For the first time in 40 years, US crude oil producers will be able to export their product abroad. (Photo: Jack Snell, Flickr CC BY-ND 2.0)
Republicans and Democrats passed a federal budget at the end of 2015 which lifted a 40-year-old ban on crude oil exports and extended renewable energy tax credits for 5 years. As host Steve Curwood hears from Harvard energy expert Joe Aldy, this compromise has implications for the climate.
CURWOOD: It’s Living on Earth, I'm Steve Curwood. As it’s still early in 2016 we want to catch up on a couple of stories that we didn’t have time to pay attention to over the holiday period. Joining us to discuss some of the decisions that happened in the final Congressional session of 2015 is Joe Aldy, who teaches energy and environmental policy at the Kennedy School at Harvard University. Welcome back to Living on Earth, Joe.
ALDY: Thanks, Steve. It's good to be here.
CURWOOD: While we were covering the Paris climate summit, there were a couple of important deals on Capitol Hill involving oil, renewable energy. Talk to me about those.
ALDY: So, we saw at the end of the last Congress a large budget deal between Congress and the White House and I think there are a couple of key elements to it. First, we saw for renewable power, for wind and solar, five-year extensions of their tax credits. Wind gets a subsidy for every Kilowatt Hour of power it produces, and we subsidize solar as a function of its investment, and both of these were looking at the expiration of these tax credits, which are important in pushing out the deployment of these technologies. We've seen historically, especially for wind, that when the tax credit expires, investment for new wind facilities tends to drop off.
CURWOOD: And in the past, of course, this is on a year-to-year basis for wind, so the folks in the wind business haven't known what's going on.
ALDY: It's been a big challenge for those who are trying to develop new wind farms because the development timelines typically are on the order for several years, and when you have the policy on the books only for one to two years at a time, that is very difficult for planning and for financing. Now they have a five-year window that provides much more certainty than they've had really since the 1990s for project planning. As a result, I think we should see more and more wind deployment and certainly more and more solar deployment, and I think that's going to be a critical part of US power system implementing and complying with the Clean Power Plan that President Obama advanced in 2015.
CURWOOD: As I understand it, there was a grand bargain on Capitol Hill that in exchange for having some certainty on renewable tax credits, that oil exports would be permitted for the first time in 40 years. How did that work?
ALDY: Well, it seems rare these days that we can actually get a compromise between both the Republicans and the Democrats, but I think this is a good example of one, where President Obama and the Democrats had said they were not interested in supporting a lifting of the oil export ban, but they really wanted to extend renewables. And Republicans had been balking at extending the tax credits for wind and solar while they were trying to push for the lifting of the export ban. So I think we see here sort of a positive outcome where we are advancing our renewable interests by agreeing to lift the oil export ban. And to be honest, I think in the near term at least, lifting the oil export ban isn't going to have a meaningful impact on the US economy, on production. Low oil prices are probably having a negative effect right now on production regardless of whether a domestic oil driller could move that oil into a foreign market or not.
CURWOOD: Now some have raised the concern that if we allow folks to export the oil that's being fracked, that this will encourage more fossil fuel development in the country. Your take?
ALDY: Well, I think if you look at the kind of analysis that have been done, they suggest that we would see an increase, maybe on the order of about 10 percent, maybe a little bit more, from current levels of US oil production. So it would be an increase here in the US, but I think there's a question of what's the right approach, the right instrument for addressing these environmental concerns. I personally think that if your concern is CO2 from fossil fuels, what we should do then is put a price on carbon, maybe enhance our fuel economy standards. That's a more effective way to address this concern than the rather blunt instrument of limiting the export of crude oil. If your concern is fracking and water, or fracking and local air quality, let's actually have good regulations on the books that address those, and then we should be able to prudently develop the resource without making our water dirty or impacting people's public health who live downwind from these sites.
CURWOOD: So, are there any surprises in the omnibus spending that the conservation crowd will be swallowing hard about?
ALDY: Well, I think overall, given where the negotiations were earlier in 2015, this was a pretty good outcome when we think about the environment, when we think about energy. There were very few policy riders. There were threats to keep the administration from implementing major regulations on water, major regulations on air. None of those survived. The EPA budget, where there were threats for it to be cut, was kept level. Honestly they could use more funds, at a minimum, to rise with inflation, but it's better than where it looked like they were going. The Department of Energy actually received more monies than they had the year before, much of that related to R & D, some even for zero carbon technologies like renewables and nuclear. So I think overall given where we were, say in the summer of 2015, it's a pretty good outcome when one looks like the energy agenda for progressives and for this White House.
CURWOOD: What made the difference, Joe? One thing that has changed on Capital Hill is the new Speaker of the House, Mr. Ryan, who was previously the budget maven. To what extent do you think his practical approach to things made the difference here?
ALDY: I think there's three things that mattered here. One, we already knew what the headline budget number was going to be. That was negotiated before the new speaker came in. So they were just arguing, not about the size of the pie, but arguing about how we were going to be allocating that pie. I think second it mattered that in the Senate, the majority leader made it very clear, "We not going to going to play games with the shutdown. We're going to govern." And so I think there was a sense of being pragmatic in the Senate, I think the new speaker also had a view to be pragmatic, and in the end you had a significant number of votes from both sides in the House as well as in the Senate to vote for this bill. So I think there's some signs of we can work together, we can each side identify victories, and recognize that this is part of what government is in America. It's not one side gets everything at once. We live in this kind of messy democracy where we have people of different views, but if they work together, they can actually find some common ground, they advance interests that are reflecting the variety of opinions I think in America and that's what we got here. It's maybe a positive sign after what is a frustrating long period of time of dysfunction in what we think about legislating in Washington, that maybe these two sides can actually work together on a few things.
CURWOOD: Joe, how optimistic are you that coming out of the Paris accord the US can meet the targets and continue to robustly expand our climate program?
ALDY: So I think that the actions that the Obama have taken in the last few years have really put the US on the right trajectory, whether it's when one looks at the fuel economy standard, the clean power plan, advancing appliance efficiency standards. They're looking at trying to address methane emissions from oil and gas drilling. I think all this can help move the US on the right trajectory and certainly will get the US to meet its 2020 goal, and it has US in the ballpark to reach its 2025 goal. Now there are some question marks. We know there are some legal challenges to the Clean Power Plan. We will need more investments in innovative technologies, I think we'll need more public policies to drive the deployment of those technologies, and that's going to be a key task I think for the next administration. But I think the important thing is we have the policies on the books now that will get us to our 2020 goal, on the road to the 2025 goal, and I think that was actually critical of the negotiations, that the US really came in with a much more credible position than it had in the past.
In 2009, going to Copenhagen, the administration said, “We're going to cut our emissions in the range of 17 percent contingent on final Congressional action," which never came. Going into Paris, the United States said,” Here's how we're going to cut our emissions to 2025”, and they were able to lay out in their position how the current policies are going to help deliver on that, and how they really have been taking meaningful actions across the economy - transportation, power, residential energy use, etc. - to really lower US emissions. I think that's really helped build trust in the new negotiations, and I think the framework coming out of Paris is one that if we could make that progress, if we can demonstrate that progress, can do so in a transparent manner, and our major partners in this exercise do so as well, I think that makes it easier for us to ramp up our ambition over time.
CURWOOD: You sound excited about this. These are exciting times?
ALDY: I think so. I think we're actually seeing the technologies people use change, we're starting to see more of the attitudes of people change, and we're starting to see the recognition of the importance of the issue, but also a recognition of what we can do - each one of us - as well as what our governments can do to address this problem. So I am, I would say, cautiously optimistic. It's a tough challenge. This is a tough challenge technologically. It's a tough challenge politically, policy-wise, diplomatically. I mean it is a really tough issue to address, but I think we're making progress now in a way that we haven't really in the past two plus decades of the global effort to try to address climate change.
CURWOOD: Professor Joe Aldy is an energy and environment expert at the Kennedy School at Harvard University, a former member of the Obama White House. Joe, thanks so much for taking the time with me today.
ALDY: It's been my pleasure. Thanks, Steve.
Listen to the full conversation with Joe Aldy:
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