BASED ON W. Peng et al. Nature Climate Change 11, 738–745 (2021).

The policy problem

Traditionally, assessment of the economics of climate policies has assumed that governments would implement idealized, optimal policies such as nationally uniform economy-wide carbon taxes. Yet over the last decade, actual policy experience has demonstrated that the reality is a lot more varied. Although some national governments are firmly leading climate policy, in much of the world, states, cities and other sub-national actors are leading the way. While uneven sub-national action is common, especially in large and politically diverse countries, little is known about its implications for costs. This question is particularly important for the United States, which is the world’s second largest emitter and which has some of the highest variability in the world for sub-national action: while about 20 states aim to achieve net-zero electricity or economy-wide emissions around the middle of the century, many others are doing little or nothing, and their political leadership faces little sustained public pressure to strengthen policy action.

The findings

As compared to an idealized nationally uniform policy, we find that varying the state-level policy stringency by a factor of three will increase the nationwide cost by only about 10%. Such results are robust under different national decarbonization targets, formulations for policy heterogeneity, and technology assumptions. The low cost hinges on two conditions. First is the availability of critical technologies (for example, low-carbon electricity and bioenergy with carbon capture and storage) and the ability to trade relevant energy products across state borders. Second is that there is at least some effort by every state. If a handful of states are not engaged at all, the leading states will need to adopt extremely expensive negative emissions technologies, which pushes up the nationwide cost. These two conditions could be difficult to meet in the real world given the technological, regulatory and political realities. Future work should consider potential constraints on technology adoption as well as trade and state politics.

The study

We employed a highly-detailed process-based integrated assessment model (GCAM-USA) to examine the costs of state-driven climate action. GCAM-USA includes state-level representation of energy transformation and consumption sectors, as well as interactions between the economic, energy and land-use systems. These detailed representations allowed us to identify critical sectors, technologies and processes that determine the cost of heterogeneous policy efforts. Using this model, we examined the costs of 12 scenarios that vary across two dimensions: (1) national mitigation effort, measured according to four targets for cuts in national total greenhouse gas emissions, and (2) subnational policy approach, modelled as three degrees of heterogeneity in the stringency of state-level climate policy. We used surveys of public opinion in each state as a proxy for cross-state variation in policy stringency (Fig. 1). We further tested the effects of a wide range of alternative policy and technology assumptions on nationwide mitigation costs.

Fig. 1: Cost of state-driven and nationally uniform policy approaches to achieve varying decarbonization targets for the United States.
figure 1

Carbon mitigation cost in 2050 as a fraction of projected 2050 gross domestic product (GDP), by national mitigation effort (20–80% decarbonization (D) by 2050 relative to 2005) and by subnational policy approach (uniform, hybrid and heterogeneous).

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