Monday, June 14, 2004

Opting In to CO2 Limits
The body responsible for reducing air pollution in California recently decided to extend their boundaries by proposing regulations on emissions of carbon dioxide (CO2) from automobiles in the state. Now, according to the New York Times, several other states appear set to follow suit, including New York and Connecticut. While this approach might appear to some as laudable pragmatism in the face of a federal administration that disdains action on climate change, I believe it to be misguided and ultimately counterproductive.

There are two major problems with this kind of back-door response to climate change. The first results from a basic fact of life: CO2 is not a pollutant. A pollutant is something that contaminates the environment. CO2, to the contrary, is an essential component of our environment, linking animals and plants in the well-known “carbon cycle.” This is not mere semantics, because thinking of CO2 as a pollutant constrains us to approach it in the same way that we have approached past pollution problems.

Consider the sulfur and nitrogen oxides emitted by cars and power plants. These gases can only be reduced at the source, and three decades of environmental regulation have made great strides in managing these emissions, even though problems still remain. For CO2 and the other greenhouse gases, however, reduction at the tailpipe or smokestack is only one of several possible strategies for reducing the emissions that contribute to climate change, particularly if one is concerned about keeping the cost of emissions reductions low.

For example, there are vast quantities of emissions from agriculture that could be reduced or eliminated cheaply. The effect would be the same, because all CO2 emissions are equivalent, everywhere on the globe. While the greenhouse gas emissions from the transportation sector can’t be ignored, focusing exclusively on this sector would result in unnecessary distortions and economic penalties.

The other problem with addressing CO2 emissions this way relates to the charters of the agencies involved. The California Air Resources Board has worked aggressively to reduce air pollution, particularly in Los Angeles and the San Francisco Bay Area. Their efforts have paid off, even if they have created unintended consequences, including forcing Californians to pay more for fuel than residents of most other states. The majority of Californians is probably willing to pay that premium, because the results are visible: air pollution in the L.A. basin has improved significantly in the last 20 years, in spite of a major increase in both population and vehicle miles driven. But that support will only reach so far.

Fundamentally, the only way to achieve the goals that CARB and the other states have set forth is to improve vehicle fuel economy. Setting aside the argument over whether this parameter is under federal or state jurisdiction, we cannot ignore the fact that the decline in fuel economy over the last decade is largely the result of a change in consumer preferences. Californians, like other Americans, have demanded larger vehicles and, along the way, have insisted that these SUVs not require 10 minutes to accelerate to freeway speeds.

To improve fuel economy dramatically, you can make the car smaller and lighter, reduce the power of its engine, or add expensive technology to reduce energy consumption, as in hybrids. All of these solutions are possible today, but all impose costs that collide with the desires of the majority of current consumers. As a result, I believe this approach creates a hidden trap for the regulators.

So far, consumers have gone along with CARB and other air quality regulators , because most of the burden of compliance has fallen on carmakers and oil refiners, and the results have been apparent in their communities. Regulating automobile attributes that consumers truly care about, in order to mitigate a long-term problem without any visible local manifestation, could undermine that support. Once car buyers in California and elsewhere realize that these new rules will constrain their choices in terms of size, weight and horsepower, they may decide that CARB has overstepped its bounds. The reaction could cost CARB not only its ability to manage CO2, but also some of its mandate to tackle "normal" pollution.

If you have been reading my blog for a while, you know that I think climate change is a serious issue that merits action, and that my opposition to this approach is not obfuscation. We need a genuine national debate on this issue, and any response must have broad voter support, because it will impose costs across our entire economy, and beyond. For that reason, and the others I’ve outlined above, I believe that treating CO2 as a pollutant and letting local agencies charged with keeping the air clean regulate it will backfire. It is also undemocratic.

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