Tuesday, April 4, 2017

Trump Energy Independence Executive Order: An Assault on the Environment?

President Trump continues his barrage of executive orders. Last week, he signed Executive Order 13783. The Executive Order is for "Promoting Energy Independence and Economic Growth." In short, the Executive Order was created to roll back Obama-era energy regulations with the hopes of stimulating economic growth. Environmental activists essentially think that Trump's actions are going to destroy the environment, whereas proponents think it is going to think it is going to be a huge boom to economic progress while having little to no effect on the environment. Who is right, or at least more right? To answer that, I would like to take a loo at some of the key provisions of the Executive Order (also see here and here for further reading):

Scale back the Clean Power Plan. What I will note before continuing is that the Executive Order does not eliminate the Clean Power Plan, which was Obama's signature climate change policy. The Clean Power Plan is currently on legal stay, but Trump might have the Department of Justice to suspend it since Section 4 the Executive Order includes a provision to review (and possibly suspend or revise) the Clean Power Plan. I took a look at the Clean Power Plan over a year ago. The Plan is expected to cost $1.3 to $2.4 trillion in regulatory costs over the next decade while only lowering the global temperature by 0.02ÂșC by 2100. That is a whole lot of cost for a very small difference.

Revisit the social cost of carbon estimates. The purpose of creating a social cost of carbon is to put a dollar amount on the damage caused by the damage caused by global warming. In 2015, the Obama administration agreed that the amount would be $35 per ton of carbon emitted. The discussion behind this social cost is important because it is the justification with which the Obama Administration justified its environmental policies. The Obama Administration assumed that the discount rate for the social cost of carbon is 3 percent. A discount rate is used to compute the value of a social project. A lower discount rate would mean paying more cost now, and a higher discount rate would mean pushing off the costs to the future. If you select a higher discount rate (e.g., 7 percent), you're saying that the issue is not as big of a deal. A lower discount rate signals urgency to solve the issue. The discount rate leads to a certain amount of subjectivity because it depends on how urgent you see the issue. The Obama Administration chose a lower discount rate of 3 percent because if views the issue more seriously. I have looked at the issue of social cost of carbon before (see here, here, and here), and what I can tell you is that a higher discount rate could mean that there is a very small, if not non-existent, social cost of carbon. This doesn't address the endangerment finding that keeps the SCC in place. However, if the Trump Administration alters the social cost of carbon, it would be more difficult to justify stringent climate change policy. In a best-case scenario, rolling back onerous energy regulations could propel at least some modest economic growth.

Lifting the coal lease moratorium. The federal government owns 570 million acres of land with coal reserves. In 2016, Obama put a moratorium on leasing the land to mining companies because there were concerns about the mining companies getting too good of deal to where it was tantamount to a subsidy of the fossil fuels industry. Section 6 of the Executive Order gives the EPA the ability to amend the coal lease moratorium. This sounds important because the coal reserves on federal land account for 40 percent of coal production. This might sound like a burdensome regulation, except for the fact that there is a coal supply glut.

Repeal guidance for taking climate change into account for NEPA reviews. The National Environmental Protection Act (NEPA) was created in 1970 to require federal agencies to take into account the environmental impact of their policies. Obama issued some guidance for the agencies to take climate change into account, and Trump is now looking to remove that with Section 3(c) of the Executive Order. This might not do much since federal agencies still need to account for the impact of greenhouse gases. This might end up causing confusion and subsequent litigation, but not accounting for all the effects could exacerbate something like national security concerns.

Postscript: I know with all the polarization we see, it's common to either call something a disaster or the greatest thing since sliced bread, but I don't see anything particularly damaging or helpful in this Executive Order. The Clean Power Plan and the endangerment finding are not going anywhere, which means the coup struck to Obama-era environmental regulation is minimal. The supposed victory for the coal industry is not that a big deal because the coal industry's biggest issue is not regulatory, but rather that it will no longer be the leader in the energy sector.

And let's also consider how much the government has done or can do to help. I would like to point out that a) the global temperature has not increased as much as most climate change models have predicted, and b) because it is a global issue, you need to get China on board. Good luck with that last one! U.S. carbon emissions have been at their lowest in twenty years, in no small part due to fracking, the dropping prices of wind and solar, urbanization, and technological development. We should be mindful to take every factor into account when assessing environmental cost and benefit, but let's be honest: this Executive Order isn't going to do much in either direction.

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