Category: Energy Economics

Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery

In our most recent (September 8th) webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA), I had the pleasure of chatting with Joseph Stiglitz, University Professor at Columbia University.  This webinar series features leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government.  A video recording and transcript of the webinar are available here.

In this case, my guest has had his feet planted firmly in more than one of those realms.  In addition to being a long-time faculty member at Columbia, Joe Stiglitz is Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute.  Among the many positions he has held, he was a Member and then Chairman of the Council of Economic Advisers in the Clinton administration, and subsequently Senior Vice President and Chief Economist of the World Bank.

He received the John Bates Clark Medal from the American Economic Association in 1979, and the Nobel Prize in Economics in 2001.  In addition, he is Fellow of the National Academy of Sciences, the American Academy of Arts and Sciences, the American Philosophical Society, and the Econometric Society.

I first met Joe in 1993 when he was a Member of President Clinton’s CEA, and then again on a long flight to Seoul, Korea, when we were both attending the initial meeting of the Second Assessment Report of the Intergovernmental Panel on Climate Change.

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In our wide-ranging conversation, Joe Stiglitz shares his thoughts on carbon pricing, post-pandemic economic recovery, green economy transition, and much more.

Stiglitz explains that he favors a multi-faceted strategy to address climate change and to spur the transition to a green economy – including public investments, research and development, regulations, and carbon pricing. Such a “carbon package,” he says, can serve as a long-term economic stimulus because it will encourage companies to retrofit their operations, thereby spurring private investment and innovation. “And that’s the sense in which it will be a growth story. It will actually make for a more dynamic economy.” 

The economic impacts of COVID-19 may have temporarily diverted resources away from climate change efforts, Stiglitz remarks, but the post-pandemic period will bring tremendous opportunities to integrate green policies into economic recovery plans in the United States and elsewhere. “The pandemic has brought to light some of the real weaknesses in our economy. It has certainly made us more aware that we need to be better prepared for the risks that we face. One of those risks was the pandemic that we hadn’t thought about, and the other one is something we know about, which is climate risk,” he says.

Discussing public investments moving forward, Stiglitz remarks, “From my perspective, we as citizens have the right to make sure that that money serves a dual purpose – not only the purpose of bringing the economy back, [but] back in a way that is more consistent with the vision that we want of the post-pandemic economy and society. And that means a more equal society, I hope, a more knowledge-based society, and a much greener economy.”

He highlights two examples of national recovery plans that include green elements – in France, where the Air France rescue package includes provisions that the airline reduce its carbon footprint; and in New Zealand, where unemployed and underemployed citizens were hired to improve public parks, which serve as popular tourist destinations. And he cites the European Union’s “Green Deal” as an example of a multilateral effort to hasten the transition to a green economy, and he likens it to a wartime effort to address a visceral threat.

“What we are talking about here is heavy mobilization of resources,” he says. “Sometimes I use the metaphor of a Green New Deal wartime mobilization. The difference is that you see your enemy right in front of you in war. The effects of climate change we are seeing right in front of us – in the fires, the hurricanes, the floods, but some people are not seeing it as clearly as we would see a military attack.”

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When we are half of the way through the one-hour conversation, I pose some questions submitted by members of the virtual audience, on issues ranging from the challenges facing developing countries to the economic capacity necessary to move the needle on climate change. 

When asked what approach he would advocate to achieve widespread policy support for achieving net CO2 emissions reductions by the year 2040, Stiglitz remarks that, “I think that as a recognition that we all share the planet and carbon molecules don’t carry passports, that we’re in this together. There is a shared concern. Hopefully that will be enough to enable people to come to agreement on what a fair sharing of the burden is.”

Beyond this, Stiglitz explains that there is plenty that individuals can do to help in the fight against climate change.  “We all have multiple roles in our society. We are consumers. We are workers. We are citizens. As citizens, we have an important role in advocacy, in helping change the political process to help deal with carbon and the green transition. The only way these problems will be solved is when we have proper public policy.”

“As consumers, I think we also have roles, moving more towards greener housing, greener eating, greener transportation. We make lots of decisions, as individuals, we do savings, and we could put our money into portfolios that are greener. We can express our values through how we allocate our portfolios.”

“As workers, I think it’s important to articulate to the extent that we can, and in some firms there’s a greater openness than others, that we ought to be thinking of moving towards greener. I would argue it’s better for the companies…if they’re ready for the green transition,” he states. “I think there are lots of individual actions, and if we’re going to move our society, it will take lots of these adding up together to succeed.”

All of this and more can be heard and seen at this website.  I hope you will check it out.

Previous webinar in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition.”

The next HPCA Conversation on Climate Change and Energy Policy is scheduled for October 19th with guest Joseph Aldy, Professor of the Practice of Public Policy, Harvard Kennedy School.  Please register in advance for this event on the HPCA website.

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A Broad Ranging Conversation from Energy Policy to Social Injustice

As readers of this blog know, in our monthly podcast – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – produced by the Harvard Environmental Economics Program, I chat about policy and practice with interesting people who are working at the interface of economics, energy, and the environment, whether from academia, NGOs, business, or government.  My guest in our most recent podcast fits that description to a tee.  Vicky Bailey has had over 30 years of experience in high-level, national and international, corporate executive, and government positions in the energy sector.  You can listen to my conversation with Vicky Bailey here.

I’ve had the privilege and pleasure of knowing and working with Vicky for more than 20 years, originally as part of a multi-year Harvard energy project directed by my colleague Professor Bill Hogan. 

Vicky has served as Commissioner of the Indiana Utility Regulatory Commission, a member of the Federal Energy Regulatory Commission, appointed by President Bill Clinton, and as President and CEO of PSI Energy, Inc., Indiana’s largest electric utility, now Duke Indiana.  Reflecting her bipartisanship, she was appointed by President George W. Bush to be the first Assistant Secretary of Energy for both International Affairs and Domestic Policy.  In the Obama administration, she was appointed by Secretary of Energy Steven Chu to the Blue Ribbon Commission on America’s Nuclear Future, and in 2014, to the National Petroleum Council by Secretary of Energy Ernest Moniz.

Vicky is the founder of Anderson Stratton International LLC, management advisory services.  She has served on numerous corporate and non-profit boards, including the Board of Directors of Resources for the Future, the Washington-based think tank, which has brought Vicky and me together again!

At the outset of our conversation, Vicky notes that the COVID-19 pandemic is changing the way people work and live, and thereby having profound effects on energy demand.  “Working from home will change energy demand. We can plan for some things, but this is something probably we hadn’t planned for, but we’re seeing energy demand come back.  Things are coming back, but it’s very slow and coming back in a different way.”

Reflecting upon what she thought might be the most significant change in the energy sector that she has witnessed, Vicky responds that discussions about energy, the environment, and climate change are much more politicized today than they were 20 years ago.  

“The words ‘climate change’ seem to now conjure up positions or sides. That wasn’t the way it was for me coming along.” She cited the important work of late Indiana Senator Richard Lugar, a moderate Republican who saw the threat of global warming through the lens of a farmer.  He was a strong supporter of climate because he recognized that the environment can cause stress on crops, which then has an issue as it relates to feeding, getting that produce, and getting that out to feed people.”  Validating how times have changed, we discuss the fact that the Clean Air Act Amendments of 1990 passed in the House of Representatives with the support of approximately 97 percent of Democrats and 85 percent of Republicans.

Near the end of our conversation, I note that the brutal killing of George Floyd in May of this year – and brutality toward many other black men and women over the years – has greatly increased national consciousness about personal and systemic racism – both in the United States and globally.  In this regard, I ask Vicky if she can share her perceptions, given her truly diverse set of experiences in business and government. Her response is heart-felt and full, and so I want to share with you an extended, albeit edited, part of what Vicky Bailey has to say:

“Yes. It has been a hard time. The murder of George Floyd that we all witnessed, or those of us who did see this video and see it on TV and other areas, you can’t unsee that.  And you have to say, why? Why is that happening? Why did it turn into that? And even if you thought, Well, okay, he did something bad, he did something criminal, doesn’t he at least get to make it to the jailhouse?   Can we make it to the jailhouse? Others seem to be able to do that, even though they commit horrendous crimes. They seem to be able to make it to the jailhouse, and our men and women don’t.  And so we’re weary of that.”

“And people are angry about that. They see other segments of society treated differently and given latitudes and benefits of the doubt, that other segments are not.  So, I don’t agree with violence and those of you who know me, I’m not a sharp elbow. I’m not a loud and boisterous kind of individual.  But there are those who feel that you don’t hear them. You don’t hear their cries.  You don’t feel their pain. Unless we come out and speak loudly, this behavior is just going to continue.  It just seems to continue. And for me, it’s a time for reflection. It’s a time for conversation. It’s a time to lend your voice. Don’t be afraid to do so.”

“But I am optimistic. I believe in America. I have said that through my own public service. And I believe we always aspire to do better, but we need our leaders. We need our leadership:  leadership and character, what we teach our children from kindergarten on.  We are a great country, but we continue to strive to do better.  And that’s what I want to appeal to. I want to appeal to that. That better side of us.”

All of this and more is found in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Listen to this latest discussion here.  You can find a complete transcript of our conversation at the website of the Harvard Environmental Economics Program.

My conversation with Vicky Bailey is the fourteenth episode in the Environmental Insights series.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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Opportunities and Risks for Green Economic Recovery

In our most recent (August 19th) webinar in the series of Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA), I had the pleasure of hosting Rachel Kyte, Dean of the Fletcher School of Law and Diplomacy at Tufts University.  This webinar series features leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government.  In this case, my guest has had her feet planted firmly in more than one of those realms.  Previously Dean Kyte served as a Special Representative of the U.N. Secretary-General, and before that was Vice President and Special Envoy for Climate Change at the World Bank.  A video recording and transcript of the webinar are available here.

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Due to the global COVID pandemic, the webinar was executed remotely.  The consequent economic downturns have made many countries think about the design of their respective economic recovery packages, including the possibility of greening recovery policies and instruments.  This was the topic of Rachel Kyte’s presentation, “Using the Pandemic Recovery to Spur the Clean Transition – Opportunities and Potential Pitfalls.”

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Citing the fact that 180 nations are in severe recessions, with some possibly teetering on the brink of depression, Dean Kyte describes the current moment as an opportunity to “pivot to a trajectory that would get us closer to being on track for the kind of economic pathway forward that we would need to reach zero net emissions by mid-century … in order to combat the worst impacts of climate change.”  Leveraging that opportunity, however, will be complicated, Kyte explained, noting that the severe economic stress caused by the pandemic is “testing the boundaries of international solidarity.”

“We are about to see over the fall, I think, some of the cumulative impacts of the economic crisis on our financial systems. And we can see that the traditional mechanisms and multinational cooperation which we rely upon in order to attack issues of global public good are straining. They are straining with COVID and they are straining with the impacts of climate change,” she says.

It is imperative, she argues, for citizens, institutions, and governments to recognize the severity of the situation, and muster the political will to address the severe economic pains caused both by the pandemic and unmitigated climate change.

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“We will really be putting pressure on the systems that are normally in place to support that – the IMF, the multinational development banks, the role of central banks,” she points out. “In these economic crises, it is the least well off, the most vulnerable, and the most vulnerable to climate change, who are impacted the most. And what we’re looking at is wiping out the advances that have been made in poverty alleviation over the last few years. That has huge impacts for the way we think about vulnerability to climate change going forward.”

Over the short-term, however, Rachel Kyte acknowledges that economic contractions have reduced carbon dioxide (CO2) emissions, as global energy demand is expected to fall by about six percent in 2020, compared with 2019. But demand will pick back up when economies rebound, she notes, unless there are systematic efforts to change it. Those efforts, she remarks, can be strategically incorporated into economic relief packages that will continue to emerge.

“There are, I think, a number of think tank groups, [and other] regional bodies now suggesting that there are clear policy priorities in order to be able to hit that sweet spot of short-term recovery, but also a cleaner and faster pathway down the energy transition,” she remarks. She specifically cites the need for green “shovel-ready” projects aligned with rescue plans for distressed industries that adhere to a pathway of deep decarbonization and increased energy efficiency. Rachel also discusses the need for smart private finance and investment in green technologies, and sufficient international cooperation necessary to spare developing countries crushing debt loads that would cripple their climate change mitigation efforts.

Referring to the nature of such a green energy pivot, she remarks that, “We’re at a moment where we need both scaffolding and scholarship or new design. The scaffolding is that we have an international system that helps us respond to pandemics, that helps us respond to economic crises, and that should help us to respond to climate change. And that system is really underperforming, at risk, and under strain.  So, we have to in this immediate phase put scaffolding around it and help it limp forward and help us all limp forward together.”

During the webinar, after concluding her presentation, Dean Kyte fields questions from the audience, including the risks of economic rescue packages that worsen the effects of climate change, the potential for reductions in Overseas Development Assistance budgets to the developing world, the challenges of green aid in Africa, obstacles facing the United Nations Framework Convention on Climate Change (UNFCCC) in making substantive progress, Mexico’s mixed record on climate change policy, and potential incentives to encourage developing countries to adopt green recovery trajectories. 

All of this and more can be heard and seen at this website.  I hope you will check it out.

Previous webinar in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, and Jake Werksman’s assessment of the European Union’s Green New Deal. 

The next HPCA Conversation on Climate Change and Energy Policy is scheduled for September 8th with guest Joseph Stiglitz, University Professor at Columbia University.  Click here to register in advance for that webinar.

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