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1. Reconsidering US Nuclear Cooperation Agreements

Author:
Richard Nephew
Publication Date:
03-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Despite having played a central role in the creation of the international nuclear commercial sector, today the United States is increasingly on the outside looking in when it comes to civil nuclear projects. The United States now accounts for a relatively small number of new reactor builds, both at home and abroad. There are a few rays of sunshine for the US nuclear industry, especially when it comes to new technology. In fact, many of the new reactor builds that are underway do involve US technology and intellectual property, even if others are performing the construction. To take advantage of a similar dynamic, US innovators are looking to both new and forgotten designs as a way of managing the challenges of nuclear fuel manufacture, safety, waste management, security cost, and proliferation. But these new technologies face an uncertain future (and so consequently does the US role), even notwithstanding the advantages nuclear energy would bring to managing climate change and the edge the United States may have in their development. Various factors account for the challenges facing the US nuclear industry, including the complex political, economic, scientific, and popular environment around nuclear technology and civil nuclear energy. Of the various problems potentially plaguing US nuclear energy policy, one remains both difficult to address and controversial: US requirements for nuclear cooperation, and in particular, the demand from many in Congress and the nonproliferation community that the United States insist on binding commitments from its cooperating partners to forswear developing enrichment and reprocessing technology. While this policy is not responsible for the decline of the US nuclear industry, it adds additional hindrance to US nuclear commerce abroad and may even be to the long-term detriment of US nonproliferation policy interests. If so, then the questions that arise are whether this is in the US interest and, if not, how the US ought to respond. If the government believes that having a role in international nuclear commerce is advisable on both economic and strategic grounds, then it needs to decide whether to commit resources to incentivize foreign partners to overlook the problems its nonproliferation policies may cause these partners or seek modifications to those policies. From a pure nonproliferation perspective, it would be preferable for the United States to invest in its nuclear industry to ensure it is competitive globally. But, this does not seem to be a likely course of action for the United States given the myriad political, legal, and budgetary complexities that would be involved. Consequently, this paper recommends several changes to how US nuclear cooperation agreements are negotiated as well as enhancements to overall US nuclear nonproliferation policies. In aggregate, they seek to rebalance and reformulate some aspects of US nuclear nonproliferation policy to make it more effective and efficient, particularly regarding engagement in civil nuclear commerce, but without compromising the core nonproliferation interests the current US diplomatic approach seeks to advance. With respect to nuclear cooperation agreements, the paper recommends the following: Relaxing the current US preference for a legally binding commitment to forswear all enrichment and reprocessing capabilities indefinitely for these agreements, while continuing traditional US policy to discourage these technologies development through various means. Relying on enhanced inspector access and improved verification tools, technology, and practices to provide confidence on the nondiversion of civil nuclear cooperation rather than assurances regarding enrichment and reprocessing that, in any event, are potentially revocable. Adopting a favorable view of “black box” transfers of nuclear power reactors and building this into policy as new, advanced reactor concepts are being explored, developed, and marketed. Creating a new sanctions regime to cover countries that pursue enrichment and reprocessing capabilities after concluding a 123 agreement. With respect to nuclear nonproliferation policy more generally, the paper recommends the following: Developing an annual nonproliferation indicators publication to identify trends in proliferation, including the kinds of goods that proliferators are potentially seeking. This document would also include a list of countries where there are presently enhanced concerns regarding national nuclear programs or concerns about transshipment and export control risk. Its objective would not be to serve as a proxy for future sanctions designations decisions but rather to give a broad perspective of the challenges that exist with particular jurisdictions even—and perhaps especially—if there is no need or justification for sanctions at present. Developing a warning system for sought-after goods. The United States should work with industry to develop a restricted database that identifies sensitive goods that are being sought. This database would be accessible to corporate compliance officers, who would be vetted for access to the information. Within it, the database could also include additional information about the sorts of tactics being employed by proliferators. Making greater use of end use verification as a means of facilitating monitoring of the nonproliferation commitments of countries, particularly regarding dual use technology. This could also be built out to include greater collaboration with partner countries and companies. Amending Executive Order 13382, which provides for sanctions against proliferators of weapons of mass destruction, to add a prong of “willful negligence.”
Topic:
Energy Policy, International Cooperation, United Nations, Infrastructure, Nuclear Power, and Nonproliferation
Political Geography:
United States

2. Powering the Globe: Lessons from Southeast Asia for China’s Global Energy Interconnection Initiative

Author:
Edmund Downie
Publication Date:
04-2020
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
China’s Global Energy Interconnection (GEI) initiative presents a transformational vision for meeting the world’s growing power demand with a globally interconnected electricity grid. The concept involves ultra-high-voltage transmission lines strung across vast distances and smart grid technology tapping large-scale renewable power sources. Chinese President Xi Jinping first touted GEI’s goal to “facilitate efforts to meet the global power demand with clean and green alternatives” at the UN General Assembly in 2015. The ambition of the GEI vision is enormous, especially since there is very little cross-border trade in electricity around the world today. Regional electricity integration initiatives championed by development banks and multilateral organizations have largely struggled against the formidable political, economic and technical complications that accompany interstate electricity trade. China has seen these challenges firsthand in its participation in the Asian Development Bank’s Greater Mekong Subregion electricity trade endeavor, which has progressed fitfully since the 1990s amid regional infrastructure gaps and uneven political support from member states. This report, prepared as part of the Belt and Road Initiative series published by Columbia University’s Center on Global Energy Policy, uses a case study of power trade in the Greater Mekong Subregion to assess the prospects for GEI in catalyzing energy integration around the world. It discusses why Greater Mekong Subregion integration has been slow, how GEI might help accelerate interconnection in the area, and what lessons the region offers for understanding the overall outlook for GEI. Based on this study, the author finds the following: Establishing a GEI-style global energy grid backbone by 2070 would require overcoming an extraordinary set of political challenges. The global grid outlined by GEI for the coming decades serves more as a demonstration of technical potential than a strict blueprint to be implemented. The limited scale attained thus far by the Greater Mekong Subregion project for grid integration and cross-border electricity trading demonstrates the headwinds such multinational efforts can face. Weak internal power sector development in recent decades has left some member states without the generation surpluses and robust power grids necessary to support meaningful levels of trade. In addition, power trade requires a strong degree of interstate political trust, motivated engagement by national utilities, and support from civil society players for the specific generation and transmission projects involved. Integration backers have historically struggled to build consensus across this diverse array of stakeholders. While enormous generation and transmission infrastructure projects are core components of the GEI vision and dovetail with the interests of China’s domestic proponents, considerable debate persists about their merits for fostering the renewables transition. Ultra-high-voltage transmission, a specialty of Chinese utilities, is a particular flashpoint. State interest in cross-border trade has been increasing across many regions in recent years, and more gradual gains in power trade around the world that can aid the renewable transition and bolster regional solidarity are possible. China can contribute greatly to this process: as an investor and contractor in grid projects abroad, as a member state of integration initiatives in Asia, and as an advocate of grid integration in international fora. GEI’s ultimate impact will depend in part on how advocates within China reconcile tensions between strengthening cross-border power trade and promoting domestic priorities, such as advancing the country’s own industrial policy objectives.
Topic:
Climate Change, United Nations, Infrastructure, Green Technology, and Electricity
Political Geography:
Global Focus

3. Electric Vehicle Charging in China and the United States

Author:
David Sandlow and Anders Hove
Publication Date:
02-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
At least 1.5 million electric vehicle (EV) chargers have now been installed in homes, businesses, parking garages, shopping centers and other locations around the world. The number of EV chargers is projected to grow rapidly as the electric vehicle stock grows in the years ahead. The EV charging industry is a highly dynamic sector with a wide range of approaches. The industry is emerging from infancy as electrification, mobility-as-a-service and vehicle autonomy interact to produce far-reaching changes in transportation. This report compares EV charging in the world’s two largest electric vehicle markets -- China and the United States – examining policies, technologies and business models. The report is based on more than 50 interviews with industry participants and a review of the Chinese- and English-language literature. Findings include: 1. The EV charging industries in China and the United States are developing largely independently of the other. There is little overlap among the key players in the EV charging industries in each country. 2. The policy frameworks with respect to EV charging in each country differ. The Chinese central government promotes the development of EV charging networks as a matter of national policy. It sets targets, provides funding and mandates standards. Many provincial and local governments also promote EV charging. The United States federal government plays a modest role in EV charging. Several state governments play active roles. 3. EV charging technologies in China and the US are broadly similar. In both countries, cords and plugs are the overwhelmingly dominant technology for charging electric vehicles. (Battery swapping and wireless charging have at most a minor presence.) China has one nationwide EV fast-charging standard, known as China GB/T. The US has three EV fast charging standards: CHAdeMO, SAE Combo and Tesla. 4. In both China and the United States, many types of businesses have begun to offer EV charging services, with a range of overlapping business models and approaches. A growing number of partnerships are emerging, involving independent charging companies, auto manufacturers, utilities, municipalities and others. The role of utility-owned public chargers is larger in China, especially along major long-distance driving corridors. The role of automaker EV charging networks is larger in the United States. 5. Stakeholders in each country could learn from the other. US policymakers could learn from the Chinese government’s multiyear planning with respect EV charging infrastructure, as well as China’s investment in data collection on EV charging. Chinese policymakers could learn from the United States with respect to siting of public EV chargers, as well as US demand response programs. Both countries could learn from the other with respect to EV business models. As the demand for EV charging grows in the years ahead, continued study of the similarities and differences between approaches in China and the United States can help policymakers, businesses and other stakeholders in both countries and around the world.
Topic:
Science and Technology, Infrastructure, Green Technology, and Electricity
Political Geography:
United States, China, Asia, and North America

4. Interactions between a Federal Carbon Tax and Other Climate Policies

Author:
Justin Gundlach, Ron Minsk, and Noah Kaufman
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Putting a price on carbon is a critical part of a low-cost strategy for reducing greenhouse gas (GHG) emissions, and a national carbon tax is a rare example of a climate change policy that has found bipartisan support in the United States. In 2018, legislation establishing a carbon tax was proposed by Democrats, Republicans, and bipartisan groups of US congressmen. However, while passing a carbon tax would certainly prove a significant step toward slashing emissions, simply adding a carbon tax to current policies is unlikely to achieve an emissions target at the lowest cost. Designing a carbon tax that contributes to achieving greenhouse gas reduction targets effectively and efficiently will require an examination of whether other new policies are also needed and whether existing policies can or should be changed or eliminated. With more proposals expected in 2019, such an examination is critical to ensuring both sufficient emissions reductions and an efficient set of policies that keep costs in check for taxpayers. As part of a broader carbon tax research program at the School of International and Public Affairs Center on Global Energy Policy at Columbia University, we have developed a framework for considering the interactions between a federal carbon tax and other policies that influence greenhouse gas emissions. Toward the goal of helping to design better policies, we identify policies and programs that are “complementary” to a carbon tax or “redundant.” A policy is defined as complementary if it: enables more cost-effective reductions of carbon dioxide emissions than a carbon tax would achieve on its own; or reduces GHG emissions and achieves a separate policy objective more cost-effectively than a federal carbon tax would on its own. Conversely, a policy is defined as redundant with a federal carbon tax if it leads to additional costs to society without achieving additional emissions reduction. In developing this framework, we recognize that real-world policies often do not fall cleanly into either category and that neither specifying the framework nor making the categorizations is an exact science. It is often difficult to identify a policy’s objective or evaluate its cost-effectiveness. In addition, the extent to which a policy complements a carbon tax depends on the nature of the carbon tax. Most obviously, with a lower carbon tax rate, fewer emission reductions would be achieved, and additional policies may be needed to make up the difference between the outcome and a science-based emissions reduction target. The results of the work, highlighted in the following table, indicate a relatively large number of policies can complement a carbon tax, such as those that support innovation in low-carbon technologies, tackle behavioral barriers to more efficient energy use, or improve public infrastructure and address barriers to reducing emissions unrelated to the price-related barriers addressed by a carbon tax. Conversely, the paper identifies regulations that force entities that pay the carbon tax to take specific actions to reduce their emissions, such as Environmental Protection Agency regulations of stationary sources of carbon dioxide emissions under section 111 of the Clean Air Act, as redundant with the carbon tax. The paper does not recommend which policies should be eliminated, changed, or added but intends to provide policy makers with information that will help them make these decisions.
Topic:
Climate Change, Science and Technology, Green Technology, and Carbon Tax
Political Geography:
United States

5. Transatlantic Sanctions Policy : From the 1982 Soviet Gas Pipeline Episode to Today

Author:
Richard Nephew
Publication Date:
03-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Though many commentators have suggested that the Trump administration’s approach with respect to sanctions threats against Europe is “unprecedented,” the relative comity in US-European sanctions policymaking in recent years may be the aberration. The United States and Europe have often disagreed about whether, when, and how to impose sanctions against even common adversaries and in order to resolve mutually recognized problems. One of the most serious examples of this occurred in 1982 when the United States and its European allies broke sharply over the US decision to impose sanctions on the Soviet Union over the crackdown on the Solidarity Movement in Poland. The crisis that emerged tested the NATO Alliance, European governments, and the Reagan administration. This paper reviews the 1982 example and then sets some lessons from it against the current US-European relationship. It offers an assessment not only of the changing political, economic, and social factors that have contributed to greater compliance with US sanctions dictates on the part of Europe over the last few years, but also the relatively brittle nature of this cooperation. It underscores that, though the United States may be in a relatively predominant economic position at present, this situation may not and likely will not persist indefinitely. From this perspective, it concludes with three recommendations for how to modify current US sanctions practice in order to help manage partner concerns and avoid future crises. Adopting a process more akin to the Federal Register notice procedure for new sanctions programs. There is a yawning need for more consultation in advance of US sanctions decisions that could have major market moving and alliance shaking potential. It is not necessary, nor would it be prudent, to have a process that required public scrutiny of individual or entity asset freeze scenarios, but for other, more broad sanctions initiatives, it would help to avoid unintended consequences and ensure a more comprehensive debate. Exceptions could also be made to this rule in the event of a legitimate emergency. Establishing an independent commission to evaluate US sanctions policies and challenges. Congress should set up an independent, bipartisan commission to examine the issue of US sanctions policy now and for the next twenty-five years. Its assignment would be to evaluate how sanctions have been used in the recent past, the international operating environment for sanctions now, and the dimensions of the sanctions policy challenge in the future. Improving congressional oversight of the sanctions process. Congress should also require evaluation reports for individual sanctions regimes as a standard part of the executive branch’s use of the International Emergency Economic Powers Act (IEEPA). Of course, similar requirements ought to be considered a standard part of congressionally mandated sanctions as well.
Topic:
Foreign Policy, Sanctions, and Global Political Economy
Political Geography:
United States and Europe

6. Rural Electricity Supply: Commodity or Entitlement?

Author:
Johannes Urpelainen, Brian Blankenship, and Jason Wong
Publication Date:
06-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Quality of electricity service remains poor in many developing countries. Reforms to distorted pricing mechanisms involving citizens increasing their payments in exchange for better service must be done carefully to avoid political backlash and persistent theft. Are people not willing to pay for better electricity quality because they feel entitled to electricity provision, or is it because they do not trust one another to also do their part? In a survey conducted in rural Uttar Pradesh, India, we examine factors that influence stated willingness to pay for better service (i.e., more hours of power per day) among rural households. Our results indicate that the general levels of trust are low, and that entitlement plays less of a role as to whether households are willing or not to contribute to improved electricity quality. Low willingness to pay remains a major obstacle to pricing reform. Generalized trust is strongly associated with higher willingness to pay for better electricity. Delays in service improvements and a lack of community support for pricing reform reduce willingness to pay for better quality. To better foster public support for increasing payments in return for better service, we provide three recommendations as follows. Building trust within the community, across agents, and with utilities could help achieve better rural electricity outcomes. Citizens are unlikely to be willing to contribute or make efforts to participate if the background level of trust remains low. Utilities can help by making credible promises and reducing service delay, or first deliver service improvements before collecting increased payments, as to build upon the trust with the community members, who will in turn be more willing to pay. Properly reducing incentives for theft is important for rural electricity reform. 76 percent of the respondents reported theft as an important obstacle to proper electricity supply, and based on what is observable and on the survey results, we estimate a lower-bound usage rate of illegal night lines to be 20 percent. While proper enforcement can be difficult, a potential solution is to focus on the katiyamen and on the officials who check the villages for theft activities. To disincentivize katiyamen, perhaps a training conversion into a utility company position can reduce katiya spread and actually help convince local residents to join the legal grid system. With officials who neglect theft through night lines or meter tampering, a proper incentive scheme should be in place to prevent accepting bribes. Currently, the incentive structures are set up such that the offending households have an incentive to bribe or bypass the proper process, creating these collected rents—the gap between the willingness to accept illegal payments and the punishment for the resident. Further policy should properly reduce incentives for theft, not only from the household perspective but also from a systems perspective. Poverty alleviation must be taken into account in electricity reform policies. The average willingness to pay for extra hours of electricity tends to be very low—at 40 rupees for four more hours, on average. Continued poverty remains a significant obstacle for proper electricity reform in rural India, and national policy should take into account the impact of income when designing policies to improve electricity outcomes.
Topic:
Poverty, Infrastructure, Rural, and Electricity
Political Geography:
Global Focus

7. The Risk of Fiscal Collapse in Coal-Reliant Communities

Author:
Adele Morris, Noah Kaufman, and Siddhi Doshi
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
If the United States undertakes actions to address the risks of climate change, the use of coal in the power sector will decline rapidly. This presents major risks to the 53,000 US workers employed by the industry and their communities. 26 US counties are classified as “coal-mining dependent,” meaning the coal industry is a major employer. In these areas, the industry is also an important contributor to local government finances through a complex system of property, severance, sales, and income taxes; royalties and lease bonuses for production on state and federal lands; and intergovernmental transfers. While climate-related risks to corporations have received scrutiny in recent years, local governments—including coal-reliant counties—have yet to grapple with the implications of climate policies for their financial conditions. Importantly, the risks from the financial decline of coal-reliant counties extend beyond their borders, as these counties also have significant outstanding debts to the US municipal bond market that they may struggle to repay. To be sure, national climate policy in the United States is uncertain. Experts have long recommended strong policy action to reduce emissions, and for years, policy makers have largely ignored their advice. Nevertheless, with growing support by the public and policy makers, meaningful climate policy in the United States may be on the horizon, and those dependent on coal should be looking ahead to manage their risks. This paper examines the implications of a carbon-constrained future on coal-dependent local governments in the United States. It considers the outlook for US coal production over the next decade under such conditions and explores the risk this will pose for county finances. The paper also considers the responsibilities of jurisdictions to disclose these risks, particularly when they issue bonds, and the actions leaders can take to mitigate the risks. In short, the paper finds the following: ● Coal production in the United States fell by one-third between 2007 and 2017. Projections of the US energy system show this decline continuing gradually under current policies. However, even a moderately stringent climate policy could create existential risks for the coal industry, with potential declines in production of around 75 percent in the 2020s. ● A careful look at three illustrative counties shows that coal-related revenue may fund a third or more of their budgets. The exposure is compounded because school districts and other special districts within the counties also receive coal-dependent revenue. The complex system of local revenue instruments and intergovernmental transfers plus a lack of sufficiently detailed budget data makes it difficult to parse out just how reliant jurisdictions are on the coal industry. ● Estimates of the direct linkages between the coal industry and county budgets will almost certainly understate the risks because lost economic activity and jobs will have ripple effects across the economy. Case studies show that the rapid decline of a dominant industry has led to downward spirals and eventual collapses of local governments’ fiscal conditions, including the inability to raise revenue, repay debt, and/ or provide basic public services. ● Coal-dependent communities have a variety of outstanding bonds, and the risk of collapse of the coal industry threatens their ability to repay them. Despite regulations requiring disclosures to reflect risks to the financial health of municipalities, our review of the outstanding bonds indicates that municipalities are at best uneven and at worst misleading (by omission) in their characterizations of climate-related risks. Ratings reports are not much better than official statements in describing the risks associated with the exposure of some local governments to the coal industry. ● Climate policies can be combined with investments in coal-dependent communities to support their financial health. A logical source of funding for such investments would be the revenues from a price on carbon dioxide emissions, a necessary element of any cost-effective strategy for addressing the risks of climate change. A small fraction of revenue from a federal carbon price in the United States could fund billions of dollars in annual investments in the economic development of coal-dependent communities and direct assistance to coal industry workers. ● In considering reforms, several questions emerge for stakeholders. These include whether regulators should develop additional requirements for the disclosure of risks from future climate policies; whether ratings agencies should increase attention to the risks to local governments of climate policies; and whether stakeholders in the municipal bond market, such as borrowers, insurers, and underwriters, are appropriately accounting for risks to the coal industry.
Topic:
Climate Change, Energy Policy, Coal, and Domestic Policy
Political Geography:
United States

8. PG&E: Market and Policy Perspectives on the First Climate Change Bankruptcy

Author:
John Macwilliams, Sarah Lamonaca, and James Kobus
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
The Pacific Gas and Electric (PG&E) bankruptcy, which was caused by liabilities resulting from massive wildfires, has widely been called the first climate change bankruptcy. It will likely not be the last, as climate change exacerbates natural disasters, leading to more frequent and intense wildfires, storms, and flooding. Wildfires alone could become up to 900 percent more destructive in certain regions by midcentury, and utility assets will also be increasingly exposed to threats stemming from hurricanes, rising sea levels, and other climate-related events. These extreme weather events will increase costs to utility-sector stakeholders, including investor-owned utilities, state and local governments, ratepayers, and taxpayers. These risks could place financial stress on utility companies, drive up electricity rates, crowd out essential investment in renewable energy and grid upgrades, and disrupt service. In this paper, Columbia University’s Center on Global Energy Policy reviews and analyzes the PG&E bankruptcy, assesses how capital markets have reacted to the bankruptcy through the lens of valuations in the US utility sector, and discusses policy implications of California’s recent legislative response to wildfire risk. This paper examines market indicators to assess investor expectations of climate risk exposure and likely cost allocation. Neither debt nor equity markets suggest widespread concern about climate risk in the utility sector. In the absence of strong market signals to encourage climate risk mitigation, the authors find that policy frameworks are needed to ensure that companies make necessary preventative investments and to define how costs will be allocated among stakeholders. This paper also reviews a recently passed California bill aimed at achieving these objectives and the lessons and best practices it offers for other policy makers. In short, the paper finds the following: Market indicators suggest that the California wildfires and subsequent PG&E bankruptcy have not caused imminent concern about climate risks in the utility sector. Equity valuations for the sector remain strong, with a utility stock index trading at a higher-than-average premium to the market benchmark. In credit markets, regulated utilities in the United States have raised more than $50 billion of corporate debt in 2019 to date, and borrowing spreads are currently below historical averages. There are several reasons why markets may not reflect widespread climate risk to utilities, despite the scientific evidence around likely future damage. Investors may believe that cost increases from climate change will occur too far in the future to materially impact the present value of their investments. Even if investors believe that climate change risks are material to valuation, they may also believe that such risks will not be considered by other investors for some time. Investors may be viewing wildfires as a California-specific risk, though the regional skew of wildfires is likely to shift significantly in coming years. They may lack the information or modeling tools for assessing the likelihood and geographic dispersion of high-impact tail events, such as the wildfires that PG&E faced. Financial markets may also reflect the belief that the costs of climate change in the utility sector will fall predominantly on ratepayers, insurance companies, and/or taxpayers rather than investors, and therefore investors may not view themselves as materially exposed. California’s recent creation of a wildfire insurance fund with contributions from both ratepayers and companies provides important policy lessons for designing comprehensive frameworks to allocate climate damage costs. These include the strengthening of both regulatory and corporate climate resilience expertise, mandating preventative investment as a prerequisite for cost-recovery mechanisms, defining utility financial exposure for climate damage situations, and providing cash for utilities to provide essential services when facing large disasters. The policy also presents some potential pitfalls that may be instructive for other state policy makers. The legislation sets aside large reserves for future damage, a necessary measure, but one that will result in higher electric bills. The bill does not allow utilities to earn a return on safety-related spending, which broadly diminishes incentives for proactive climate mitigation investment. The potential insufficiency of the wildfire fund also creates uncertainty about future cost allocation. Finally, failing to reform the California legal framework that allows utilities to be held liable for damages they did not cause perpetuates risks for companies and ratepayers. If the first climate change bankruptcy is indicative of a new reality, it is not that utilities are going to go bankrupt overnight. Rather, climate disasters will increasingly add financial stress to utility-sector stakeholders, as costs accumulate from both acute events and damaging extreme weather impacts. Adapting the regulatory bargain for a climate-exposed future will require lawmakers, regulators, and shareholders to develop new approaches and new incentive structures to ensure an accountable, robust utility sector. Moreover, while climate change is already presenting real financial challenges to utilities, it will not be the only sector to face large climate-driven costs. Other corporate actors can look to the utility experience to better understand how policy makers, investors, and companies will respond to the growing financial threat from climate change.
Topic:
Climate Change, Economics, Gas, and Electricity
Political Geography:
United States and California

9. Engaging State-Owned Enterprises in Climate Action

Author:
Philippe Benoit
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
Policy makers, academics, and others have devoted significant effort over the past three decades to considering how best to incentivize households and private companies to reduce their greenhouse gas (GHG) emissions. There has been much less discussion about how best to incentivize state-owned enterprises (SOEs) -- companies that are either wholly or majority owned by a government -- to cut emissions. Yet when it comes to energy sector GHGs, these state companies are among the world’s leading emitters. They are major emitters at both the country and global levels, notably from electricity generation. In the aggregate, they emit over 6.2 gigatonnes of carbon dioxide equivalent per year in energy sector GHGs, which is more than every country except China. Public sector companies are also major providers of low-carbon alternatives, such as renewables and nuclear power, and importantly, they often operate under incentives that are quite different from those facing their private sector counterparts. Given the emissions profile of SOEs, the nature of their corporate mandates, and their ownership structure, Columbia University’s Center on Global Energy Policy undertook research to examine how best to engage these companies in efforts to lower greenhouse gas emissions as part of its ongoing work on climate change. The paper explores the role of these public sector companies in climate change, examines the effectiveness of market-oriented solutions such as carbon taxes in changing SOE behavior, and evaluates some other potential strategies for reducing their emissions. In short, the paper finds the following: The state-ownership structure of SOEs allows governments to exercise shareholder power to press for the implementation of their climate policy preferences. Providing public sector financing and making associated infrastructure improvements are other ways that a government can encourage its SOEs to invest in low-carbon alternatives. In contrast, many SOEs operate with nonfinancial mandates, market protections, and other conditions that limit their responsiveness to carbon pricing mechanisms that are effective in changing private sector behavior. There are other ways to alter public sector companies so that they embrace a greener pathway without being directed, especially if a firm’s management determines the pathway will serve its corporate interests. This can be especially important for state-owned companies that have the political weight to resist government climate policy pressures. In emerging economies with large SOE emissions and with governments willingly direct their SOEs, using these companies to reduce emissions is a policy tactic that can present implementation and other advantages because it requires the government to target a limited number of companies that the state already owns and controls. How much a government prioritizes climate change relative to other goals is the most critical factor that will determine the extent to which its SOEs prioritize low-carbon investments. Successfully merging climate goals into growth objectives, at both the broader economic and the SOE-company levels, increases the likelihood that a state company will engage in the low-carbon transition in a sustained manner.
Topic:
Climate Change, Energy Policy, Science and Technology, and Green Technology
Political Geography:
Global Focus

10. 2019 Guide to Chinese Climate Policy

Author:
David Sandlow
Publication Date:
09-2019
Content Type:
Working Paper
Institution:
Center on Global Energy Policy
Abstract:
In 2018, China was the world’s leading emitter of heat-trapping gases by a wide margin. Its policies for limiting emissions will have a significant impact on the global climate for decades to come. From a historical perspective, China’s status as the world’s leading emitter is relatively recent. During most of the 19th and 20th centuries, Chinese emissions were modest. Then, in the early part of this century, as the Chinese economy boomed, Chinese emissions began to skyrocket, overtaking those from the United States around 2006. China’s cumulative emissions of carbon dioxide since the beginning of the Industrial Revolution are roughly half those from the United States. (Carbon dioxide, the leading heat-trapping gas, stays in the atmosphere for many years once emitted.) China’s leaders have declared that the impacts of climate change “pose a huge challenge to the survival and development of the human race” and that China is “one of the most vulnerable countries to the adverse impacts of climate change.”[11] The Chinese government has adopted short- and medium-term goals for limiting emissions of heat-trapping gases and a wide-ranging set of policies that contribute to meeting those goals. Those policies are shaped in part by other objectives, including promoting economic growth, cutting local air pollution and developing strategic industries. This Guide examines Chinese climate change policies. It starts with a review of Chinese emissions. It then explores the impacts of climate change in China and provides a short history of the country’s climate policies. The bulk of the Guide discusses China’s principal climate policies, explaining the policy tools the Chinese government uses to address climate change and related topics. Appendices provide background on institutions that shape climate policy in China. What are “climate policies”? Monetary and fiscal policies affect emissions and could therefore qualify, as could policies on many other topics. This Guide does not catalog all policies that could affect emissions or the climate, but instead focuses on policies most directly related to climate change, including those on energy, transportation, urbanization, forestry, climate adaptation and climate diplomacy. In choosing policies to focus on, I am guided in part by international convention and in part by governments’ extensive reporting on this topic. The Intended Nationally Determined Contributions submitted by more than 160 nations to the UN Framework Convention on Climate Change show a broad international consensus that policies on energy, transportation, urbanization and forestry, among others, are considered “climate policies.” The Chinese government’s official documents on climate change show the same.[12] Several official documents are important resources for anyone interested in China’s climate policies. Every year the National Development and Reform Commission (NDRC) publishes a report on China’s Policies and Actions for Addressing Climate Change.[13] These reports provide detailed information on a range of topics. Other key sources for understanding China’s climate policies include: China’s Intended Nationally Determined Contributions, submitted to the UN Framework Convention on Climate Change in June 2015;[14] Work Plan for Controlling Greenhouse Gas Emissions in the 13th Five-Year Plan, issued by the State Council in October 2016;[15] China’s First Biennial Update Report on Climate Change, submitted to the UN Framework Convention on Climate Change in December 2016;[16] China’s Second Biennial Update Report on Climate Change, submitted to the UN Framework Convention on Climate Change in December 2018;[17] and China’s Third National Communication on Climate Change, submitted to the UN Framework Convention on Climate Change in December 2018[18] Several themes run through these documents, including strong commitments to low-carbon development, cutting coal use, scaling up clean energy sources, promoting sustainable urbanization and participating actively in climate diplomacy. Implementation is fundamental to any policy. This is especially true in China, where policy implementation can be a considerable challenge. Key ministries may fail to coordinate. Resources for enforcement may be lacking. Policies designed to achieve different objectives may conflict. The priorities of provincial leaders may not align with policies from Beijing. For these reasons and more, stated policies—while important—are just part of the picture when it comes to understanding the Chinese response to climate change. The organization of this Guide reflects that. Most chapters start with a section of background facts. This background provides context and can help in forming judgments on the impacts of policies to date and potential impacts of policies in the years ahead. Where implementation has been especially challenging or successful, that is highlighted. This Guide can be read in parts or as a whole. Individual chapters are designed to stand alone and provide readers with information on discrete topics. The Guide as a whole is designed to provide an understanding of China’s response to climate change and the implications of that response for China and the world. The Guide can be accessed in three ways: by purchasing it as a book on Amazon.com by visiting the Guide to Chinese Climate Policy website at https://chineseclimatepolicy.energypolicy.columbia.edu/, and by downloading it for free from the website above or the website of Columbia University’s Center on Global Energy Policy—http://energypolicy.columbia.edu/ This is a “living document.” Many of the facts and policies it describes will change in the months and years ahead. As that happens, this Guide will be updated. New editions of the Guide will be released regularly.
Topic:
Climate Change, Energy Policy, Science and Technology, and Green Technology
Political Geography:
China and Asia