Carrots Are Not Enough

Carrots Are Not Enough

Some historians say the phrase “the carrot or the stick” originated with coaxing a stubborn donkey. Politicians are much more fond of handing out carrots than wielding sticks. But most people would conclude — just from their own personal experience (and especially if they’ve raised children) — that both carrot-like incentives and stick-like deterrents are necessary. It turns out that, in crafting climate policy, we also need both.

The Inflation Reduction Act (IRA), our most robust and sophisticated climate-policy accomplishment, is essentially a bunch of carrots — albeit a very big and enticing bunch. Incentives such as those in the IRA are necessary to reduce emissions, and for sparking the development and adoption of renewable energy and electric vehicles.

But while the IRA is moving us in the right direction, we continue to burn fossil fuels at an alarming rate, pushing us quickly toward more threatening climate outcomes. At their peak in 1966, fossil fuels supplied 94% of U.S. energy. And, though carbon emissions have declined as natural gas and renewables have displaced coal, fossil fuels still supply 80% of U.S. energy — a staggering amount essentially unchanged since 2000. The IPCC recently issued another in its ever-more urgent calls for immediate and sustained effort to transition away from fossil fuels, demonstrating the inadequacy of our “carrots only” approach.

Yet we still cannot muster the political will to wield the stick. The most recent evidence of this is President Biden approving the Willow Project, the largest pending oil development on U.S. public land, despite his campaign pledge of “No more drilling on federal lands, period. Period, period, period.” The President was under intense political pressure to approve the project from Alaskan politicians, oil companies and some political allies. And he needs political alliances, such as with Alaskan Senator Lisa Murkowski, to move other legislative priorities (including getting his nominees into senior government positions).

Alaska’s Congresspeople, including its Democratic house member (Mary Peltola), support Willow by arguing that we will need oil for awhile, that the development will provide jobs and that we might as well be satisfying demand with American oil rather than allowing that business to go to Russia. Willow supporters insist that other oil-producing countries will make up the difference between supply and demand, so rejecting Willow will not have an impact on the burning of oil. There are even claims that approving Willow will keep gasoline prices low.

What they don’t mention is that oil won’t even start flowing from the project for six years. Further, it is international commodities trading (among other factors) that drive fluctuations in gasoline prices, not domestic oil production. The U.S. Bureau of Land Management (BLM) calculates that, when operating at full capacity, Willow will lower global oil prices (currently around $75/barrel) by about 20 cents.

And we will keep buying foreign oil. BLM concluded that 30% of the oil from Willow will replace other domestic production, not imports. In fact, it can be argued that the entire project is unnecessary. Due to the explosive growth of renewable energy, enhanced energy efficiency and the electrification of transport, Willow could be “obsolete before the ribbon is cut.”

Alaskan politicians support Willow because 85% of the state budget is derived from oil revenues, and oil production hit a 40-year low in 2020. In addition, remember that Alaskans don’t pay sales or income taxes — they get paid to be state residents. Oil royalties have created the Alaska Permanent Fund, which pays several thousand dollars in yearly dividends to each state resident (including children), and has for decades. Alaskan Kim Heacox observes that the dividend first felt like a gift, then an entitlement. “Now,” he says, “it feels like a bribe.”

Most supporters of Willow acknowledge (as Murkowski does here) that we must transition from fossil fuels to avoid an ever-more disrupted future — they just don’t want to do it right now. But the world can’t wait. If we are to limit the increase in global average temperature to 1.5°C, which still means living with centuries of climate disruption greater than we experience today, we need to leave almost 40% of known fossil reserves in the ground. If we cap warming at 2°C, ushering in an even more disrupted and unpredictable climate, we still cannot exploit known reserves. The International Energy Agency has concluded that achieving net-zero carbon emissions by 2050 requires governments to stop approving all new oil, gas and coal projects.

Heacox notes that Biden had the opportunity to “send a signal around the world and inspire other leaders to stand up to big oil and say no — not here, not now, not ever.” It didn’t happen, which is a failure of leadership and a triumph for the political power of the oil industry and American petro-states like Alaska. Similar political forces are at work in debates on other fossil-fuel infrastructure, such as the proposed new rail line in Utah’s Uinta Basin, which could drive a quadrupling of the region’s crude oil production.

University of Alaska Professor, Phil Wight, points out that “We have the policy to build a renewable energy future. It’s much less clear how a managed decline of fossil fuels is going to happen.” This is because we have to phase out fossil-fuel production, even while it is still profitable, and that requires some policy “sticks” to complement our “carrots.” These include stopping approval of new coal, gas and oil development, internalizing the cost of carbon emissions in our economy through a carbon fee or tax, incorporating the cost of climate change when assessing the benefits and costs of government decisions (using the social cost of carbon) and phasing out subsidies for fossil-fuel production.

Abigail Dillen points out that, due to permafrost thawing from global warming, ConocoPhillips will need “massive, energy-intensive ‘cooling devices’ to refreeze the permafrost just to keep the operations on solid ground. The land itself seems to grasp the obvious: We are not supposed to be doing this.”

Policy incentives and strategic public investment have created a renewable energy revolution, but the burning of fossil fuels continues unabated. We cannot meet our climate goals without phasing fossil fuels out, starting today. David Wallace-Wells notes that “You have to draw the line somewhere, and the Biden administration keeps doing so only to cross it.”

Without holding the line on an aggressive fossil-fuel phase-out, clean-energy advancements will not by themselves secure a livable future. Carrots are getting us started, but they are not enough. It’s time to bring out the big sticks.