The United States recently reaffirmed its goal through the Paris Agreement to reduce economy-wide greenhouse gas emissions to 26–28% below 2005 levels in 2025, and the Obama Administration’s Climate Action Plan previously proposed an 80% target by 2050. This paper investigates the role of temporal flexibility from emissions banking provisions under an economy-wide cap-and-trade policy, which provides insight into the consistency between near-and long-term goals. Model results using U.S. Regional Economy, Greenhouse Gas, and Energy (US-REGEN) indicate that significant and sustained transformations must occur across many sectors of the economy to meet the 80% target. In particular, electrification and energy efficiency are key elements of economy-wide reductions, as electricity may provide over half of final energy by 2050. Given the stringency of the long-term target and convexity of marginal abatement costs, the time path for mitigation with banking suggests that 2025 abatement should exceed the pledged level (42% instead of 26–28%) to reduce cost uncertainty in later decades. Total policy costs are 30% higher when banking is excluded; however, political economy barriers and uncertainty may limit the use of banking provisions. We show how current literature on meeting the 80% target almost exclusively assumes banking, which may bias policy recommendations and have important consequences for near-term R&D prioritization and model development.
John Bistline and Francisco de la Chesnaye authored a peer-review paper entitled “Banking on Banking: Does ‘When’ Flexibility Mask the Costs of Stringent Climate Policy?” that was recently published in the scientific journal Climatic Change.