In his Inauguration address on 21 January, Obama placed tackling climate change high on the agenda for his second term. His definitive statement that “we will respond to the threat of climate change” signalled to the US and the world that he was ready to take decisive action. In his State of the Union (SOTU) address, delivered yesterday, Obama elaborated on his plan to deliver concrete outcomes on climate change.
His approach sought to connect climate change with the lives of everyday Americans. In emphasising the widespread destruction caused by wildfires, droughts, heatwaves and hurricanes in the US in recent years, he framed it as a domestic issue that Americans have no choice but to address now “for the sake of our children and our future”.
He also connected climate change to the economy. He acknowledged that addressing it will be costly, but it will also bring opportunities, as the workforce is provided with the right skills and training, creating “middle class” jobs and empowering citizens to take control of their energy use. He declared “the good news is, we can make meaningful progress on this issue while driving strong economic growth”.
What is striking is the way he connected domestic concerns to global ones. Energy security and remaining economically competitive on the global stage are also compelling reasons to act.
Obama, climate change and the next four years
Obama placed a national cap-and-trade scheme back on his policy platform. Significantly, he has not raised it since efforts for national climate change legislation were defeated in 2010. He urged Congress to pursue a market-based solution “like the one John McCain and Joe Lieberman worked on”, and appealed for this on ethical grounds “to protect future generations”.
This is a powerful call to Congress, but given the deep ideological divisions, it would be a triumph if Obama can deliver this in the next four years. Recognising this, Obama spelt out the actions that he will take without Congress support.
1. The clean energy revolution
The SOTU address comes at a time of dramatic and historic change in the US energy market. At the start of his first term, Obama called for a clean energy revolution. Yesterday Obama explained how the major policy initiatives and substantial investment in clean energy and technology development and deployment, are making this a reality.
A recent report by Bloomberg New Energy Finance confirmed “a revolution is transforming how Americans produce, consume, and even think about energy”. It shows that traditional sources of energy are in decline, while natural gas, renewables and energy efficiency are increasing. Last year the US added 17 GW of renewable energy capacity, a new record, and the uptake of renewables has doubled in the last five years.
The US EPA announced earlier this month that emissions from US power stations fell by 4.5% in 2011. Overall, US CO2 emissions have fallen by 13% in the past five years.
In declaring that “no area holds more promise than our investments in American energy”, Obama committed to continuing investment in clean energy innovation, so that renewable energy will become increasingly cheaper than fossil fuels. He confirmed that oil and gas development in the US will continue, but announced the creation of a new Energy Security Trust to fund research into cleaner fuels and shift cars “off oil for good”. This would be funded by oil and gas revenue.
2. Federal executive action
The biggest opportunity here is for the EPA to implement limitations on emissions from existing power stations. This would result in substantial cuts in CO2, as the electricity sector is the largest single source of GHG emissions, representing approximately one-third of US emissions.
Following the Supreme Court’s ruling that CO2 is a “pollutant” under the Clean Air Act, the EPA has the authority to impose limitations on CO2 emissions from industrial sources such as power plants.
Last year, the EPA proposed performance standards for new power plants. It has indicated that its next step is to impose limitations on existing plants. This is likely to involve tough negotiations between the EPA and the US coal states, but ultimately it is within the EPA power to enforce it.
Polling shows that the timing is right; public support for climate change action in the US is high.
3. Support action by the states
State action on climate change in the US is extensive. The federal administration has an important role to play in facilitating further action and supporting their initiatives with other countries.
In announcing a new goal of halving the energy wasted by home and businesses over the next 20 years, Obama confirmed his support for progressive state action by promising federal funding for states with the best ideas to create jobs and lower energy bills by constructing more efficient buildings.
In the US, there is a range of actions at state level in transportation, energy efficiency, smart grids, and renewable energy. Twenty-nine states have renewable energy portfolio standards, and 25 have their own emission reduction targets.
As well as contributing to emission reductions, states can serve, to quote US Justice Brandeis, as “laboratories of democracy” testing out approaches that might provide possible models for federal action. Californians will tell you about their state’s proud history of shaping federal laws, by taking the lead at state level, such as it did recently with low carbon fuel standards.
If the US is to achieve its 2020 and 2050 emissions reduction targets, federal co-operation with the states is essential, with or without a national carbon price.
What are the implications for Australia?
What does this mean for Australia? We are seeing a rapid transformation in energy markets on a global scale. In the last two weeks, China has conceded that “there’s no market for further development of energy-intensive industry”. Bloomberg reported that renewable energy is cheaper than energy from new coal powered stations. And Obama’s speech confirmed that the US is rapidly transitioning its economy.
This is just the latest signal that major economies are moving away from emissions-intensive fuels, and it has significant implications for Australia.
It will likely affect export demand for coal, which will certainly decline over time. Australia needs to transform its economy so that, once again, we are competitive in more areas than just the resources sector.
To deploy new technologies in Australia, we need durable legal frameworks. The carbon price and the Clean Energy Finance Corporation are examples of mechanisms that send the right price signal to attract such investment. Finance mechanisms are also required to encourage the uptake of the range of clean technologies at scale.
In this context, the current threats by the Coalition to repeal Australia’s Clean Energy package, a package consistent with global developments, are unhelpful. Australia cannot afford to waste another two years prevaricating while the rest of the world is swiftly moving to a low carbon future.
It is quite likely that Obama’s presidency will be seen as the beginning of a long-term downward trend in carbon pollution. That might well be Obama’s climate legacy.