In this unsettled election year, it's hard to say whether these developments will lead to a bipartisan "grand bargain" on climate change. But here's the good news: Congress and the president could act now to reduce climate-related risks and the associated costs -- both human and financial -- in ways that would benefit our communities and our states immeasurably. These four measures could be implemented today through a combination of executive action and limited legislation. What's more, they are both fair and fiscally prudent:
1. Eliminate subsidies for fossil fuel production and consumption. Public subsidies for producing fossil fuels (such as the percentage depletion allowance for oil and gas wells) distort the energy market and hide the full cost of carbon-based fuels. Removing those subsidies would help level the playing field for renewable energy sources. On the consumption side, having drivers pay for at least part of the actual costs of maintaining highways, lighting and other driving-related services through higher fuel taxes would nudge household and business decisions toward greater carbon efficiency. Doing so would also promote fairness by discouraging individual behaviors that impose climate-related costs on society as a whole.
2. Redirect government subsidies for climate-risky behavior. In general, we are more likely to take risks if we know that someone will bail us out. Indeed, people and businesses continue to locate where climate-related risks (sea-level rise, flooding, wildfires) are growing because the federal government continues to provide bailouts in the form of federally subsidized flood insurance, coastal zone protection and wildfire fighting on federal lands. To reduce those risks, existing programs could be modified to incentivize climate-resilient behavior by households, developers and businesses. We already do this to some extent: When property owners receive financial assistance from the federal government following a presidentially declared disaster, for example, they may be required to purchase flood insurance coverage. Similar requirements could be established for other climate-related risks. For example, Australia requires homeowners building in wildfire-prone areas to use landscape design features that make their properties less combustible.
3. Incorporate "carbon shadow pricing" into federal expenditures. The Obama administration's Clean Power Plan (CPP), an ambitious effort to reduce carbon emissions, will be tied up in the courts for years. The uncertainty over whether and how the CPP will be implemented complicates decisions by the private sector, which craves regulatory certainty to make long-term capital investments. To address this problem, the federal government could implement carbon shadow pricing -- that is, making investments and other internal decisions as if there were already a price on carbon. By using carbon shadow pricing while purchasing goods and services and investing in infrastructure, the federal government could serve as a model to the private sector and the public; avoid locking in emission levels in long-lived infrastructure; and reduce the costs of adjusting to a future price on carbon.
4. Incorporate climate-risk analysis in designing public infrastructure. The lifespans of new transportation systems, ports, buildings and other infrastructure could be compromised if they are not designed to be resilient to climate-related risks. Federal agencies have begun to address this challenge. For example, the 2014 Department of Transportation Climate Adaptation Plan calls for incorporating projected climate changes into infrastructure planning and design processes. However, six years after issuing draft guidance on including climate risks in formal environmental reviews, the federal government has yet to finalize this guidance. But there is no need to wait: Federal infrastructure investments can still be designed with sensitivity to potential climate risks.
If these measures are not taken, the federal government's traditional roles in disaster relief and as insurer of last resort are likely to exacerbate budget deficits as the climate warms. State and local governments (which also have responsibilities for public health, firefighting, protecting coastal property, and flood control) will feel the pinch as well. There is no time to waste. Fortunately, we need not reach a grand bargain on climate before taking meaningful actions.
