Establishing a Durable Governance Framework for Energy Policy

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Workshop Conclusions

 

February 14-15, 2013

Energy policy-makers have long sought to ensure adequate energy supplies at an affordable price while ensuring that production and consumption adhere to key environmental goals and requirements. However, the challenge of reducing greenhouse gas emissions to sustainable levels is a particularly difficult one for energy policy, and one that should channel innovative thinking about technology, economics, and policy.

Meeting the climate challenge will require the wholesale transformation of the global energy system, taking decades. During that time, science will narrow existing uncertainties and perhaps uncover new ones, hopes for technological innovation will flourish and sometimes be realized, and policy initiatives will succeed or fail. All are outcomes that cannot now be predicted in any detail but will surely happen – and will have profound effects on the success of efforts to mitigate climate change.

Given these conditions, institutions and policies for managing energy and climate trends must be durable enough to maintain progress over an extended time period, yet flexible enough to adapt to new information and revealed experience as they develop. The climate issue is unusual, perhaps even unique, in the extent to which policy-makers must accommodate these dual needs.

The American Academy of Arts and Sciences convened a workshop on February 14-15, 2013, to consider the importance of durability and flexibility to the design of institutions and policy tools that deal with climate change, and the specific challenge of sharply reducing greenhouse gas emissions over the next four to five decades. In the course of the workshop, a general consensus emerged that four design characteristics are necessary to promote both durability and adaptability. Participants agreed that successful policies and institutions will need to:

  • Signal a clear commitment to resolving the climate problem that decisively shapes the long-range planning of affected parties, especially industry, but including producers and consumers. This signal could take several economic or regulatory forms, including some mix of several options, including regulatory stringency, a tax, a cap-and-trade system, research and development, and/or technology subsidies. The debate over which of these signals is most effective has yet to be resolved. Whatever the mechanism, the essential goal is to guide investment and behavior over the long term.
  • Incorporate a process for acquiring and acting on new information. Scientific advances, technology innovation, and policy experience will all change the policy environment over time. Systematically incorporating mechanisms into policy design to incorporate new information and respond to these changes is essential to avoid blind alleys and unnecessary costs.
  • Provide for a systematic evaluation of policy experience. The science of climate change is a robust enterprise, and both private and public actors are spending heavily on technological innovation. Though new scientific and technological information will thus likely be readily available to policy makers, the same cannot be said for new information produced by evaluations of policy and institutional experiments. Recent experiences with various cap-and-trade schemes in the U.S. and in Europe demonstrate the importance of learning from such evaluation.
  • Produce outcomes that key constituencies value. These outcomes range from affordable energy from innovative sources to demonstrated progress in reducing greenhouse gases, regardless of what policy instruments are employed. Earning the commitment of key constituencies is essential to making practical progress.

The workshop discussion strongly suggested that applying these design characteristics can enhance the likelihood that a given policy is durable yet flexible. For example, considering whether a policy will endure could well alter the relative attractiveness of a carbon tax, a cap-and-trade system, or a regime of performance standards. In addition, it seems clear that many existing policies and institutions, designed as they were for policy problems without such a long time horizon, do not incorporate these characteristics. Few policies and institutions embrace rigorous evaluations or mechanisms for learning from them.

The participants in the workshop represented a wide variety of legal and public policy research disciplines. Drawing on this diverse experience, the participants agreed that while some important research on institutional and policy design for energy innovation and climate change exists, much remains to be done to understand fully how to develop durable yet flexible tools. Moreover, doing so should be a matter of urgency. While major new energy and climate policies at the federal level are not likely to emerge from Congress in the present political climate, they are likely to emerge in the long term. Moreover, the executive branch is currently taking steps under existing authority, including the Clean Air Act, to address carbon emissions. A focus on durability and flexibility can shape the way such authority is exercised. Subnational and foreign jurisdictions are also already embarking on the implementation of climate policy. Here again, a focus on regulatory design is important and may shape policy choices. Given the complexity of the challenge, it is essential to begin to build intellectual capital about the most effective policy design tools.

The Academy workshop only scratched the surface of what will be needed to develop a research agenda about the most effective mechanisms to create durable yet adaptable energy and climate policy. However, a useful first step would be to confirm the results of this workshop with more systematic analysis of essential design characteristics. This would permit a detailed investigation of specific institutions and policy tools, their capacity to effectively promote energy and climate policies, and the process by which such institutions and policies come into being.

 

Workshop Organizers

 

Dallas Burtraw
Senior Fellow and Darius Gaskins Chair
Resources for the Future

Ann Carlson
Shapiro Professor of Environmental Law 
Faculty Co-Director, Emmett Center on Climate Change and the Environment
University of California, Los Angeles, School of Law

Robert W. Fri
Visiting Scholar
Resources for the Future

 

Participants

 

Stephen D. Ansolabehere
Professor of Government
Harvard University

Douglas Arent
Executive Director, Joint Institute for Strategic Energy Analysis
National Renewable Energy Laboratory

Jan Beyea
Chief Scientist
Consulting in the Public Interest

William Boyd
Associate Professor of Law
Director, Energy Innovation Initiative
University of Colorado Law School

Jody Freeman 
Archibald Cox Professor of Law
Director, Environmental Law and Policy Program
Harvard Law School

Kelly Sims Gallagher
Director, Center for International Environment and Resource Policy;
Associate Professor of Energy and Environmental Policy, 
The Fletcher School of Law and Diplomacy
Tufts University

John D. Graham
Dean, School of Public and Environmental Affairs
Indiana University

Marilu Hastings
Environment Program Director
The Cynthia and George Mitchell Foundation

Daniel M. Kammen
Class of 1935 Distinguished Professor in the Energy and Resources Group, the Goldman School of Public Policy, and the Department of Nuclear Engineering
Director, Renewable and Appropriate Energy Laboratory
University of California, Berkeley

Nathaniel Keohane
Vice President, Environmental Defense Fund;
Adjunct Professor of Law, New York University School of Law

Richard Lazarus 
Howard and Katherine Aibel Professor of Law
Harvard Law School

M. Granger Morgan
Head, Department of Engineering and Public Policy 
University and Lord Chair Professor in Engineering
Director, Center for Climate and Energy Decision Making
Director, Wilton E. Scott Institute for Energy Innovation
Carnegie Mellon University

Edward A. Parson
Dan and Rae Emmett Professor of Environmental Law
Faculty Co-Director, Emmett Center on Climate Change and the Environment
University of California, Los Angeles, School of Law

Eric Patashnik
Professor of Public Policy and Politics, Frank Batten School of Leadership and Public Policy
University of Virginia

Barry Rabe
J. Ira and Nicki Harris Family Professor of Public Policy, Gerald R. Ford School of Public Policy
Director, Center for Local, State, and Urban Policy
University of Michigan

Richard L. Revesz 
Dean and Lawrence King Professor of Law
New York University School of Law

Maxine L. Savitz
Vice President, National Academy of Engineering; 
Vice-Chair, President’s Council of Advisors for Science and Technology;
General Manager of Technology Partnerships (ret.), Honeywell, Inc.

William M. Shobe
Professor of Public Policy, Frank Batten School of Leadership and Public Policy
Director, Center for Economic and Policy Studies
University of Virginia

Adele Smith Simmons
Vice-Chair
Chicago Metropolis Strategies

Mitchell P. Smith
Professor and Chair of International and Area Studies
Director, European Union Center
University of Oklahoma

Robert N. Stavins
Albert Pratt Professor of Business and Government, Environment and Natural Resources Program
Director, Harvard Environmental Economics Program
Harvard Kennedy School

David A. Weisbach
Walter J. Blum Professor of Law, University of Chicago Law School;
Senior Fellow, Computation Institute of the University of Chicago 
and Argonne National Laboratory

Elizabeth J. Wilson
Associate Professor of Energy and Environmental Policy and Law, 
Humphrey School of Public Affairs
University of Minnesota

 

 

This report was prepared as an account of work sponsored by an agency of the United States Government. Neither the United States Government nor any agency thereof, nor any of their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or usefulness of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise does not necessarily constitute or imply its endorsement, recommendation, or favoring by the United States Government or any agency thereof. The views and opinions of authors expressed herein do not necessarily state or reflect those of the United States Government or any agency thereof.

This work was supported by the National Science Foundation under Award Number SMA-1250486.