Political Polarization, Ideological Splits Hinder Energy Policy, Spence Says

 

Takeaway

  • The 'belief gap' between climatologists and the American public may be narrowing.
  • Americans say they support environmental protection in general but oppose policies that could harm the economy.
  • A carbon tax wouldn't directly limit emissions levels; a cap-and-trade system would.

David Spence, associate professor in the Department of Business, Government and Society and co-director of McCombs’ Energy Management and Innovation Center, recently examined the history of and challenges in reforming U.S. energy policy in a Brigham Young University Law Review article. Texas Enterprise caught up with Spence to better understand his views on today’s complex energy landscape.

How does the current political climate in Congress affect energy policy?

In the last few decades our parties have become ideologically polarized. In the ’60s and ’70s both parties were much more centrist than they are now. On the left you had Southern Democrats that were fairly conservative. On the right, you had northeastern moderates, like Nelson Rockefeller, and you might recall that it was Richard Nixon who created the Environmental Protection Agency. Even into the late 1980s George H. W. Bush wanted to be the environmental president and signed major Clean Air Act amendments. We just don’t see people reaching across the aisle very often [today]. It’s even worse right now because it’s an election year.

But isn’t the environment just as salient an issue now as it was in the ’60s?

Yes and no. What was different in the ’60s was we weren’t doing anything, and the Cuyahoga River in Ohio was literally on fire. What followed was a groundswell that led to the passage of the Clean Air Act, the Endangered Species Act, hazardous waste legislation, etc. So, while people still care about these issues, we’re arguing over smaller things — except for climate change.

But even with that issue we are seeing signs that the “belief gap” on beliefs between climatologists and the American general public may be slowly narrowing. In the last 10 years this gap had been pretty wide, with Gallup polls showing that only 40 or 50 percent of Americans surveyed believed human activity was driving climate change. Our most recent energy poll [The University of Texas at Austin Energy Poll is a semiannual national opinion poll exploring consumer sentiment about energy issues] found that 65 percent [of respondents] believe climate change is occurring, and 65-70 percent cite human activity, such as deforestation and fossil fuels, as the prime culprit.

Is there a difference between peoples’ attitudes toward the “issue” of the environment and their direct experience with it?

Yes. Opinion polls since the ’70s have been asking, “What’s more important to you, economic growth or protecting the environment?” If one asks that as a general, philosophical question, people will usually say protecting the environment is more important. But if you ask about specific situations — “Would you support this environmental rule even if it means x number of people lose their jobs?” — then the balance begins to swing more in the other direction. When people are confronted with a choice about higher energy prices, then they’ll tilt more toward economics. Even if you support the reduction of fossil fuels in principle, you may hesitate when it comes to your pocketbook. There’s a huge gap between what people say they are willing to pay and what they actually will pay.

Does this mean people are just hypocritical when it comes to energy and the environment?

No, not at all. There are just so many difficult trade-offs involved. When we read an article about fracking, for example, it usually talks only about the environmental risks associated with fracking operations. It almost never addresses the value of natural gas as a cleaner alternative to coal. Energy is a complicated issue and it’s hard to get people to think about all these trade-offs at once.

How much of the energy policy conundrum is due to the fact that most proposed solutions are split, in a way, between factions?

There is fragmentation among proponents of various solutions. In terms of reducing emissions, for example, economists prefer a tax for efficiency reasons. And business usually prefers a tax as well, because tax provides certainty of costs. With a tax rate they can plan, deciding how much they want to pollute and how much they want to pay.

Environmentalists prefer certainty in the emissions levels. A tax doesn’t give you that; it just tells you how much you pay per ton of emission. A cap-and-trade system gives you control over emissions levels, and that’s what environmental groups tend to prefer.

Yet another group of people argues that the cheapest way to address these issues is with efficiency measures. And there’s a lot of data showing that there are myriad win-win efficiency investments that we ought to be undertaking (weatherizing, more efficient appliances, etc.).

Can you explain how the perception of immediate vs. long-term consequences affects public and policy-maker perceptions?

Sure, a really good example of this is climate change. The problem here is that the benefits are going to be widely distributed (since the effects of greenhouse gases are global effects) and in the distant future. The carbon dioxide and greenhouse gas emissions we are releasing now persist and affect the earth’s climate for 50 to 100 years.

The cost to reduce these emissions, on the other hand, falls on U.S. taxpayers now, people who are current voters and who understand that their jobs or companies may be hurt by emission limits. It’s harder to make that economic sacrifice when many of the beneficiaries will be people born decades from now, or people who live outside the United States.

What does this mean for business? Does all this policy uncertainty make it easier or harder to figure out appropriate business models and strategy?

Harder. Imagine if you were a prospective builder of a new plant, especially one using fossil fuels. Think about the uncertainty involved in your decision: you’re not sure what the air pollution rules are going to be 40 years from now; you don’t know how much natural gas is going to cost; and you don’t know if Congress is going to do anything. When there’s lots of uncertainty like this, it’s very hard for businesses to plan.

Where can we look for energy and environmental reform if not from Congress?

At the state level we are seeing such things as greenhouse gas emissions control (especially in California and the northeastern states) and clean energy standards, such as the establishment of renewable portfolio standards (RPS).

At the individual level, you see the effects that consumers have on the markets. For example, here in Texas you can buy green power. There’s a percentage of Texans, and people everywhere, who’ll pay a premium for this power. This puts pressure on industry (and other people) not to use “dirty” energy.

Just recently we see Greenpeace calling attention to Google and Apple because these companies are building their servers in places where there’s a lot of coal-fired electricity. I think we’re going to see more and more of that kind of private action and market pressure.

 

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Faculty in this Article

David Spence

Professor, Business, Government & Society

Professor Spence's research and teaching focus on business-government relations with emphasis on energy and environmental regulation. He received his...

David Spence teaches in the Texas Executive Education program, featuring open enrollment, custom and certificate classes for executives and organization teams.

About The Author

Matt Turner

Market Researcher, McCombs School of Business, The University of Texas at Austin

Matt Turner, Ph.D., is a market researcher in the Communications Office. Matt’s main duty is to serve as the ranking steward for all external media...

Comments

#1 Do you believe that fossil

Do you believe that fossil fuels are dirty and that man made pollutants are causing climate change? I think our university should take note of the fact that there are currrently no real alternatives to fossil fuels that do not require natural gas back up and battery technologies that do not exist to make green energy competitive. I would remind you that oil and gas was and still is a big driver in the funding of our great University and without this backing the University would not exist in its current form. I am waiting for someone from McCombs to acknowledge what the oil and gas business has meant, does mean, and will continue to mean to the funding of education in this state and to our University. We have for many years been the economic backbone of the state. What we do in the oil and gas business is keeps our state one of the most competive in the world. Without our efforts the lights go out. We should celebrate what we produce here and not consistently and with great fervor, talk it down at every opportunity. It remains the only economic bridge to future technologies that will some day replace it, but not for many many years. Bill Wallace BBA 76

#2 Bill, I think we can and

Bill, I think we can and should acknowledge both the benefits and the costs of our reliance on fossil fuels. As someone who works closely with large oil companies and sees our natural gas boom as both an economic and environmental boon to the U.S., I agree with what you say. However, I also believe that economists and epidemiologists have demonstrated that the costs of coal combustion, in particular, exceed the benefits. And yes, I think the question of whether human activity is driving global warming is pretty well settled. (Climate science tells us that it very likely is.) The precise effects of that warming, their magnitude and distribution, and how we ought to respond remain interesting, open questions however, in my opinion. My most recent energy brief about natural gas may be of interest: http://www.mccombs.utexas.edu/Centers/~/media/D4DBD2D555F740D8AE6B510D35C8D6B1.ashx David

#3 David, "Very likely" seems to

David, "Very likely" seems to be subject to the eyes of the beholder. I do not want to argue so much as to have it acknowledged by those who speak for the University, that fossil fuels should not referenced in their speaking as "dirty". It connotes that the industry is evil and out to destroy our way of life, instead of the truth that we are in truth serving our country by being a huge part of the economic engine and prospertity that we enjoy. By the way, thanks for your time in answering my first email and for answering this one as well if time allows. BW

#4 Bill, I'm happy to discuss

Bill, I'm happy to discuss these issues. I do not think that the fossil fuels industry is evil or out to destroy our way of life. Most of my professional life I have worked with and for energy companies, both electric utilities and oil and gas companies, and I have great respect for the people I have met throught that work. At the same time, it is evident (to me) that the externalities of coal-fired power production produce significant harm, harm that is not priced into the electricity that comes from coal combustion. Perhaps we can agree to disagree about that, however. Thanks again for your comments. David

#5 Thanks, David. I hope we will

Thanks, David. I hope we will meet over coffee some day in Austin, to get to know each other a little better. I told Kelley and Diane, who visited in my office today from the McCombs School, that I would like to meet you some time. We have a ranch in Llano County and are down often, as well as for all football weekends. If you have some spare time maybe we could get together and hash this out a little more. BW

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