The Foreign Service Journal, February 2009

24 F O R E I G N S E R V I C E J O U R N A L / F E B R U A R Y 2 0 0 9 policy could be an opportunity for global leadership — or it could be an issue that divides Americans and sep- arates U.S. views from a global con- sensus. Neither our energy nor our cli- mate problems can be solved over the next four or even eight years. In many ways, the challenge for Presi- dent Barack Obama’s administration is to set the tone for a new approach to energy production and use for years to come, by starting a new conversation with the American public and global allies and aggressively, yet carefully, pur- suing several key elements that will begin the transition to a secure, low-carbon future. The pillars of a new U.S. energy and climate strategy should include strong domestic leadership on climate and energy policy and a grand bargain withmajor emitters. The strategy should capitalize on new economic opportunities and pursue productive engagement with the international community. Key Elements of a New Approach Domestic Policy on Energy and Climate. Strong do- mestic leadership on climate and energy policy starts at home. Domestic policies should seek to balance the eco- nomic, security and environmental consequences of en- ergy production and use. In addition, given the wide- ranging effects that energy and climate policy will have on other policy areas (e.g., agriculture, trade, foreign pol- icy, security, economics, etc.), it is important to consider the complex linkages, potential trade-offs and likely un- intended consequences of these domestic policies. Energy Policy. In times of economic hardship and limited capital, it is imperative that the federal govern- ment prioritize its energy policy actions, make wise in- vestments and catalyze private-sector spending. In the near term, actions with the potential to create jobs, strengthen markets for low-carbon energy technologies and address multiple energy challenges, while yielding near-term gains, should be at the top of the list. Some of the obvious choices are to eliminate barriers and provide incentives for greater efficiency gains in all sectors; reset the system of incentives (tax breaks, standards, regula- tions, etc.) for low-carbon energy sources; and modern- ize and expand the electricity grid to provide greater reliability to consumers while enabling more aggressive demand-side management pro- grams and an increased capacity for renewables. Climate Policy. U.S. domestic climate policy must simultaneously address mitigation of greenhouse gas emissions while making a long- term substantive commitment to climate science and, where neces- sary, adapting to the unavoidable repercussions of climate changes. Domestic mitigation policies should establish a clear, straightforward and transparent framework with long- term as well as incremental goals, and ensure compatibil- ity with state-level programs already under way in order to reduce uncertainty for businesses. Emissions reduction policies should be applied equitably among sectors of the economy, avoid disproportionate economic disruptions and allow adequate time for capital turnover. The most important, yet difficult to implement, part of this strategy is to put an economy-wide price on carbon. Establishing a price for carbon (along with having the proper regulatory environment) will increase the com- petitiveness of low-carbon energy solutions and encour- age greater energy efficiency to spur the transition to a low-carbon economy. A Grand Bargain with Major Emitters. Strong U.S. domestic policy designed to limit greenhouse gas emis- sions is essential but not sufficient for achieving global climate goals. Other major emitting economies must also contribute to the solution. The United States should seek a grand bargain with major emitting countries to reduce emissions. This bargain should include a long-term emis- sions reduction goal and interimmandatory emissions re- duction targets for each country. It is especially important to ensure the participation of China, which is estimated to have overtaken the United States as the largest global emitter of carbon diox- ide. Recognizing developing countries’ concerns over burden-sharing and their continued ability to develop economically, a global climate agreement should include common but differentiated targets for developed and de- veloping countries. One approach would be to use a “climate on-ramp,” allowing rapidly developing countries to gradually adopt sector-based targets in their heaviest-emitting sectors of the economy, with an eventual switch to economy-wide emissions reduction targets. Such a grand bargain could F O C U S Absent a major strategic shift in policy, U.S. influence in global energy markets will continue to erode.