The White House’s Council of Economic Advisors has urged the President to… well, mostly keep doing what he is trying to do: reduce greenhouse gas emissions, price the externalities of emissions, and invest in clean energy technology.
The council included a chapter on ‘transforming the energy sector and addressing climate change’ in its 2010 annual report. It mostly focused on climate change but also made an argument about the economic and security implications of a continuing reliance on oil – with price volatility being a key message:
In the United States, continued reliance on petroleum-based fuels poses challenges that go beyond climate change. It makes the economy susceptible to potentially costly spikes in crude oil prices and imposes significant national security costs. A panel of retired senior military officers and national security experts concluded that unabated climate change may act as a “threat multiplier” to foment further instability in some of the world’s most unstable regions (CNA Corporation 2007). Fossil fuel consumption is also associated with other forms of pollution that harm human health, such as particulate, sulfur dioxide, and mercury emissions from coal-powered electricity generation.
Interestingly, for cap-and-trade watchers: the council doesn’t take the hardline free-market view on emissions trading systems, noting that floors and ceilings to prices are legitimate ways of containing the costs of a cap-and-trade system.
The council is also down on fossil fuel subsidies, saying that eliminating them in major non-OECD countries alone would could reduce greenhouse gas emissions by enough to reach 15 per cent of the targeted 50 per cent reduction by 2050. They add:
In the United States, these subsidies—including tax credits, deductions, expensing practices, and exemptions—are worth about $44 billion in tax revenues between 2010 and 2019. Their elimination will help put cleaner fuels, such as those derived from renewable sources, on a more equal footing and reduce wasteful consumption of fossil-fuel based energy caused by underpricing. Proper pricing of fossil fuels will also help reduce reliance on petroleum, thus enhancing energy security and aiding in the achievement of climate mitigation goals.
Yes, but try and get that through Congress…