A Leading Expert on International Trade Talks About Climate Change

In my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the opportunity of engaging in interesting conversations over the past five years with a significant number of outstanding academic economists who have carried out work that is relevant for environmental, energy, and resource policy, including by serving in important government positions.  My most recent guest is no exception.  Robert Lawrence, the Albert Williams Professor of International Trade and Investment at the John F. Kennedy School of Government at Harvard University, served as a Member of President Clinton’s Council of Economic Advisers from 1999 to 2001.  A prominent theme of our conversation is that the rise of political populism and economic protectionism are serious barriers impeding efforts to combat global climate change.  You can listen to our complete conversation here.

Robert Lawrence notes that public policies designed to protect the U.S. economy and labor force often have deleterious impacts on the economy and on climate policy, particularly in the case of tariffs initially imposed on China by the Trump administration and more recently by the Biden administration.

“As part of our trade war with China, Trump imposed a 25 percent tariff on electric vehicles. We already had a two and a half percent tariff on automobiles. So, that’s a 27 and a half percent tariff on electric vehicles. And that was before Biden has now raised those tariffs even further to 50 percent. So, in effect, we’ve closed the US market for electric vehicles, and have taken similar measures when it comes to solar panels,” he argues.

“We also have broad tariffs on steel and aluminum, which are key inputs if you want to make wind turbines. So, what we’ve done is in the name of … national security and also to achieve and protect our own domestic production of these products, but [an impact] is to severely, in my view, slow down the pace of decarbonization.”

Lawrence acknowledges that the Inflation Reduction Act (IRA), passed by Congress and signed into law in 2022, was a fairly successful attempt to address climate change in a bipartisan way.

“The IRA, in using subsidies, is essentially dealing with a political reality that the first best, in the minds of most economists, [which is] raising the price of CO2 emissions, proved to be impractical within the American political system. And so, we got what I think of as a second-best approach, but nonetheless, it is an approach moving us in the right direction,” he explaines. “And so, I think we see the constraints of politics leading us to do what’s feasible.”

Robert goes on to say that the recent domestic shift toward protectionist trade policies has coincided with the decline of American manufacturing, but it has not had the effect of restoring the sector to the significant stature it once held.

“I think both the Biden Administration and the Trump Administration for that matter, got it wrong because they don’t understand the reality … They think you can restore the middle class by restoring manufacturing’s role in the economy, and I think basically we’re way past the peak where this is feasible,” he says. “It’s not that manufacturing isn’t important. It has a role to play in providing us with the hardware for de-carbonization, for the digital economy, but it’s not a driver of the opportunity that it once was for people who are relatively less skilled.”

The author of several books on trade policy, including the soon-to-be-published Behind the Curve: Can Manufacturing Still Provide Inclusive Growth?, Lawrence explains that while he is a proponent of free trade, he believes such policies must be crafted carefully.

“There is a very strong argument for an open trading economy and an open trading system. At the same time, I also think, and increasingly we’re aware, that there are different kinds of risks,” he says. “There’s an optimal pace of change from a political standpoint. Even if eventually a country would be better off putting its workers in areas where it can compete, the transition requires paying attention to some of the political consequences of doing that. And so, a lot of my work has been devoted to thinking about how you can move towards freer trade, but also deal with the labor market consequences of doing that.”

For this and much more, please listen to my podcast conversation with Robert Lawrence, the 61st episode over the past five years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunesPocket CastsSpotify, and Stitcher.

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An International Relations Authority Expresses Optimism about Climate Change

When thinking about the challenges the world faces regarding climate change, the global commons nature of the problem immediately highlights the importance of international cooperation, and that suggests that thoughts from those who study and who have experience in international relations can be very informative.  In the most recent episode of my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I have the opportunity to engage in a conversation with someone who combines international relations scholarship with significant high-level experience in government.  I’m referring to Meghan O’Sullivan, the Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard Kennedy School, where she directs the Belfer Center for Science and International Affairs.  You can listen to our podcast conversation, produced by the Harvard Environmental Economics Program, here.

In my view, Meghan O’Sullivan can be thought of as the quintessential Harvard Kennedy School faculty member, because in addition to her extensive and relevant scholarly research, she has had abundant experience in the policy world as a practitioner, including work in policy formulation and negotiation.  In that regard, I will mention just one appointment, namely her role as Special Assistant to President George W. Bush and Deputy National Security Advisor.  Among her other books, she is the author of Windfall: How New Energy Abundance Upends Global Politics and Strengthens American Power.  Her research and writing have focused on the intersection of global energy strategies and international affairs, which inspired her to found the Geopolitics of Energy Project at the Kennedy School in 2011.  I ask her to describe the essence of the project.

“The project is founded on the idea that… this interaction [between energy policies and international affairs] is really important for foreign policymakers to understand… [because] energy is a big explanatory variable when we think about power dynamics in the system, and for people who may be on the energy and climate side to… better understand how the global system impacts their ability to move the energy system in one way or the other,” she explains.

O’Sullivan responds to another question by noting that two recent changes in world energy markets are having significant geopolitical consequences – technological advancements, and the global push toward clean energy.

“I think it’s incredibly important [that] the world can get to net-zero and in a time frame that’s going to have a big impact on our climate, and allow us to address all of the insecurities that come about through climate change,” she states. “The push to try to get to net-zero, the effort that countries and businesses and foundations and individuals are making in the interest of either advancing the energy transition or slowing down the energy transition, that has become a really big driver of international affairs.”

Meghan acknowledges that the U.S.-China relationship is also a critical component in the international effort to confront climate change.

“One of the big changes in the international system that’s become very apparent in the last several years has been this U.S.-China great power competition. And it’s in that framework that… we have to drive towards net-zero. And it makes a big difference that we’re no longer in this kind of cooperative environment that characterized a lot of the last 30 years, and we’re in a global environment that is much more competitive,” she says. “What we can achieve through global mechanisms or through international bodies, we have to assess it differently because the U.S.-Chinese relationship is a big part of the environment in which our actions are unfolding.”

She also maintains that while global emissions continue to rise, there are solid reasons for hope that climate solutions will emerge.  

“On the one hand, it’s absolutely true that we’ve seen much progress just in terms of technological advancement and the bringing down of costs of certain renewable technologies and…the really large amounts of money that are going into clean energy investments… That is very heartening,” she says. “On the flip side, though, we can’t ignore the fact that emissions continue to rise. And last year I think was the highest level of global… carbon emissions that we’ve ever seen.”

Taking a big picture view, O’Sullivan expresses the opinion that the global community will coalesce around climate strategies that will foster real progress.

“We’re going to be in a world with hopefully greater technological [capacities]… but also I think we’re going to have more and more political pressures to address this [issue], and I think our political landscape will continue to evolve in a direction where greater climate action will not just be possible, but it will be necessary,” she remarks.

You can hear this and much more in my conversation with Meghan O’Sullivan, which is the 60th episode over the past four years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunesPocket CastsSpotify, and Stitcher.

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A Behavioral Economist Thinks About Energy and Climate Change

When examining environmental, energy, and climate change policy, the methods and the topic of behavioral economics arise with some regularity.  In my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” we’ve talked about such behavioral research in regard to energy-efficiency policies with Michael Greenstone and others.  And, much more recently, in a podcast episode just released, I had the opportunity to talk with a behavioral economist who is now on the faculty of a school that’s focused on environmental studies.  I’m referring to Hunt Allcott, who is Professor of Global Environmental Policy at the Doerr School of Sustainability at Stanford University, and who – I’m proud to say – is a graduate of the PhD program in Public Policy at Harvard.  You can listen to our podcast conversation, produced by the Harvard Environmental Economics Program, here.

Allcott serves as Co-Director of the Stanford Environmental and Energy Policy Analysis Center, and is a Research Associate at the National Bureau of Economic Research, as well a member of the board of editors of the American Economic Journal: Economic Policy.

The crux of Allcott’s research focuses on the ways in which human behavior affects economic decisions and outcomes in a variety of contexts, and the lessons those have for policymaking. In our conversation, he cites several examples where government policy can influence consumer decisions in ways that will benefit both consumers and the environment.

“It’s like what behavioral economists call a shrouded attribute. It’s a future cost that’s kind of easy to forget when you’re making a purchase decision. So, if it’s… true that consumers aren’t thinking very hard about these future energy costs, then we’re probably erring on the side of buying too many gas guzzling cars and energy guzzling air conditioners and light bulbs. And so, as a result, the government can make us better off by pushing us in the direction of being more energy efficient,” Allcott remarked. “It was fun for me to… work with a group of others to develop actual empirical tests of, okay, how would you substantiate those consumer protection arguments in the data? So, that’s some of the work that I’m most proud of.”

Allcott also discusses the federal electric vehicle tax credits, which are designed to incentivize consumers to reduce carbon emissions.

“You subsidize a new electric vehicle, that’s a new EV on the road, [and] that’s good for the environment in most places. You give somebody a tax credit to buy a used EV, that’s just trading an electric vehicle from one person to another, and so there’s no new net vehicle on the road, at least [not] directly,” he stated. “Is the incidence really on the used vehicle buyer, in which case there’s no environmental benefit, or maybe the prices of used electric vehicles are going up because they’re worth more upon resale. That’s not as good for the buyers, but then it might induce more new electric vehicle sales because when you buy a new EV, you then recognize that the resale value might be higher.”

Allcott officially joined the faculty at the Doerr School in September 2022, just as the school was being launched.

“There are 60 existing faculty members that were moved into that school as part of earth systems, energy systems, civil engineering, and some other departments. I was actually… the first external hire of this school to reach through the provost and actually show up on campus. And so, I’ve been here for, I guess, 15, 16 months so far, and it’s just been a great experience trying to help Stanford have an even bigger imprint in this space of impact on energy and environmental issues.”

Ironically, Allcott notes that much of the research taking place at the Doerr School and in which he’s now engaged is not focused on behavioral economics.

“This has been an opportunity to step back and rethink what is the right research direction for the next five to ten years. And perhaps interestingly, all the topics that our group is now working on are what I would call non-behavioral topics. There’s not really a behavioral economics angle to them,” he explained. “Upon arriving at Stanford [I asked] ‘okay, I’m in the sustainability school. What are the most important environmental economics topics?’ I think energy efficiency and behavioral economics is still on that list, but there’s so much other stuff. There’s the Inflation Reduction Act, there is electricity market design, and then within each one of those two, there’s a lot of different sub-areas that we’re actually focusing on.”

You can hear this and much more in my conversation with Hunt Allcott, which is the 59th episode over the past four years of the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunesPocket CastsSpotify, and Stitcher.

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