Climate and Energy Policy: What do Americans Want?

Consider, for example, the fact that President Barak Obama’s Administration has been reviewing Transcanda’s Keystone XL Pipeline project for more than six years. And, Amy Harder of The Wall Street Journal recently reported that this delay has emboldened resistance to at least 10 other oil and natural gas pipeline projects across North America representing $40 billion of investment. (See “Protests Slow Pipeline Projects Across U.S., Canada – Anti-Keystone XL Fight Emboldens Resistance to At Least 10 Other Projects.” The Wall Street Journal 9 Dec. 2014)

In addition, opposition to the Yucca Mountain Nuclear Waste Repository in Nevada and to the proposed Cape Wind generation facility off the coast Massachusetts illustrate how very long and costly delays to energy infrastructure projects can be. Some refer to this process of building public support for energy infrastructure projects as gaining “social license.” (Read more about social license and energy infrastructure here: Energy Investing: US-Canada Energy Summit).

In this environment, it’s essential for energy producers, developers, utilities, regulators and legislators to have a clear understanding of how consumers, and voters, actually think about difficult energy choices.

Fortunately, new research by Dr. Stephen Ansolabehere, Professor of Government at Harvard University, and Dr. David M. Konisky, Associate Professor of Public Policy at Georgetown University, provides rich insights into how—and how not—to develop energy, environmental and climate policy in their book Cheap and Clean: How Americans think about Energy in the Age of Global Warming.

Hats off to EPIC

Before we begin, I’d like to thank Dr. Michael Greenstone, Director – Energy Policy Institute at Chicago (EPIC), Milton Friedman Professor of Economics at the University of Chicago, for bringing Dr. Ansolabehere to Chicago recently for an engaging presentation on his research—rife with audience participation and discussion. I’d also like to thank Dr. Ansolabehere for the use of several slides and exhibits below.

EPIC is a collaborative energy institute of the University of Chicago’s Social Sciences Division, Harris School of Public Policy and Booth School of Business. I’ve found the EPIC Seminar Series of lectures and Symposia to be remarkable opportunities to gain direct access to some of the world’s leading thinkers on energy, economics and the environment.

About the Research

Ansolabehere and Konisky explain that, for decades, public opinion research on energy has been highly fragmented and episodic. The prior research often focused on the latest crisis—highlighting short-term events like oil spills, nuclear accidents and gas price spikes. As a result, “the emphasis on such episodes has made public opinion about energy seem fleeting, fractured and lacking in any rationale” (363). Furthermore, prior research typically asked about only one form of energy in isolation from other choices. The authors explain that pollsters and analysts must instead think systematically to really understand public opinion about energy in a meaningful way. Systematic thinking about energy asks questions like:

“What are the main sources of energy, and what are the public’s attitudes toward each one? What are the key attributes of each energy source, how do people view each energy source according to those attributes, and how important are each of the attributes in explaining what people want?” (578).

In my opinion, the really exciting thing about Ansolabehere and Konisky’s new research is that it has tracked these types of questions for more than a decade to see what the public wants the energy sector to look like and how public preferences have changed (578).

Their methodology utilized the MIT/Harvard Energy Surveys to gather information from 2002 to 2013 and then, based on the data, identified, quantified and explained the factors that really drive public opinion for various fuels such as coal, natural gas, nuclear, oil, hydro, solar and wind by developing a variety of multiple regression models. In addition, they also evaluated public opinion on different climate policies including regulatory caps, cap and trade and carbon taxes.

The regression models are fully described in the book and the appendix contains the summary statistics of the models including the coefficients, standard errors, significance levels and correlations.

Energy Choices

The first thing to understand is that we consume electricity, transportation, and heat, not coal, nuclear or solar power. In short, the authors explain that people value the qualities or attributes of the power they use and not the fuel itself. This means that people really want energy that is inexpensive, dependable, and safe—and it’s these attributes that really drive public opinion (62).

Having said that, the authors paint a picture of US public opinion about the energy sources used to generate electricity. As shown in the graph below, Americans want less reliance on coal and oil as illustrated by the large portions of pink (reduce use of fuel) and red (not use at all) throughout the time series (2002 to 2013). Second, Americans want to keep natural gas and nuclear power as they are, or increase them somewhat—with natural gas having the edge between the two.Third, Americans want to substantially increase the use of “alternative fuels” such as solar and wind as illustrated by the large portions of green (increase use) across the series (171).

In addition, Ansolabehere and Konisky report that very few American’s are pure conservationists who want to use less of every energy source (582). And very few want an “all of the above” energy strategy as often cited by the Obama administration (173).

So what’s the big idea?

“People have clear, stable opinions about the energy future that they would like to see in the United States. They know what sort of power plants they would like to see developed, and they know why. There is a simple, unifying structure to public opinion about energy, and that is the desire to have an energy system that simultaneously reduces environmental harms and economic costs” (363).

Economic Costs and Environmental Harms

Well, we’ve just seen what people want. But why do they want what they want? And are their perceptions about energy supported by accurate information? Ansolabehere and Konisky conclude that a “Consumer Model” best describes what people want from energy and energy policy. In short, people think about energy like they would any other consumer good.

The authors explain that in the Consumer Model, “an individual’s opinion about the use of various fuels and the direction of public policy depends on two key factors or attributes of energy—the economic cost (the private good) and the environmental cost (the public good)” (580). In fact, they found that between 75 and 80 percent of the variation in support for different fuels was explained by these two factors and while there can be other factors—they are of secondary importance (362). Survey respondents were then asked how expensive they thought electricity from each of these different fuels sources is and how harmful each method of generating electricity is to the environment.

In terms of costs (above), people generally got the cost of coal and natural gas as less expensive than nuclear and oil correct. However, the public incorrectly believes that solar and wind power are much less expensive than coal, natural gas, nuclear power and oil (246).

When informed of the true costs of electricity from solar and wind power, they found significant decreases in support for these fuels and increases in support for fossil fuels (411). Americans still wanted to significantly expand use of these fuels but their support was more tempered. So, Ansolabehere and Konisky remind us that public support for a fuel source does not mean that people ignore economic costs of the fuel in judging a public policy to increase the use of that fuel (389).

In terms of environmental harm, Ansolabehere and Konisky note that people have the relative harms about right. They correctly see coal and oil as having the most adverse environmental effects. Natural gas is seen as less harmful than these fuels but more harmful than hydro. Solar and wind power are correctly perceived to pose few environmental harms (259).

Importantly, people gave greater weight to environmental harm than to economic considerations in evaluating energy choices and policies. In fact, environmental harms were more than twice as important than economic costs as evidenced by larger coefficients in the regression models (290). So environmental harm is a strong predictor of energy preference. The policy implication of this finding suggests that the government should put, for example, $2 into clean coal for every $1 into research on cheap solar to be in line with the public’s relative preferences (361).

The public’s reaction to nuclear power appears strong and perhaps exaggerated (258). The authors conducted further research into nuclear power and found that two-thirds of the sample indicated they would support significant expansion of nuclear power “if there were a safe and effective way to deal with nuclear waste” (264).

Providing more information on environmental harms decreased support for coal, natural gas and oil and increased support for nuclear power (422). In addition, there was a substantial decrease in support for coal and an increase in support for alternative fuels, especially wind (432).

Interestingly, the research dispels conjecture that public perceptions about energy are explained by political or demographic differences among people. The authors found that it’s not political party or ideology, education, age or religion that really matters. Those factors are secondary. Rather, people think about energy through a common lens of cost and harms and then fit particular fuels into that framework. Then, the particular fuel defines the terms of the political debate (276).

Finally, economic cost and environmental harm were also found to be the most important factors that explain why people oppose the location of some sorts of power plants near their homes but not others—the not in my backyard (NIMBY) attitude (354).

Understanding the Trade-Offs

In order to effectively move climate and energy policy forward, we must recognize that there are real trade-offs between the economic costs and environmental harms of energy production. Today, no fuel exists that is both cheap and clean (593).

Based on data from Dr. Michael Greenstone and Dr. Adam Looney, the authors illustrate a “technology frontier” for new electric generation sources by plotting the “levelized” cost of generation against the social cost (environmental harm) for each fuel. The levelized cost is the present value, in real dollars, of the total costs of building and operating an electric generation plant over its financial life and duty cycle—presented in cents/Kwh (125).

Social costs are the hidden costs that consumers do not see on their electric bills. They arise from pollution caused by energy production that causes increased health care costs. For example, burning coal produces sulfur oxides, nitrogen oxides and particulates that contribute to the formation of smog (ground level ozone), acid rain and other pollution (lead, mercury, etc.). High levels of smog increase risk of cardiovascular disease, lung cancer, bronchitis, and asthma (110). Greenstone and Looney also estimate that the true social costs of fossil fuels (ignoring global warming) is about 75% more than we currently pay for energy (609).

As illustrated below, Ansolabehere and Konisky use existing coal-fired generation plants as the reference point since they are the least expensive (about 3 cents/kWh) but have the highest social costs from pollution and carbon emissions. New pulverized coal plants provide only a marginal reduction in social costs and are more expensive than new natural gas plants that provide significantly greater reductions in social costs. Solar, wind and nuclear power have significantly lower social costs. However, solar power costs about 17 cents/kWh more than coal while wind and nuclear are about 5 cents/kWh to 7 cents/kWh more respectively.

Bottom line, cleaner energy will cost more.

Global Warming

Today, the risks associated with global climate change (flooding in major cities, expansion of deserts, droughts, disruption of food supplies, etc.) are widely discussed by almost every national government in the world. The authors explain, “energy is back on the national agenda not because we have an energy crisis but because there is a risk of a looming global environmental disaster” (450).

The conundrum for public policy makers who realize the long-term implications of today’s energy choices is that although most Americans are concerned about global warming they don’t see it as the most important problem (“MIP”) facing the nation and have a low willingness to pay (“WTP”) to solve the problem. In short, the authors did not find climate concern to be a major driver of public opinion about energy (443).

For example, in Gallup’s January 2012 poll, “two-thirds of Americans identified the economy as the nation’s most important problem, followed in order by dissatisfaction with government (15 percent), healthcare (6 percent), immigration (3 percent), education (3 percent)”. Typically, energy and environment do not rank highly compared to the economy and other problems (467).

Ansolabehere and Konisky found that the median amount people were willing to pay to “solve” global warming was only $5 per month ($60 per year) or about 5% of the typical monthly electric bill. And two dozen other studies, assessed by Johnson and Nemet, found the median amount to be $135 per year. In short, “most Americans don’t appear willing to make the trade off that many policy experts feel is required: substantially higher energy prices in order to substantially reduce carbon emissions” (483). The authors sense that Americans don’t want to pay more now to solve a future problem with no immediate health or environmental benefits for people living today (e.g. pay more, get nothing) (445).

Although nuclear power is widely recognized by climate scientists, economists, and others as a potentially important way to significantly reduce carbon emissions to address global warming the public doesn’t yet make that connection (334). Despite the fact that nuclear power has virtually no carbon emissions and offers the capacity to offset significant amounts of greenhouse gas. In addition, nuclear power provides more reliable electricity at a far lower price than solar or wind (286).

Ansolabehere and Konisky explain, “Nuclear power is the one non–fossil fuel that can be deployed quickly at an industrial scale to bend the carbon curve in our energy sector. Unlike wind and solar power, nuclear power does not suffer from either the intermittency or the transmissions problems that currently limit these sources, making it a useful way to generate baseload capacity” (335).

Surprisingly, Ansoblahere and Konisky found that people who were concerned about global warming were less, not more, likely to support nuclear power than those who were not concerned. And nuclear power was not alone. Except for solar power, they found no relationship between concern about climate change and support or opposition to the fuel (312). However, providing information about global warming seems to increase support for nuclear power (373). And what’s really interesting is that public attitudes for every fuel were local rather than global.

“Americans are more concerned about local pollution issues, including pollution of rivers, lakes, and reservoirs, air pollution, pollution of drinking water, and toxic waste contamination of soil and water. Even other global issues, such as ozone depletion and loss of tropical rain forests, weigh more heavily on the minds of most Americans than global warming” (470).

In other words, people mentally connect with perceived local environmental harms from air and water pollution and economic cost more than they do to global warming. Given these findings, how can climate and energy policy move forward?

Climate Policy

Ansolabehere and Konisky explain that the problem with our highly competitive electricity market is that it exerts strong downward pressure on prices but that the social costs associated with different fuels are not reflected in prices. As a result, the market fails to deliver cleaner energy.

“The electricity market fails, then, to allow people to “buy” cleaner water or cleaner air. There is pent-up demand for these attributes for fuels, and, hence, people give even greater weight to those attributes in public opinion polls, because that is the unmet demand in the market” (508).

Certain government policies, like environmental regulations and fuel taxes, are designed to force firms to “internalize” the social costs that would otherwise not be seen on the consumers monthly electric or gas bill (17). Ansolabehere and Konisky reviewed numerous public opinion polls, from 2007 to 2012, on three commonly discussed policies designed to address climate change. These three polices are:

  1. Regulate carbon emissions (Regulatory Cap) – Either directly through a cap or limit on carbon emissions from manufacturing, industry and consumers or indirectly through renewable fuel standards that require a minimum amount of electricity come from noncarbon emitting sources. Notably, 30 state legislatures and electorates have adopted renewable portfolio standards (576).
  2. Create a market for emissions (Cap and Trade) – A system of tradable carbon emission permits issued by the government up to a total limit on all emissions (a cap). Generally thought to be more economically efficient than a “one-size fits all” regulatory cap because firms with a low marginal cost of reducing carbon emissions would have an incentive to further reduce emissions and trade them while firms with a high marginal cost to reduce emissions could efficiently buy permits instead of facing costly restrictions. (See Regional Greenhouse Gas Initiative (RGGI) of 9 Northeast and Mid-Atlantic states)
  3. Tax emissions (Carbon Tax) – A direct tax on the production or consumption of coal, natural gas and oil in order to discourage use of fuels that emit carbon into the atmoshpere and to encourage use of fuels that do not. A simple and direct method of adjusting the price of each energy source to reflect its social costs (524).

These polls found dramatically more public support for a regulatory approach to limit emissions than for the other policies. First, there was about 75% to 80% support for a regulatory cap on carbon. Notably, the public wants a regulatory approach to limit emissions even though many economists believe that cap and trade would be a more efficient policy. Second, cap and trade received between 45% to 55% support. Third, carbon taxes were supported by only 25% to 45% of respondents depending on the level of the tax. Although taxes are efficient they can be politically unpleasant (528). However, public support rose to 40% for “revenue-neutral” carbon taxes which are tied to an equivalent reduction in federal income and payroll taxes (564).

Seeking to further explain this phenomenon, Ansolabehere and Konisky identified the correlations between the three regulatory policies, concern for global warming and the environmental and economic attributes of energy as shown below.

Global Warming Concern (Green) – The green portion of each bar explains the amount of predicted support for each climate policy that’s associated with a concern for global warming. Notice that the baseline support associated with a concern for global warming is relatively high–about 30% for Regulatory Caps and Cap and Trade and about 22% for a Carbon Tax.

Environmental and Economic Attributes – The purple, red, blue and yellow components illustrate how the predicted support for each policy is influenced by those who also see the connection with the environmental harms (purple) and economic costs (red) of traditional fuels as well as the environmental benefits (blue) and economic costs (yellow) of alternative fuels. Notice that these attributes of energy production dramatically added 50% of support for Regulatory Caps (now at 80%) but only about 20% to Cap and Trade.

The political implications of these findings are huge. In short, concern for global warming alone is not enough to drive climate legislation. Furthermore, a simple regulatory approach appears to be the politically expedient solution. The authors go on to illustrate the nexus between their research and two key pieces of legislation.

First, The American Clean Energy and Security Act (Waxman-Markey bill), which passed the House in 2009 but failed to pass the Senate, proposed a national system of tradable carbon allowances (cap and trade). It was almost entirely viewed as about global warming and this may have been the political error. The sponsors failed to make a connection between reductions in local environmental harms and climate policy. However, their opponents successfully emphasized the economic cost of the legislation (603). Case in point, concern for global warming alone was not enough to carry the day.

Second, California passed the Global Warming Solutions Act in 2006, also known as AB (Assembly Bill) 32, which created a cap and trade system. Subsequently, Proposition 23 was put forth to postpone implementation of AB 32. However, opponents of Proposition 23 successfully emphasized the environmental and health damages of coal and oil, which the voters understood, and it was defeated. They rarely even mentioned global warming (606). Today, AB 32 is regarded as the most aggressive piece of climate legislation ever adopted by an American legislature (494). Here, climate legislation was driven by local environmental concerns.

“It takes more than just concern about global warming to win support of a majority of the public for climate policy. The political fate of various climate policies depends primarily on the other half of the equation—how the public thinks about energy” (567).

Environmental Policy + Energy Policy = Climate Policy

Ansolabehere and Konisky conclude that we should stop thinking narrowly about climate policy as just climate policy. Instead, they suggest that climate issues should be viewed more broadly from the perspective of energy and the environment.This strategy would seek to develop policies that simultaneously achieve immediate environmental and energy goals and long-term climate goals (573).

For example, the authors suggest aggressively targeting the co-pollutants of carbon such as particulates, sulfur and mercury that present immediate and localized health risks. By reducing the use of fuels with the highest concentrations of these pollutants progress can be made on immediate health risks (573). In this way, progress is made on the local pollution issues as well as on the long-term climate issue. Dr. Ansolabehere goes on to suggest, “mercury and soot regulations might do more to help the US meet its climate goals than a 25 cent gas tax and would be politically easier to sustain.”

This appears to be a very logical strategy based on the research findings. Ansolabehere and Konisky have found considerable public support for regulatory policies like U.S. EPA caps on carbon emissions and renewable portfolio standards. And they’ve found that on questions of immediate environmental regulation public opinion approaches a consensus (or at least a majority) large enough for the government to act (575).

Pragmatism and Policy

I highly recommend Cheap and Clean: How Americans Think about Energy in the Age of Global Warming by Dr. Stephen Ansolabehere and Dr. David M. Konisky for their holistic and systematic analysis of how Americans really think about energy, environmental and climate policy.

It’s amazing to know that there is a basic consumer model that aptly describes public opinion on energy. It’s rational and apolitical. It weighs the trade-offs between economic costs and environmental harm and is primarily concerned about local issues.

After that, climate policy can be highly partisan. But this research should help policymakers in both government and industry develop the pragmatic solutions Americans want while simultaneously addressing long-term climate issues.

Ansolabehere and Konisky summarize their findings best by saying:

“Americans need to hear pragmatic solutions that fit with our approach to energy generally. We think about energy as consumers. We are motivated by the economic costs and local environmental harms, things we can see and feel and name. We need to think and act locally” (493).

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