Friday Fact Check: US leader in climate change w/o relying on government action.

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How the U.S. Made Progress on Climate Change Without Ever Passing a Bill
Robinson Meyer, The Atlantic, June 16, 2021

Here, at least, is the standard story: The past decade has been abysmal for climate-change policy in the United States. In 2009, a handsome new president took office pledging to pass a comprehensive climate bill in Congress. He did not. The Environmental Protection Agency sought to meaningfully reduce carbon pollution from power plants. It did not. The United States joined the Paris Agreement. Then we elected President Donald Trump, and we left.

Yes—and here, the narrator always inserts a gale-force sigh—America knows what it needs to do: Pass a carbon fee or tax, some kind of policy that nudges people to reduce their use of fossil fuels. Yet America refuses. And so the 2010s, once greeted as a “new era” for climate action, now seem unexceptional, the third decade in a row that the United States understood the dangers of climate change but failed to act. Meanwhile the seas rose, wildfires raged, and the Earth saw its hottest 10 years on record.

You have probably heard this tale before; it is a popular and undeniably accurate read of recent history. It has just one flaw: America is decarbonizing anyway.

hat 2009 climate bill, the one that President Barack Obama couldn’t pass? It required the U.S. to cut greenhouse-gas emissions 17 percent by 2020 as compared with their all-time high. Yet last year, our emissions were down 21 percent. The same bill said that the U.S. had to generate 20 percent of its electricity from renewables by 2020. Last year, we met that target. We will surpass it in 2021.

These numbers are not a mere fluke. Last year was a singular, awful moment in economic history, but even accounting for the effects of the COVID-19 recession, America’s real-world emissions last decade outperformed the Obama bill’s targets. From 2012 to 2020, real-world U.S. emissions were more than 1 billion tons below what the bill would have required, according to my analysis of data from Rhodium Group, an energy-research firm. (Of course, had the bill passed, the U.S. might have done even better.) Meanwhile, across the economy, companies are learning how to decarbonize. Ford is already producing more electric Mustang Mach-Es than gas-powered Mustangs; General Motors, Honda, Volvo, and Jaguar have promised to stop selling gas cars altogether by 2040. Royal Dutch Shell was court-ordered last month to cut its emissions, and shareholders just forced Exxon to replace a quarter of its board with climate-concerned activist investors. Most important of all, the costs of solar and batteries have declined in the United States by a factor of 10 over the past decade, and the cost of wind has fallen 70 percent. Ten years ago, virtually no analyst thought they would fall so low. The International Energy Agency made headlines this year when it called solar “the cheapest electricity in history,” but the entire apparatus of renewable energy has seen cost declines.

What gives? America is supposed to be doing nothing right. Yet we’re making progress anyway. How? Why?

A group of scholars, engineers, and economists may have an answer. Over the past few years, this group has puzzled together a powerful thesis that explains why America and the world are decarbonizing—and how they can get better at it. Decarbonization isn’t best accomplished by fiat, they argue, but by feedback loop; it proceeds by a self-accelerating process that I have called “the green vortex.” The green vortex describes how policy, technology, business, and politics can all work together, lowering the cost of zero-carbon energy, building pro-climate coalitions, and speeding up humanity’s ability to decarbonize. It has also already gotten results. The green vortex is what drove down the cost of wind and solar, what overturned Exxon’s board, and what the Biden administration is banking on in its infrastructure plan.

In the group’s telling, the past decade might not be defined by “a failure to have any sort of comprehensive climate policy,” as Jesse Jenkins, an engineering professor at Princeton, told me, but by a “piecemeal, bottom-up investment and subsidy-led approach to driving emissions change.”

“Policy makers have been dithering about climate change since 1988, and in the background you have this steady progression of technologies,” Greg Nemet, a public-affairs professor at the University of Wisconsin at Madison, told me. Foreign industrial policy has driven that progression, he said, although American tax rebates—and California’s economic planning—have also played a part. Those policies have allowed the entire world to decarbonize and led companies to support ever more aggressive carbon cuts. That, in essence, is the green vortex.

In coining green vortex, I’ve borrowed from the work of Nina Kelsey, an international-affairs professor at George Washington University, who has argued that combining financial incentives and technological change into a “green spiral” can drive decarbonization.

“There’s so much energy spent on trying to convince people what we should do about climate change,” she told me. “I think it’s gone about as far as we can go.” What will fix climate change now, she says, is making it profitable for companies to fight climate change.

We should hope this thesis is correct. Under America’s new Paris Agreement pledge, announced by President Joe Biden in April, the country will need to double the pace of its emissions decline over the next decade. Whatever we’re doing right, we’re soon going to have to do it twice as fast. So … you know … we’d better figure out what it is.

The idea that drives the green vortex is: Practice makes improvement. The more that we do something, whether baking a cake or manufacturing electric vehicles, the better we get at it. (Economists call this “learning by doing.”) This idea might seem intuitive, but it is often ignored in policy conversations. Over the past half decade, learning by doing has driven down the cost of semiconductors, solar panels, and electric vehicles.

The green vortex leverages this idea to describe a positive feedback loop. Policy can speed up the pace of technology development. As technologies develop, they get cheaper. As they get cheaper, more companies adopt them. As more companies adopt them, their leaders grow more comfortable with climate policy generally—and more supportive of pro-technology policy in particular. As more corporate leaders support climate policy, coalitions change, governments can pass more aggressive measures, and the cycle expands and begins again.

The core mechanism here is that subsidies speed up learning by doing. Any industry would, eventually, figure out how to make a product more cheaply; subsidies move that learning forward in time, so that the unsubsidized price starts looking attractive more quickly. “You’re trying to grab the lever that accelerates the pace of cost declines,” Jenkins said. “That’s where the policy has teeth.”

The cycles of the vortex can start slow, but there is wide evidence for them. Nemet, the Wisconsin professor, pointed me to one case in particular. In the 1970s, amid a global surge in the price of oil, Denmark began to seed a homegrown wind industry. By the early ’80s, this small country best known for its maritime culture and cheese-filled pastry found one of its largest markets in the U.S., when California began subsidizing large wind farms. By 1990, three-quarters of the world’s installed wind capacity was in that one state. Cheap solar energy emerged from a similar global alignment, Nemet’s work has shown, this one between Chinese factories and German tariffs in the early 2010s.

But to harness the green vortex in order to make decarbonization cheap, the industries that adopt these technologies matter quite a bit. Kelsey, the GW professor, has thought carefully about this exact question. Generally, you can divide industries facing decarbonization into four broad categories, she told me. The first two are straightforward: There are winner industries and loser industries. So solar companies, on the whole, will prosper; coal-mining firms and traditional oil-and-gas companies will decline.

But many, if not most, companies probably fall into a category that Kelsey calls “resource managers”: They will respond to climate policy chiefly by using less energy and fewer raw materials—increasing their efficiency and decreasing their electricity use. Google, Nike, and Walmart are all arguably resource managers, as are most restaurants, hair salons, and doctors’ offices.

But a precious few industries—some of the most important to the second story of American climate politics—fit into a fourth box. Some companies look like losers; under their current business model, they stand to suffer from the energy transition as much as oil companies. But if they restructure their business and reimagine their products, then they would become winners, poised to dominate the future economy. Kelsey calls these the “convertible industries,” and they anchor her scheme.

In the American economy, she told me, two such industries tower above the rest: automakers and electric utilities. Both sell a product that contributes to climate change today but does not need to. Ninety-eight percent of light-duty vehicles sold in the United States in 2020 burned gasoline, but automakers could—with some capital investment and reorganizing—sell electric cars instead.

The green vortex also makes Biden’s climate and infrastructure agenda, the American Jobs Plan, fit into place. Large swaths of Biden’s plan, which has been criticized for a lack of focus and unnecessary constraints, are devoted to beefing up industries. This choice makes more sense in light of the green vortex. It focuses much of its attention on industries that are crucial to decarbonization but that remain in their early stages. So it spends, for instance, $174 billion on “winning” the global EV market, chiefly by building “domestic supply chains” for electric vehicles and helping consumers buy specifically American-made vehicles.

The Biden plan spends even more time on industries that don’t yet have a plan to go zero-carbon. So it promises to invest in 15 industrial-scale demonstration projects to produce green hydrogen, and to create another 10 factories that will pioneer new ways to make zero-carbon steel, cement, and chemicals. And the plan promises that the federal government will buy such zero-carbon products to help fledgling firms.

This focus on domestic production, on American-made cars and steel, runs against 40 years of textbook economics, which has prized efficiency above all. Herbert Stein, President Richard Nixon’s chief economist, once declared that “if the most efficient way for the U.S. to get steel is to produce tapes of [the TV show] Dallas and sell them to the Japanese, then producing tapes of Dallas is our basic industry.” And it’s true that fostering a domestic carbon-capture industry might suck up dollars that could go toward decarbonization elsewhere. But if you’re trying to accelerate a vortex, it makes sense: Biden is betting that a strong domestic EV industry will build political demand for more decarbonization down the road.

“I feel a little weird looking at Biden’s infrastructure plan, because I say, ‘Well, you’re doing everything I would tell you to do,’” Kelsey told me.

Could a dynamic like the one these policy wonks and academics describe really save the world? According to Kelsey, it already has—just not for climate change. The green vortex helped fix the fraying ozone layer in the 1980s, she argues, when it allowed for the global phaseout of ozone-depleting chemicals, called chlorofluorocarbons or CFCs. “The most important thing, the underreported thing, is that the same companies that made the polluting CFCs also made the substitute for CFCs,” she said.

When major American chemical companies realized they could sell those new chemicals, called hydrofluorocarbons or HFCs, to the same customers who once bought their CFCs, they lobbied a recalcitrant Reagan administration to support a global ozone pact. The 1987 Montreal Protocol, which phased out use of CFCs, passed soon afterward. Then, when demand for HFCs wasn’t as robust as those companies had projected, they pushed the U.S. and the world to toughen the Montreal Protocol. The agreement was tightened multiple times in the ’90s and made stricter again in 2016

And that vortex has continued forward on its own strength. In the past decade, it has become clear that although HFCs do not deplete the ozone layer, they do ravage the climate, trapping heat thousands of times more effectively than carbon dioxide. (Humanity, you might say, leapt from the atmospheric frying pan into the climatological deep-fat fryer.) Yet again, the U.S. has moved swiftly to address this problem. Last year, bipartisan majorities in Congress voted to keep phasing out the chemicals over the next 15 years, which will prevent the equivalent of 900 million tons of carbon dioxide, more than Germany’s annual emissions. President Trump signed the phaseout, one of the most substantial pieces of climate policy in American history, into law on December 27. Why did Trump, no climate fan, approve the measure? Perhaps because it created another new market for those same chemical companies to sell a new type of replacement. Trump was, in other words, trapped in the green vortex. In the next decade, we’ll find out if that feedback loop can work the same for decarbonization more broadly—and whether American policy makers can learn not just to live in the green vortex, but to manipulate it.