[David Goldston] Good afternoon, everybody. Welcome to this MIT congressional webinar on climate. Thanks for joining us. We have three experts from MIT today from a variety of fields. You already know their bios, so I won't take time on that.
I'm David Goldston of MIT's Washington Office. I want to thank two MIT students, Jessica Horowitz and Melissa Stok, who are involved with the Environmental Solutions Initiative at MIT for getting us going on this and helping arrange it. A couple of quick things.
We are recording this, and it will be available afterwards. So just be aware of that. Questions. Some of you may have heard as we were trying to figure out exactly how we're handling that. We will take the questions through chat.
So just please chat to everyone with any questions you have, and I'll moderate and ask them. We'll start with some opening comments from our speakers. I'll have a few questions, and then we'll start taking questions from all of you.
So we're going to get started with our speakers each talking about what they think are the steps that are most needed to address climate in the near-term. And it'll be John Sterman, then Jessika Trancik, then Chris Knittel. They'll each talk for about five minutes, and then we'll go to the Q&A. So John, take it away.
[John Sterman] Great. Thank you very much, David. And welcome, everybody. I thought what I would do is use our interactive climate policy simulator, En-ROADS, which we developed at the MIT Sloan Sustainability Initiative jointly with the nonprofit, nonpartisan Climate Interactive, to make a couple of points. And I know a number of folks in the audience today have seen it, but perhaps you have not seen the most recent update which was just made public last week.
And you should be seeing the screen. And what you're seeing is that in the new reference baseline case– global primary energy use on the left, emissions on the right– due to changes in the economy, greater progress in renewables, cost reductions in renewables and other changes, the baseline is now suggesting an expected level of warming of 3.6 C or 6.5 Fahrenheit above pre-industrial levels. I'm going to use Fahrenheit today because of being in this country. But you'll see both here at any time. So what I wanted to do was very quickly go over some of the main policy and actions to address the climate crisis, starting with things that many people are advocating for but that don't seem to be high leverage. Remember that what we need to do is cut emissions by about half globally in the next decade in order to have a decent chance of limiting the expected warming to no more than 3.6 Fahrenheit
(2 C) and even deeper cuts to be on a one and a half degree pathway. And then we have to go all the way to zero by 2050 approximately, and possibly need some negative emissions. That's very ambitious. So normally what we do is we have you experiment. And remember, this model is completely free and available for you at en-roads.org, so don't take my word
for what's happening here, but try it out yourself. So let's take a look at some ideas that are very common and popular here for addressing the climate crisis. And one is the Trillion Trees Initiative: afforestation on a massive scale in the United States and globally. So we're at 6.5 Fahrenheit right now, 3.6 C. We need to get down to 3.6 Fahrenheit, 2 C. Let's plant a trillion trees and see what happens.
And it simply doesn't make much difference. It's worth a tenth of a degree. And the reason for that is it simply takes so long to acquire the land, plant the trees, and especially for all those trees to grow large enough to be removing significant amounts of carbon from the atmosphere.
It also takes a very substantial amount of land to do that, here, approximately twice the total land area of India to get that impact. So while planting trees, reforestation, is important on many grounds– ecological preservation, extinction risk reduction, and so forth– it simply is not a significant lever on the climate crisis. Well, what about a radical technical breakthrough? For example, fusion power, or an artificial leaf that would turn sunlight directly into electric power, or hydrogen? Let's try that.
Now, this is a technical breakthrough. Of course, you can't schedule a breakthrough, but what if we were able to have a major breakthrough today and produce electricity with no carbon whatsoever? And what you see is, it makes relatively little difference here: 0.2 degrees Fahrenheit, 0.1 degrees C. And maybe the breakthrough isn't big enough. I'll make it even bigger, meaning it's happening sooner, it's commercialized quicker, and it's even cheaper relative to coal than the first one. And it still doesn't make that much difference.
And you can see why very clearly. First of all, it just takes a long time to go from the breakthrough in the lab, to commercial viability, to adoption and diffusion, and scale up around the world. And in the meantime, you're still burning all the fossil fuels.
And every minute they're in the atmosphere, they're warming the climate. A more subtle effect is – and you can see it in this graph on the left – that as the zero-carbon energy is adopted, it's squeezing out fossil fuels, but it's also suppressing the other renewables. The green band here is renewables, including wind, solar, geothermal, hydro, and you get a lot less of those if there's this magical new source.
So that also is a relatively low-leverage action. Same is true for conventional nuclear. You get a lot more of it, doesn't make a difference to the climate because it takes so long to permit, design, build, and commission conventional plants, and it also suppresses the other renewables. Bioenergy, likewise, has a relatively modest effect, and in fact, the dominant form of bioenergy in the world today is wood, burning wood for electric power.
And it actually is harmful to the climate over the rest of this century because you're getting more CO2 per kilowatt hour of usable energy from burning wood than you do from the fossil fuels, even coal, whereas the regrowth of those harvested forests is not certain and takes a very, very long time. So those are some policies that are widely discussed but don't have high leverage. So what does have high leverage? Well, there's a variety that do. Notably, a price on carbon. That has a big impact.
We went from 6.5 to almost a full degree Fahrenheit lower, and that's only at $74 a ton. If we rounded up to $100 a ton, you have a full degree Fahrenheit of impact.
That's a very effective policy. Of course, you want that to be fair and equitable, so the revenue from that price on carbon should be fully rebated to the people, either per capita at equal basis, or perhaps especially directed at low and moderate income folks. So that's very helpful. What else is very helpful? [David Goldston] John, if you could start winding up, that'd be great.
[John Sterman] I'm sorry? [David Goldston] If you could start winding up, that would be great. [John Sterman] Yup. Other highly effective policies are energy efficiency in transportation and buildings and industry, electrification of both of those sectors once you've decarbonized the energy system, reducing deforestation, and especially cutting the emissions of methane and the other non-CO2 gases. And here we are with a 3.6 – 2 degrees C – scenario without any technological magic.
So we have a wide range of high-leverage policies here that can make a significant difference in the United States and around the world. None of them require magical technical breakthroughs that can't be scheduled, and all of them can be done with what we have in hand today, plus the normal innovation and improvements that come from scale and learning. Thank you. [David Goldston] Great. Thanks, John.
Jessika? [Jessika Trancik] Great. Hey, everyone. I'm going to focus my remarks on a key priority for federal climate policy, which is to accelerate technology innovation. And here technology means not just hardware and physical infrastructure, but also software, business models, and other forms of codified knowledge that support institutional and behavioral change.
And the main point I'd like to share is about how we can be more intentional and ultimately more successful in using government policy to accelerate beneficial technology innovation by applying new insight on the process of policy-induced innovation. I should say that everything I'm saying here sort of builds upon and is not in disagreement with what John Sterman just said. When we think about innovation, we're thinking not just about new technology, but it's a constant process that's evolving.
So whatever carbon price and suite of other policies that are there, the more we can accelerate that process of beneficial technology innovation, the faster the emissions reductions and other benefits can – that other benefits can accumulate. And so it's really important to think about this process of technology innovation. It's one of our highest leverage policy actions that can be taken. OK, so how does the process of policy-induced technological innovation work, and how do we shape it toward greater benefit? This is really what I've been looking at in my research over two decades. And I've gone deep under the hood of technology innovation to understand the process at several interacting levels, including the level of devices, the physics and the engineering, company strategy, and emergent phenomena like economies of scale, and the role of government policy, and this has led to some useful policy insight.
So let's look at the case of solar energy costs, which have fallen by 99% over the last four decades. In a recent paper we asked, what was the role of government policy? And specifically, two different types: funding for research and policies that stimulated market expansion. What we learned was that these two types were both pivotal.
We estimate that 30% of the cost decline in solar energy was stimulated by government funding for research, and about 60% by market expansion policies around the world. And these are things like feed-in tariffs, renewable portfolio standards. They could be carbon prices in the future. One important conclusion is that it's very unlikely that research funding alone would have brought about the same results. So market expansion policies jump-started this massive process of competition and innovation in private industry policy, and industrial innovation activity in the private sector went hand-in-hand.
So looking forward, this process can be repeated and improved upon for faster progress, but it's not going to happen on its own. We need to tailor policy nudges to characteristics of technologies and stages in technological development. So let's take another example of nuclear fission. Here, the trends in cost are in the opposite direction. US nuclear costs have been increasing.
And when we apply that same mechanistic modeling approach, we uncover different priorities than for solar energy. The priorities in this case are for research development and field demonstrations of designs that move more of the construction process into manufacturing plants, and thereby address these ballooning construction costs. Now, when we look at battery technologies, we learn about key research funding priorities to avoid premature technology lock-in and ensure scalable materials. And different tailored insights emerge for how to nudge forward innovation for many other technologies. Now, importantly, nudging the innovation process forward with policy means defining that word "forward." For this, we need metrics to measure progress in individual technologies against energy system-wide goals.
And this can help unleash a competitive process toward a common goal, so many different efforts all working toward a common goal. And when we look at electric vehicles, for example – just to take one example – we learn how to measure charging station rollout strategies against people's needs. Or for grid-scale storage, we learn how much costs have to fall to enable further renewables integration without increased electricity costs. Critically, through measuring progress, we must track – measuring progress, rather, means tracking the distribution of impacts on communities. We really have to and can do better in accelerating innovation that equitably benefits and involves communities, while growing high-quality and sustained jobs and local economic growth opportunities, supporting these growth opportunities. So the new mechanistic insight on innovation that I described allows us to intentionally support these beneficial outcomes that go far beyond simply reducing the costs of low-carbon technology.
So to summarize, a key priority for federal climate policy in my view is to be more intentional in finding the right nudges to accelerate innovation, shape it toward beneficial outcomes. We need to support portfolios that are diverse enough to manage uncertainty about the future, but not so diverse as to slow progress. And I'll go through some specific examples of – maybe if we have time, David – of government initiatives. But some of them involve – I can go through this a little bit later, but some of them involve supporting energy services as a whole, not just looking at electricity, transport, industry and heating sectors in silos, changing institutional structures to allow cross-agency cooperation, and then systematically supporting community involvement in the innovation process. This is all very doable, I believe.
And really, there's two reasons why I have this optimism. First, we have several low-carbon technologies that have entered these virtuous cycles in the marketplace, including solar energy, wind energy and batteries. And second, we have new knowledge of the process of policy induced technology innovation that can allow us to be more intentional and ultimately more successful. So thank you. [David Goldston] Thanks, Jessika. Appreciate the remarks.
Just a reminder to everybody, feel free at any point to start putting questions in the chat and we'll start taking them after I give some questions to our speakers. Chris. [Chris Knittel] Great. Thanks, David. And thanks for everyone who are attending, and good afternoon.
So I wanted to actually key in on something that Jessika was talking about, which is an equitable transition. And first, a bit of a plug of a large-scale research project going on at MIT right now. And this is led by Ernie Moniz, and we've called it the Roosevelt Project. And this is a joint initiative between MIT CEEPR – the Center for Energy and Environmental Policy Research – and Harvard. And actually, the goal of this research project is to understand how we can transition to a low-carbon economy in a way that produces high-quality jobs, minimizes worker and community dislocations especially among at-risk communities, and really harnesses the benefits of these new energy technologies in a way that can actually spur regional economic development.
And I'm going to focus my five minutes on two maps that I generated as part of this Roosevelt Project that I believe is both a challenge and an opportunity for climate change policy. So before I show you my maps, I just want to say that the Roosevelt Project is split into two phases. The first phase we wrote roughly nine white papers that really take both a retroactive and a prospective stock of what transitions we successfully navigated in the past, what will be required to navigate successfully this new transition in the future. I put the website there where you can freely download these white papers to understand what we've done. And we're now in the second phase, where we're in four communities, actively working with the communities and policymakers inside those communities to pilot and test different ways to speed up the transition, and also transition in a way that, like I said, can safeguard those at-risk communities. So please, come back to that website in about six months to a year to understand the lessons that we've learned there.
So as part of this project, I created along with Tomas Green, who was a former graduate student at MIT, the two maps that I'm going to show. And this first map is the average carbon footprint for every census tract in the US. And there's about 72,000 census tracts, so this is a very granular scale to really understand carbon footprints and how they're distributed around the US. And this is the challenge and the opportunity. So the challenge here, as you can see, is that carbon footprints are much higher in middle America than they are on the coasts.
And if I were to zoom in on urban areas, you would see they're much lower in urban areas relative to rural and suburban areas. This is going to be a challenge because we really need to understand how a policy, a given policy, is going to impact different regions of the US and the people that live in those regions. It's a potential opportunity in the sense that, if we can adopt policies that both decarbonize and generate revenue at the same time, like a carbon tax that John was talking about earlier, then we can use those revenues internally to the policy to safeguard these communities.
And what we work out in the paper is ways to design a cap and dividend plan that keeps the money inside of different regions in the US, so you're not sending money out from middle America to the coasts and from rural communities into the cities, which I think would be devastating and probably death blow to a particular policy. The next thing I want to mention and show is a map of what electricity-specific carbon footprints look like. So if you look at just the electricity side of the total carbon footprint that I showed you before, I think the challenge is even tougher here.
And the one thing that I'll mention is, many of the policies that we tend to rely on, or at least potentially advocate for at a national scale, might actually lead to a lot of money flowing out of those rural communities and middle America into the coasts. So just imagine, for example, a clean energy standard or a renewable portfolio standard that's nationwide. If you don't design that correctly then what you're effectively going to be doing is taxing all of the red and purple areas on this map and subsidizing all the green, yellow, and blue areas. And again, that seems to me as an amateur political scientist a policy that will have a number of negative ramifications, either before it's adopted or after it's adopted. So I think we need to be smart.
We need to think about policies that can generate the revenue to undo the negative effects of carbon policy. I think we are fooling ourselves if we think that this is a free lunch for everybody, so that we really do need to be thoughtful about which policies we adopt and the specifics of those policies. And I look forward to working with anyone on the call today to design policies to safeguard those at-risk communities. And with that, I'll turn it back over to David. Thanks. [David Goldston] Thanks, Chris.
Before I get to some general questions, one question in the chat is specifically on the map, so why don't I turn to that immediately? The person is asking, why would upstate New York, which is relatively rural and cold, have such a low carbon footprint? [Chris Knittel] Yeah, so that's partly because their electricity is very clean. And also just that there's two effects, not only the carbon intensity of the fuel or product you're using, but also how much you're using. So they have relatively clean electricity and they're not consuming a ton.
Even though they're using propane and natural gas for heating, on the electricity side, they're not consuming a lot of electricity as well. [David Goldston] Great, thanks. So let me start with a general question to all of you, and this came up a little bit already in several of the presentations, about the nature of where we are on technology.
So, to what extent is getting where we need to go to meet the Paris targets a matter of scaling up existing technology, and what are the main barriers to that? And to what extent is it that we actually need technologies that we don't have now? Say, better energy storage, for example. So Jessika, why don't I start with you, and then – [Jessika Trancik] Yeah, sure. Great.
Thanks for the question. So, you know, we've made a lot of progress in technology, but the way I think about it is – and I think it's a useful way to think about it – is that this is a constantly evolving process. So some technologies are already taking off in the marketplace, solar energy, wind energy, electric vehicles to some extent. Others are much further from that point. And in some cases for these more difficult to decarbonize energy services, or at least currently more difficult, like certain processes in industry, air transport, other kinds of long-haul transportation, there we need more. We're starting with R&D, so research funding and trying to – the idea would be to fast track that.
So maybe I can get into a little bit of specifics. But really, David, the way I think about how we can approach this question is that we are actually – we know a lot more now. So I talked about how we can find those effective nudges for individual technologies, how we're able to come up with these more satisfying and more effective metrics for measuring progress. So we can think about slotting this into an energy transition map with innovation goals and sort of portfolios of policies and technologies in the immediate, medium and longer term.
But some of the areas that I think maybe aren't discussed as much, and this audience may or may not know, but that I feel like I should mention, some specific opportunities are in two – I'm going to split them up into two categories of technology: in non-hardware technology, or what I call soft technology. That's often overlooked. And then I'll talk about some hardware or physical technologies that I think need to be focused on.
So in soft technology, some of the key opportunities – and this includes software, business models, new approaches to institutional design – some of the key opportunities are in new business models for electrification, and heating, and transportation for electric vehicle charging, and vehicle sharing. And it's important here that we think about equitable access. I think that's really critical. It's not the direction that I see us going in right now, and we can do it. Also, smart and secure algorithms to avoid privacy risks and stressing the electric power grid.
In general, artificial intelligence could push us off the track of emissions reductions and some of these other goals that we are talking about, or it could be a hugely powerful tool, but it really needs to be managed and shaped toward beneficial outcomes. New kinds of demand management. There's a lot of talk about long-duration energy storage, but there's another kind of energy storage, which doesn't involve any physical technology at all, which is about shifting demand in time and space. I see a lot of promise there. And better ways, business models and ways of providing access to solar energy systems and other clean energy services in many communities that do not have access currently. And then, finally, this idea of institutional design to bring in community involvement.
And I could talk – I don't want to take too much more time, but just in terms of hardware and physical technologies, it is true. We need to work on low-cost, ultra-long-duration storage, new battery chemistries and materials, low-carbon fuels like hydrogen and ammonia. I think the recent House report rightly pointed out that this could potentially provide a number of different energy services, but we don't yet know whether it's going to be feasible. We need to look at that. And even tailored biofuels for certain applications.
But there, we need more sophisticated metrics to measure the environmental and social impacts. So those are some specific examples. [David Goldston] I want to go to John in a second, but can you just say a word about AI throwing things off the track? I assume that's because of the electricity use required for AI. Is that what you're thinking there? [Jessika Trancik] Yeah, or just, if certain segments of the population, especially – and it would tend to be more wealthy, currently – would be able to spend much more time moving around in their vehicles with less of a cost to their own personal time.
First of all, that's a problem because it's a hugely inequitable outcome, but it also would increase energy consumption. And that's just one example, but there is – I could go on for like an hour. And on the other hand, I do think it's very much possible to shape this in a beneficial outcome for the climate, but we need to get moving on that now, in my view. [David Goldston] Great, thanks. John, what about you? What's your thinking in terms of scaling and need for new technologies? And also, how does En-ROADS handle that question of technologies that don't exist yet but need to? [John Sterman] Yeah.
Thanks. And Jessika did a great job describing some of the opportunities to take technologies we already have today, and improve them further, and deploy them at greater scale. I think the point that I'd like to make is, first of all, we already have essentially all the technologies we need. Further improvement is, of course, welcome. But we don't need to throw any Hail Marys, put all our resources into some exotic technological breakthrough.
That's actually a huge distraction. So for example, the greatest potential impact to reduce emissions and at the same time create jobs, improve our health, create community resilience, and foster economic and community justice is energy efficiency. It is by far the fastest, safest, cheapest way to lower our emissions, and we have what we need to do that. The problem is not the lack of innovation in the technological side. It's the lack of innovative social contracts and institutional arrangements.
So just as an example, my house where I am coming to you from right now, it's about 95 years old. We did a deep energy retrofit five years ago, which is mostly about lots of insulation, good quality windows, tighter building envelope, LED lighting, high efficiency appliances, heat pumps instead of natural gas for heating and cooling, and solar on the roof. And so, over the past five full years, we have made almost 50% more energy than we use here with zero fossil fuels. And it was cost-effective.
And this is possible now. At the Sloan School of Management, we built a new building that we occupied 10 years ago. And the post audit of that project showed that the energy efficiency technologies that we deployed there, all of which were ready to go off the shelf, not only reduced the emissions for heating and cooling by 70%, but generated an economic value for MIT of almost $10 million in net present value. And that's a 10-year-old building.
You can do much better today. So the big opportunity in energy efficiency is not just institutions like MIT or faculty who, quite frankly, are affluent compared to the average American, but in low and moderate income housing in the United States. This is going to be a huge opportunity. The poor we know are living in the oldest, least efficient, leakiest, least healthy housing.
They have the highest absolute energy bills and it consumes a bigger chunk of their income than for any other group, and they don't have the capital or funds to make the upgrades, and their landlords, the building owners, aren't willing to do it. This is a solvable problem. There's already private businesses cropping up to do it. And it creates an enormous potential to not only cut emissions, but to do so in a way that generates a lot of economic and social value. So energy efficiency is the number one thing we ought to do while we're decarbonizing the electric grid and dealing with the problems that Chris's maps so clearly illustrated. The second thing I want to point out here is that, whatever the federal government may choose to do in the way of promoting renewables, decarbonization, energy efficiency, and so forth, it is a tiny amount compared to the amount of private capital that would be unleashed if we had a meaningful price on our carbon emissions.
As Chris pointed out, that's a non-trivial policy design issue, but a solvable one. And what you would find if there was a meaningful price on carbon emissions is a huge flow of private capital, venture capital, private equity, reallocation of capital budgets from large incumbent firms once there's clarity about pricing things more appropriately. And the innovation that will be unleashed by that is going to be dramatic, it's going to be quick, and it's going to make a huge difference. [David Goldston] Great, thanks. I want to get back to a carbon tax as well as to the question in the chat. But first, Chris, what's your thinking on this scaling and still-needed technologies? [Chris Knittel] Yeah, I'll just say that that last part of John's talk stole my thunder, in the sense that my number one point was going to be that we need to think about how we could harness the marketplace to create better incentives to innovate.
I can sit here and speculate what I think the next technology we need is. If I had to speculate, it would be long-term storage, or CCS, or maybe something that dropped the cost of electrolysis down. But the great thing about the marketplace is, if you set up the right incentives, it'll find the lowest hanging fruit. And as of now, we just don't have very large incentives for innovation in carbon-reducing technologies. We have incentives for innovation in things that might be related to carbon-reducing technologies, like cheap electricity via photovoltaics, but we're not doing that in particular for carbon.
So really, and this is why webinars like this are great, what we need is policy at the federal and state level that can harness the marketplace and find the best technologies or the holes in the technologies that we need for meeting Paris or even more aggressive commitments. [David Goldston] Great. Well I'm going to come back on a question on carbon tax in a moment. But we've got a question in the chat about the usefulness of energy efficiency in terms of making an impact in the developing world.
What's the thinking on that? John, as the prophet of energy efficiency, do you want to start on that? [John Sterman] Sure. Well, so there's no question that folks in the developing world have so far contributed the least to the climate crisis and are going to suffer the most from its harms. It seems to me that the duty, obligation, and opportunity of the affluent, the developed countries, is to provide the technology, the resources, the assistance to enable those countries to leapfrog the fossil economy that they're trying to build but haven't built out to a full extent yet, and jump straight to a clean, green, sustainable economy. In the same way that in Africa, they never built out landline telephony and instead jumped straight to mobile, and, oh, by the way, were able to innovate with mobile in ways that weren't happening in the developed world, M-Pesa mobile money being a great example of that. So this is absolutely doable.
And instead of – and as we do it, what we're going to find is it's helping us, we in the developed world, in the United States, by reducing the migration, the forced climate migration, the drought, crop failures, and other harms from climate change that are going to not only affect everybody in Africa, Latin America, South Asia, but hurt us also, and benefit our economy and our national security. [Chris Knittel] David, if I could add just – [David Goldston] Yeah, Chris. [Chris Knittel] And this is a point where John and I might disagree on, but that's OK. The world has about 100 years worth of coal available to it. One of the things that keeps me up at night is, will the world – not just the US, but the world – leave that coal in the ground? And if they don't, then that really opens the door for carbon capture and sequestration as a game changer here, in the sense that coal can still be burned but reduce the climate impacts of that.
So that is one area where, if the US can innovate on that, lower its costs so that developing countries would have less of an issue with adding that on. Because, other than carbon requirements, they would have no incentive to do that. I see a potential there, only because of the risk of having to hope and pray that the 100 years of coal will be left in the ground.
[John Sterman] So David, since Chris said there might be a disagreement here-- [David Goldston] Sure. Then we'll go to Jessika. [John Sterman] I'll just quickly comment that if we had a meaningful price on carbon pollution around the world, then if CCS technology turns out to be cost-effective or enough R&D goes into it that it becomes cost-effective, then great.
It can be deployed, it'll be an enormously important part of the solution. But I'd rather not pick winners and losers here, especially for countries that would suffer from some of the other environmental harms of coal, such as mercury pollution, fly ash, mountaintop removal, and the social harms that come from coal mining. So let's – you're absolutely right, Chris. We have to keep the fossil carbon, not just the coal, but the oil and gas, too, we have to keep it in the ground. There's no way to limit the warming to as much as 2 degrees C – 3.6 Fahrenheit – without doing that. Let's let the market and the innovation that it will generate figure out whether CCS or bioenergy with CCS is going to be a meaningful part of the solution.
[David Goldston] Jessika? [Jessika Trancik] Yeah. Just a couple of quick comments to add to these points. One of the reasons I think it's useful to think about this broad definition of technology that doesn't just include hardware, but other forms of codified knowledge, is that we can actually think about energy efficiency improvements, which are stimulated by various policy instruments – innovation toward these could be stimulated using a range of policy instruments.
But this codified knowledge, this knowledge that allows for energy efficiency, if it is codified, it's something that could potentially be shared across locations. So this is something that doesn't just have an impact in local areas, which is how we've traditionally focused on energy efficiency. It's a bit more locally-focused. But I think one could do more to develop global markets for energy efficiency with this kind of definition of technology. And then the other thing I wanted to mention is that energy efficiency often goes hand-in-hand with transitioning to lower-carbon energy sources.
So if you think about certain smart devices or smart management of your home energy services, this can allow people to potentially adopt electric vehicles, which then charge at times that allow them to access cheaper electricity and benefit the grid overall. This can allow for comfortable living environments and also the integration of solar energy. And so anyway, these things go hand-in-hand. And then finally, what I expect, and what we're already seeing, is a lot of great ideas on energy efficiency, on low-carbon solutions, coming out of the developing world, more rapidly growing economies.
And so that's something else that I wanted to point out as well. [David Goldston] Thanks. So I want to get back to the – I'm sure we'll come back to energy efficiency as well, but at least two of you have made the case for carbon tax. And yet, that doesn't seem something that is in the immediate offing in Congress.
And in fact, in many policy circles, seems to actually be falling away as one of the things that's even on the discussion list, in favor of things that – standards and other proposals like that, which may implicitly have a price on carbon, but not in a comprehensive way. If someone said the carbon tax or direct carbon price through cap and trade is off the table, what are the next tools that you would say, let's try this, at least for starters? Either comprehensively, or by sector? Just again, I'm looking at the US now. Anyone want to take a crack at that to start with? [Chris Knittel] I'm happy to. So there's two benefits, key benefits, from carbon pricing versus standards, say, CAFE standards or clean energy standards. One is that those standards tend to be sector-specific, so you often get too much mitigation in one sector and not enough in the other. And then the other is that they tend to actually artificially depress the price for either of those.
So you just do too much consumption of electricity or driving. So at least on the first one, we can let these standards talk to each other. It wouldn't be difficult to design a clean energy standard, and a fuel economy standard, or a low carbon fuel standard, where the permits are tradable. And there you would actually capture the benefits of sector-specific or sector leveraging of reductions. I will say, though, that the big challenge to all of those is that my work and the work of others has shown that these standards are very regressive, and they will hurt certain parts of the US more. So my big concern is that, if we want to protect those at-risk communities, we're going to have to have a second policy or a third, fourth policy that's generating revenue somehow to protect those communities.
And that's I think the biggest concern. We might get enough votes on the climate-specific policies and not enough support for the revenue generation side. [David Goldston] Or, at least use existing revenues in a different way. Before I turn to the others, I know you've also done some work recently on how a relatively small carbon tax, even though I just talked about taking it off the table, could actually be a sort of a booster to the standards policies. Do you want to say a word about that? [Chris Knittel] Yeah.
I didn't talk about that because you took it all the way off the table. You let it inch its way on the table. Yeah, so that work is showing that, especially when we have deep decarbonization goals, that a little bit of carbon pricing goes a long way.
And the reason for that is, as we think about completely decarbonizing the economy, the marginal costs, or the costs of getting those last few percent out of the economy of carbon, is very, very expensive without a carbon tax. So what we show in that paper, and it's available on the CEEPR website as well, that if you added, just did the last 5% or 10% of the reductions via a carbon tax and leverage standards the other way, you can reduce the costs by as much as 60%. So a shout-out to AOC, a wimpy carbon tax goes a long way when you're meeting or setting very deep decarbonization goals. [David Goldston] Great, thanks. John or Jessika... [John Sterman] Yeah, so let me build on that if I may, real, real fast.
A couple of quick points. So first of all, I fully agree with Chris about the value of even some level of carbon price to aid the standards. And one of the benefits of that is, it helps not only with equity if you give the money back to the people – and you could clearly design a policy instrument that would give the revenues back to people based on their, say, prior five-year carbon footprint, so as to address the problem that showed up in Chris's map there. The second thing is, a price on carbon emissions helps tamp down on rebound effects. If people drive more efficient cars because you've mandated it, they've got more money in their pocket. And the research shows that they're going to drive a little more, not that much, but they're also going to spend that money.
And that drives a rebound effect in emissions that undoes a lot of the benefits. So whatever policy mix we've got, we have to take steps to mitigate the potential rebound effect, or we go to a lot of trouble without really addressing the fundamental problem. There's a lot more to say about this, but I hope we can get to some questions from folks, so let me leave it there. [David Goldston] Yes. And I just want to again encourage people to put questions in the chat.
As you can tell from the ones we've gotten, we will get to them right away. Jessika, thoughts on this? [Jessika Trancik] Yeah. I mean, basically the way I think about it is that we need some sort of control or policy that addresses emissions directly. And this is carbon dioxide, it's other greenhouse gases as well, methane leaks, that's critical. And then also you need those instruments that support innovation and come in and support that whole process from research to development, demonstration and deployment. So these are the needs.
And we don't live in a perfect world, so we have to work with what is possible. And there are different ways to go about it. And then the third major need is this one that Chris has talked about, which is the uneven and unfair impacts of these policies that is also needed. And, as was mentioned, these can be addressed in different ways. It can become quite complicated, but yet I think we can do it even if we're limited in what policy instruments we're able to adopt.
[David Goldston] Let me turn, and again I encourage questions from the audience, but let me turn back to the international issues for a moment. US will presumably be rejoining Paris. Even with Paris, there's both the concern about the extent to which countries are meeting their targets, and the extent to which the targets are adequate to begin with. There's been some short-term gains because of the economic impact of COVID. How would you assess where things stand internationally in terms of reaching targets and the kinds of steps that are needed, and where COVID fits in on that. John, do you want to start on that? [John Sterman] Sure.
So the estimates are – we're not quite done with 2020, but the estimates are that global emissions will be 7% to 10% lower as a result of COVID this year. But two quick points on it. That's not enough to stop the accumulation of greenhouse gases in the atmosphere. We're emitting at about twice the rate that carbon dioxide is being removed from the atmosphere by plants and as it dissolves in the ocean.
So CO2 concentrations are still going up. And the second point is, that's no way to address climate change. The idea of hundreds of thousands of deaths and harming the economy, this is not how we want to address climate change, and it's not necessary. The technologies we have in hand today, especially efficiency, but also in the renewables and the soft and hard technologies Jessika pointed to – these are deployable today, they save money, they create jobs, they improve our health.
What we need to do is use the pandemic as the opportunity to rebuild our economy faster, safer, and get us on that pathway to be consistent with the Paris targets. No nation on Earth is consistent with their Paris promise right now, and even full compliance with Paris would not get us on that pathway. And you can take a look at the brand new UNEP Emissions Gap Report just published this week to see the details.
So we need a much more aggressive global approach here. The United States plays a critical role in leadership here. If we're not going to take significantly stronger actions even than our Paris commitment, I don't see how we persuade the other countries of the world where most of the emissions are generated today to be more ambitious. [David Goldston] So before we get to our other speakers answering that if they're interested in doing so, let me ask the question from the audience that's in the chat that picks up on, John, both your initial talk and also a little bit of what you just said.
Which is, are there other agriculture related policies that are more effective than afforestation? Do you want to take that first? Then we'll go to the others as well on that question. [John Sterman] Who wants to take that one? [David Goldston] All right. Anyone have enough ag expertise to have at that one? [Chris Knittel] Well, having taught at UC Davis, that I guess gives me some street cred on the topic. Not that I have specific numbers, but there are a whole host of potential policies that can be applied to ag. There are things like what's known as biochar that could be long-term sequestration of carbon that could leverage the agricultural industry.
I'll say that the agricultural industry tends to get somewhat of a free ride on a lot of discussions about what we're going to do. So the incentives that we tend to think about on the ag industry tend to be offsets, where we pay them to do something that they might have done if they were actually carbon constrained. There are such things as methane capture among livestock. There's different ways of over fertilization and overwatering that, if we clean those portions of the ag industry up, could provide reductions. I don't have En-ROADS in front of me to run those through John's carbon model, but they are important questions about, can we rank order what we could do in the agricultural industry from cheapest to highest? [John Sterman] Yeah.
They're pretty high-leverage. They're hard to enforce and measure. It's hard to verify that you've really sequestered carbon in your soils, et cetera. But there's a lot of opportunity here.
The IPCC 1.5 degree report from two years ago goes into some detail on the opportunities here. I'd recommend that to folks. [David Goldton] And what – presumably this will become a higher profile issue if there really is an all-of-government approach in the Biden administration.
Jessika, did you want to add anything on that? [Jessika Trancik] Yeah. I mean, let me just kind of pick up on that all-of-government approach because I think that's really critical. And one of the things that was called out in the recent House report as well is this idea of regional partnerships.
I think that's going to be important in the case of agriculture. And here I think we shouldn't be thinking about necessarily – and actually, for a lot of these what I consider to be soft technologies that require coordination, that there are many different stakeholders, and that require this kind of consultative process – I don't actually think we should necessarily be going for complete coordination, but at least we should have these platforms where coordinated efforts can emerge and consultative processes can emerge. And so I think that's a really important institutional innovation that should be pursued.
[David Goldston] Great, thanks. As we're coming toward the end, I just want to tell people that the three speakers will be available for a little bit after the recorded session ends at three, if people want to ask questions at that point. [Jessika Trancik] And David, could we come back to your question about recovery and sort of the US – [David Goldston] Please, go ahead.
[Jessika Trancik] – role? Yeah. So just kind of coming back to that, I think it's such an important point because really, when I think about innovation, it's not just to have some fancy new technologies. It's really about this clean energy transition. But it's about providing new opportunities. It's about providing opportunities for homegrown innovation and the growth of jobs and economic opportunity for all. But this doesn't happen on its own, as many of you know.
So just having a few policy instruments out there, if we don't do it right, I don't think we're going to get the outcomes that we want and the results from innovation. So on the one hand, there's this huge opportunity to sort of really stimulate economic recovery, revitalization, do things differently, and at the same time address climate change. It sounds like a lot to do at once, and many people question whether that's possible. I think it is possible, but it's going to be really key to steer and sort of harness those technology innovation forces. The other thing I want to say about the role of the US is that, of course, the US has been a bit absent on the international stage. Really, it's important to jump right back into the international process and adopt climate policy at home.
But things haven't stopped internationally. I think the opportunity for the US is to get back in, move markets forward, have access to these markets. And that's also going to – the US does still have this unparalleled capacity for technology innovation. And so the US getting back in I think will act to encourage other countries to increase their ambition. So I don't think it's too late.
There's still this opportunity to really get back in, to boost American competitiveness, and that way encourage recovery. But we have to find those right instruments and nudges for the marketplace to do that. [Chris Knittel] Yeah. And I was going to fill in on the policy side. I think the US is uniquely positioned to move the world.
Not only because we're the largest economy in the world and we have the most emissions up in the atmosphere so there's a moral obligation to try to move the world, but we also import the most in the world. So we can move other policy by putting a carbon tax adjustment at the border, if we had our own set of strong carbon policies. That would incentivize other countries that we would say, we're going to tax your imports at the carbon intensity unless you're doing as much as we are in abating carbon emissions. Europe's thinking about doing that right now. But if the Europe and the US as a bloc of countries would do that, that would make it in the interest of those other countries to adopt their own carbon policy. [David Goldston] So thanks for adding that.
One last question that maybe someone can answer in a minute or so. We've got a question about what people think about the idea of creating an ARPA-C, an ARPA focused on climate, as there has been an ARPA-E and IARPA and some of the other DARPA spinoffs. I think we only have time for probably one person to – [Jessika Trancik] Yeah. Maybe I could jump in there. Yeah.
And just quickly I wanted to mention also, in talking about international involvement of the US, I do want to just acknowledge the really important role that US cities and states have played, in fact, in keeping the US on the scene internationally. But obviously the US federal government can do so much more. But yeah.
On this question of ARPA-C and ARPA-E, I guess just really briefly what I'll say there is that it is important to be moving beyond these siloed approaches to energy services like electricity, transportation, et cetera, or even to energy and ag emissions. We need to be taking this whole-climate approach. And so I think an institution is needed to do that, and also bridge the early development of technology and market entries. There's a lot of opportunity there. So just to give a specific example, electricity is ahead in terms of decarbonization related to, say, transportation, heating, industry, but the thing is that heating, transportation, industry can also help electricity to decarbonize that final amount to reach deep decarbonization targets.
So we should be supporting these kinds of innovations and improvements in technology and energy services. [David Goldston] Great, thanks. John, do you want to give a quick thumbs up or thumbs down? [John Sterman] Well, so – [David Goldston] We're over time, but if you want to say – [John Sterman] In 20 seconds, no MIT faculty member is ever going to say that we should not increase federal support for R&D. However, I think we'd get more bang for the buck and quicker emissions reductions when we have so little time to bring them into reality by devoting those funds to the things that make a big difference today. And that's efficiency and promoting renewables.
[David Goldston] So thanks to our speakers and for those who attended. We are going to hope to send out a survey early next week to see how helpful you found this and if there are things we could do to make it more helpful, so that can inform how we do webinars next year. And again, thanks to the students who enabled us to do this and got us going on it, and I appreciate our three speakers. They're obviously all reachable.
You can find their email addresses at MIT, and the Washington Office is happy to be helpful in that regard as well. And so that concludes our recorded program. Again, if anyone wants to stay on for a few minutes and ask questions, we can do that. But thanks again for being with us this afternoon.
2020-12-26