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Declaring an Emergency to Slow Global Warming

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The US has been unable to achieve much progress in its attempts to slow global warming. An intransigent Congress, Russia’s invasion of Ukraine and resistant oil exporters have stymied the Biden administration’s efforts — and a deal with West Virginia Democratic Senator Joe Manchin may not unblock progress, as some expect. Another option that has been mooted is the declaration of a climate emergency, which could be done without further immediate pain to consumers. Through targeted measures under the International Emergency Economic Powers Act (IEEPA), capital flows to increase exploration and production of fossil fuels could also be limited, and possibly even stopped. 

Those supporting the Biden administration’s efforts to address global warming have been effusive in their praise of Manchin’s willingness to compromise to pass legislation that would fund many important environmental projects and impose a tax on methane emissions. Celebrations may, however, be premature, because Manchin refused to include a change in a key tax measure adopted by the Republicans in their 2018 tax cut. That measure limited deduction of state and local taxes, critically harming high-tax states such as New York. A number of Democratic members of the House of Representatives, whose votes are required for passage, indicated they would not support the Manchin proposal unless their requirements were met. As a consequence, the compromise, as presented, has little chance of passage in my view.

The Biden administration does, however, have other means of pushing ahead, although without the tax credits and the tax on methane. US President Joe Biden could destroy or limit the growth of much of the oil industry by declaring a climate emergency. Should he exercise this power in the next few months, a substantial portion of the fossil fuel business might be unrecognizable by the time a new president takes office on Jan. 20, 2025.

Public Support

Public backing for a declaration of climate support is strong. According to a Yale Program on Climate Change Communication survey, 58% of the registered voters polled favored the president “declaring global warming a national emergency if Congress did not act.” Biden has not acted yet because Congress is still working through legislation to fund the government for the next fiscal year — particularly as Manchin is one key to that effort and would clearly rail against such aggressive climate action.

Those proposing presidential action are calling for Biden to limit exports of US crude oil and petroleum products, as well as natural gas. Such steps would, however, be a mistake, because they do little to address global climate problems. Actions that affect trade in energy today would also likely exacerbate the current global energy crisis, possibly even worsening the problems created by Russian President Vladimir Putin.

Wide Discretionary Powers

The “climate emergency” is a long-term, not a short-term problem, and measures that address it must focus on investment and manufacturing decisions. The powers granted by the courts and laws give wide discretion to the president to take steps in a stated emergency. President Donald Trump was, for example, allowed to divert funds to build his wall on the Mexican border after declaring an emergency. The five conservative members of the Supreme Court endorsed his actions.

Biden could similarly use presidential powers to order the military to move quickly to address the longer-term threats to US security from global warming. Some of the billions appropriated to the military could then be reassigned to achieve this objective. Biden could also order manufacturers to redirect production to special projects, such as electric vehicles under the Defense Production Act — just as Trump ordered companies to produce ventilators in 2020.

These actions would contribute to efforts to reduce emissions. However, they are not especially attention-grabbing, and in the current situation the Biden administration needs to take bold steps to reassure those worried about global warming that the US is serious. The president may thus want to put his thumb in the eye of the oil industry, and IEEPA gives him that option.

Legal experts at the Brennan Center for Justice explain that the president could invoke IEEPA after determining that a threat emanates substantially from abroad and threatens national security. After that, the law gives the president a wide array of powers to control financial transactions. In this case, the exploration and development of fossil fuels abroad could be identified as representing a danger to the US. The treasury would then proceed to use IEEPA’s power to block transactions and freeze assets.

Historical Precedent

IEEPA has been used more than 60 times since 1997. Trade in oil as well as exploration and production in Iran, Venezuela and Sudan have been subject to sanctions issued under IEEPA. Efforts by the Democratic Republic of the Congo to develop oil reserves in its environmentally valuable jungles offer a first potential target now for such sanctions. The country’s leaders plan to auction off vast areas for oil development, according to the New York Times. The bidding would die if companies planning to explore there were warned that their access to US financial markets could be terminated.

Such a step would be viewed as very aggressive in the international context. However, many believe that aggression in defense of the global commons is required. Biden has the power to take such action. If he exercises it, there is little the multinational companies that rely on US financial markets can do other than obey.

Of course, other countries operating outside of the US financial orbit could step in. China, for example, took an active role in the development of oil in Sudan. However, oil production from Sudan is but a trickle, while those opining on the country’s prospects 20 years ago predicted a gusher. US sanctions have also suppressed oil production from Iran and Venezuela.

Aggressive use of IEEPA powers would likely lead to a large drop in E&P activity, especially if US contractors were sidelined. Such use of IEEPA provisions may be seen correctly as brute force and unfriendly action. However, those who belittle the Biden administration need to beware. Brute force is sometimes the only option when tailored and well-planned measures cannot be implemented.

Philip Verleger is an economist who has written about energy markets for over 40 years. A graduate of MIT, he has served two presidents, taught at Yale and helped develop energy commodity markets since 1980. Kim Pederson is editorial director of PKVerleger LLC. The views expressed in this article are those of the author.

Topics:
Low-Carbon Policy, Trade, Fiscal Terms, Resource Access
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