An orderly yet wide-ranging energy transition in the United States will require restrictive supply-side polices to “actively wind down fossil fuel extraction,” say the co-authors of a new report that urges policy-makers to treat carbon fuels the way they did lead paint and asbestos—either ban them outright or phase them out.
Economists’ favoured response to the climate crisis has long been some form of carbon pricing, aiming to leverage market economics for positive climate outcomes, write political economist Mark Paul and policy and planning specialist Lina Moe of the Rutgers University Climate and Community Project. Then came investment-based strategies, like the recently-passed Inflation Reduction Act (IRA), which facilitated a huge expansion of renewable energy and clean technologies in the U.S.
The IRA poured massive amounts of money into demand-side climate investment policies, but it lacked restrictions to curb and phase out fossil supply, write Paul and Moe. In fact, parts of the IRA expanded fossil fuel extraction.
“Implicit in the strategy of focusing on clean energy investment is the assumption that fossil fuel firms will voluntarily close their doors as they get pushed out and exit the market in an orderly fashion,” write the researchers. “They will not.”
“Without discrete restrictive supply-side planning and policy, the end of fossil fuels will be a chaotic collapse where workers, communities, and the environment suffer.” Their report explains “the economic rationale—and climate necessity—of deploying restrictive supply-side policies to actively wind down fossil fuel extraction.”
History shows that products can quickly go from commonplace to banned, the two academics write. In the last 40 years, the U.S. has outlawed lead paint, phased out asbestos, and severely m,curtailed tobacco marketing and sales. Similar policies can be used for fossil fuels; in fact, they are already in place in other countries and at the state level and are more prevalent than acknowledged.
Paul and Moe provide 10 examples of concrete, supply-side policies on which policy-makers can take action now:
• End fossil fuel subsidies: The U.S. hands fossil companies nearly US$15 billion in subsidies each year, and ending them would yield “sizeable declines in extraction,” the report states. The U.S. has seen some efforts in this direction, but ending all subsidies will require legislation from Congress.
• Ban new fossil leases and permits on federal lands and waters: “Emissions resulting from the extraction of fossil fuels on public lands account for roughly one-fifth of U.S. greenhouse gas emissions,” the report states, illustrating the scale of the problem. A preliminary estimate in January put total U.S. emissions at around six billion tonnes in 2022.
• Reject all new fossil fuel infrastructure: “As scientists have made clear, no new extraction can be undertaken if climate goals are to be achieved,” Paul and Moe state. A nation-wide ban would be most effective, but state and local governments can begin to put their own restrictions in place.
• Build fossil-free zones: As bottom-up actions that can be implemented at local, state, or regional levels, fossil-free zones would create geographic areas where the extraction, production, transportation, and use of fossil fuels is prohibited. Local action could build consensus at a micro level around a single city, neighbourhood, or even a building.
• Tax windfall profits: The article cites the Taxing Big Oil Profiteers Act introduced in Senate last April as an example. The bill imposes an additional 21% tax through 2025 on the excess profits of oil and natural gas companies with more than $1 billion in annual revenue.
• Implement a carbon cap and dividend: “In its simplest form, a carbon cap sets a hard ceiling on the total amount of emissions produced on an annual basis,” the authors explain. It could help wind down the fossil industry in a timely manner, and when coupled with an equal per capita dividend, it could protect the incomes of low- and middle-income people.
• Disclose climate-related risk: Climate risk disclosures would sway investment decisions to favour companies that are leading in decarbonizing their portfolios. Such disclosures are not yet required by the U.S. Securities and Exchange Commission, but the proposed Climate Risk Disclosure Act would grant that authority to the agency. Similar legislation in Canada proposed by Sen. Rosa Galvez has received wide support.
• Monitor and fix methane leaks: Methane controls have the direct effect of lowering the per-unit carbon intensity of fossil production. Though the IRA’s new federal fee on methane emissions is a first step in the right direction, it needs to be accompanied by enforcement and regulation.
• Ban fossil fuel exports: The U.S. has previously done so for crude oil between 1975 and 2015, say the authors.
• Nationalize the fossil fuel industry: Doing so would neutralize the industry’s efforts to fight climate policies and create “a powerful lifeline for the more than 1 million workers in the industry that will face the threat of unemployment and underemployment as the industry shrinks.”
“Fortunately, smart and actionable restrictive supply-side policies exist,” write Paul and Moe. “Indeed, many have already been introduced in Congress. And if they are deployed in tandem with policies to boost energy efficiency and clean and renewable energy, they will help ensure a just and full transition away from fossil fuels.”