a tax — and eliminate uneven standards among states. Proof that some federal action is needed can be seen in Texas, which is currently the sixth largest emitter of greenhouse gases worldwide, yet has not adopted a climate policy to reduce those emissions.

Make no mistake, climate legislation is coming, though almost certainly not until a new presidential administration takes office. Climate change will be the subject of loud political debate on Capitol Hill this summer when the Senate considers America’s Climate Security Act — also known as Lieberman-Warner. But this will only be a dress rehearsal; few are under any illusion that final climate law will emerge from this initial exercise.

In less than a year, however, this situation could easily be reversed. The new president will likely be a game-changing force, as all three top presidential contenders have committed themselves to tackling global warming. Also decisive might be the new movement of US governors who are publicly demanding a state-federal partnership to proactively address climate and energy issues. These demands were aired last month when 18 states signed such a declaration, issued at the Governors’ Conference on Climate Change at Yale University.

The states’ record of fostering groundbreaking environmental policies that ultimately evolve into national law is well established. State innovation was, for example, at the heart of the battle against acid rain. State laws served as models for the federal Clean Air Act, Clean Water Act, and legislation creating Superfund sites.

In addition to the cap-and-trade program that will be launched in September by the ten Eastern states in the Regional Greenhouse Gas Initiative (RGGI), two other regional groupings of states are working to establish carbon trading — the Western Climate Initiative and the Midwestern Governors Association. They have rolled up their sleeves, convened key stakeholders, and are hammering out the actual details of how to establish and implement an effective cap-and-trade mechanism.

This is wisdom that would go a long way in Washington as lawmakers debate Lieberman-Warner, which would create a national cap-and-trade program. One important element of the debate on Capitol Hill concerns the formula for allocating or auctioning carbon credits, and a number of states have developed valuable expertise on this issue. A RGGI expert working group, for instance, conducted an in-depth analysis on the subject, and many states have already made the crucial choice to auction 100% of carbon credits under RGGI trading. Under this system, northeastern utilities would purchase credits, or allowances, permitting them to emit CO2 at current levels, with requirements for steady reductions. As the utilities lower CO2 emissions, they can sell the credits to utilities that have made slower cutbacks. The RGGI auction proceeds would be used to help vulnerable citizens defray higher energy costs, to support energy efficiency programs, and to invest in renewable energy projects — all preferable to offering free emission allocations to major polluters. As it now stands, Lieberman-Warner calls for doling out a significant percentage of free emissions permits to major emitters of greenhouse gases.

Climate Policies
Climate policy by state. CENTER FOR CLIMATE STRATEGIES

But the states have far more to offer. They also have approved a host of energy-efficiency measures affecting all sectors of the economy. For example, one set of policies provides both emissions reductions and substantial economic savings from the building sector through improved building codes, insulation and weatherization programs, and lighting retrofits. From the waste management sector, waste reduction and recycling programs yield similar two-pronged benefits.

These policies go hand-in-hand with others mandating that an increasing percentage of a state’s energy come from renewable sources, such as solar and wind power. Many states — chief among them California — have shown similar national leadership by significantly toughening auto emissions standards, leading Congress to increase national vehicle standards last December and the Environmental Protection Agency (EPA) to challenge the states in court.

The fact that so many states are acting with a similar impetus begs an important question: What would happen if you aggregated these policies and applied them on a national scale?

One study conducted by the Center for Climate Strategies (CCS) — a non-partisan group that has worked on climate policymaking and analysis with many of these states — indicates that the adoption of a comprehensive, nationwide climate and energy policy would have substantial economic benefits. Using data from 12 states that are leaders in the field of climate change and energy, CSS calculated that were all 50 states to adopt similar rules and legislation, the aggregate economic savings would be $25 billion. The nation could achieve a 33% reduction in projected greenhouse gas emissions by 2020 — a common interim target — and save money doing so.

Overall, the 27 states that have either adopted or are working on climate plans have targeted greenhouse gas reductions of 50 to 85 percent between 2040 and 2100, and their shorter term projections place them on this path.

The states’ experiences also can be incorporated into a national cap-and-trade scheme. For example, in the first phase of the European Union’s Emissions Trading Scheme, the cap-and-trade mechanism increased costs without reducing emissions. Carbon credits had been over-allocated, so there was little pressure to make reductions; emitters, however, realized profits by passing on the cost of carbon credits to consumers, even though the credits had been given to them for free. Although a recalibration has since occurred and the lessons learned are being incorporated, it seems reasonable to expect that a US cap-and-trade system will encounter similar trials.

The crafting of climate plans at the state level has been based upon a model of bipartisan consensus-building. Utility executives, trucking interests, builders, business leaders, and others have worked face-to-face with environmentalists and non-profit public interest groups to develop policy solutions that were in most cases adopted unanimously. One reason for that is simple: There is mounting evidence that these policies will create new jobs and promote broad economic development.

As a result, back in the home districts of Congressional representatives, governors have created an informed network of stakeholders committed to responsible climate action and ready to support a needed national response. Federal partnership with state governments opens a new political possibility as well — the forging of a genuinely bipartisan national consensus to secure passage of crucial federal climate legislation.