The following is an advance reading for the Spring Conference 2016 discussion Grasping the Global Energy Future: Challenges and Solutions.
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The national energy system of the United States is aging and has to be renewed in a dynamic fashion to adapt to the transformative changes in the world of energy. Failure to do so will result in substantial economic disadvantage and national security vulnerabilities, and risk the United States’ position as the leading global power in the twenty-first century. The need for modernization represents a unique opportunity to upgrade the United States to a cutting edge system of energy hardware and software. 

Moreover, climate change is a severe threat to the United States and an existential one to much of the rest of humanity. Climate change represents an ever growing, direct risk to the American people as extreme weather events wreak havoc, rising sea levels engulf coastal cities, and natural beauties and wildlife habitats degrade. The impact of climate change on other countries’ economic, political, and security postures will have major repercussions on US national security and economic prosperity. The United States cannot isolate itself from political and social instability, mass migration, conflict over resources, poverty, and health epidemics that excessive climate change would induce and future generations will have to endure. Taking resolute action to reduce greenhouse gas emissions is a form of ‘insurance’ against the most severe and irreversible potential consequences of climate change. The longer action is postponed, the greater risks and higher costs are faced. 

In today’s interconnected world, responding to the growing energy needs of the developing world amidst a changing climate is critical to the United States’ national security and economic prosperity. Mankind has within its grasp the wherewithal to engineer a global energy revolution. The international community took an important step towards action in Paris in December 2015. Yet the task at hand—transformation of the entire energy value chain across the globe—is colossal, and will require political will, technological ingenuity, business acumen, and international cooperation on a whole new level.  

In today’s interconnected world, responding to the growing energy needs of the developing world amidst a changing climate is critical to the United States’ national security and economic prosperity. 

Critical to preventing the most catastrophic consequences of climate change as well as securing the United States’ economic and environmental security and prosperity in the future is the transformation of the US energy sector, the single largest emitter of greenhouse gases today. Though the task at hand represents a formidable challenge, the United States can revolutionize its energy sector without compromising its energy security and economic development, without a major change in consumption patterns and lifestyles. The benefits of such a transition from a strategic, national security and economic perspective vastly outweigh the short-term costs. A United States that uses cutting edge energy technologies to fuel its economy in cleaner and safer ways is to the benefit of current and future generations.

American geopolitical, economic, and technological leadership also predisposes the United States to lead and benefit from the energy sector transformation abroad. The global transition to a lower carbon economy plays directly to the comparative advantages of the United States: individual empowerment, innovation, and engineering ingenuity. A world that manages to limit global warming below 1.5 degrees Celsius will be incomparably more peaceful and stable, where it will be easier to promote stability, the prevalence of universal liberal values, and achieve American strategic objectives. Conversely, failure to lead on the global energy transformation and falling behind on climate action will undermine the moral leadership of the United States in the world.

The strategy outlined in this paper offers the United States a pathway to become a global leader in both. It does so by building on the experience and mistakes of pioneers in energy transitions, as well as its own early successes, and putting a strong emphasis on transparent market friendly measures. 

Failure to lead on the global energy transformation and falling behind on climate action will undermine the moral leadership of the United States in the world.

The strategy focuses on accelerating the modernization of its energy sector to fuel a robust economic growth, increase the efficiency of the economy and existing energy value chains while reducing emissions, and prevent the catastrophic consequences of climate change, building upon the progress made in the last decade. It would also maintain and enhance the United States’ edge in the energy domain; boost the competitiveness of the economy; facilitate the provision of sustainable energy globally; ensure the energy security of key allies in Europe and Asia; prevent rivals and adversaries from using energy resources as a weapon; and reduce the volatility of global energy markets to strengthen global growth. 

The three-pillar strategy’s first pillar builds upon the United States’ unparalleled richness in both human and natural potential. It leverages US abundance of resources to address climate change in a resolute manner without delay by putting the right domestic policies in place. At the center of this pillar is the accelerated decarbonization of the US economy, based primarily on a well-calibrated and progressively increasing carbon fee. 

A carbon fee—covering all sectors, not just power generation as the controversial Clean Power Plan—would have several major advantages. It would further boost the competitiveness of cleaner-burning natural gas vis-à-vis coal in the short term. It could propel the upgrade and modernization of fossil fuel generation capacities to cut emissions during the transition, boost the competitiveness of carbon capture and storage techniques to provide a long term future for gas, and propel energy efficiency investments across the whole value chain. It would go a long way in helping to revive the commerciality of nuclear power to provide essential zero-carbon baseload generation capacity to address seasonal intermittency issues that are likely to prevail in the long term. It could boost the United States’ innovative capabilities to maintain a competitive edge in the energy sphere by increasing research and development and early deployment funding.

Revenues from the carbon fee could be used to fund six major purposes: 

• Provide effective assistance to those whose livelihood is disrupted by the energy transition through early retirement schemes, education, and job training programs
• Provide targeted subsidies to those struggling to pay their energy bills
• Boost public funding for energy technology R&D, and early deployment
• Boost energy efficiency across the whole of the US economy
• Renew the crumbling transportation infrastructure of the United States, with special regard to urban mass transportation systems, intercity high speed rail networks, and investment into bridging gaps left by the private sector in an emerging national infrastructure catering to electric vehicles
• Offset the potential decrease of corporate tax revenues in the context of a comprehensive US tax reform that reduces the corporate tax rate
   

The second pillar ensures that the United States leads on global climate action and addresses the energy insecurity of key allies. Sustained US leadership is essential to uphold and bolster an international consensus and action on climate change post-Paris COP21, and to prevent countries from turning back. Excessive dependence on external energy supplies from a single source may endanger the ability of allies to conduct an independent foreign policy that is both in their national and in the allied interest. Therefore, the United States must strive to do everything in its capacity to assist allies and partners in the quest to improve their energy security. The United States should also work with key allies and international institutions to deal with the instability associated with the transformation of the energy sector and its impact on major traditional producers. 

The United States must strive to do everything in its capacity to assist allies and partners in the quest to improve their energy security. 

The third pillar pushes for energy liberalization to enable better functioning domestic and global markets and aims to build a functioning international energy governance system. The United States should work toward a global web of networks, alliances, and instruments to promote transparent and efficient energy markets and effective climate action. 

This strategy may seem ambitious in light of the political realities in the United States today. Yet, as support for climate action and energy sector modernization in the American electorate grows, and associated costs of action shrink at the back of economies of scale and technological development, there is an emerging political space that allows for bold, bipartisan policies. This paper seeks to inform the debate in the 2016 election season and the legislative and executive action beyond.
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David Koranyi is the Director of the Eurasian Energy Future Initiative of the Atlantic Council. Follow him on Twitter: @DavidKoranyi. 

This article was originally published by the Atlantic Council, as part of the Atlantic Council Strategy Paper series.

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The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of the Pacific Council.