Category: Trade Policy

Guarded Optimism about the Paris Climate Agreement

My monthly podcast – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – provides a venue for me to 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 latest guest is a “rock star” on the international climate policy circuit – David Victor. 

Perhaps the ultimate professional compliment I can give someone after having read something they’ve written is to think, “I wish I’d written that.”  There are two people about whom I’ve recently thought that, and neither is an economist (as am I).  One is a lawyer, Jason Bordoff, on the faculty at Columbia University (he will be featured in a blog post in the near future); and the other, a political scientist, is David Victor, professor of international relations at the School of Global Policy and Strategy at the University of California, San Diego, where he is director of the Laboratory on International Law and Regulation. 

In addition, David is Co-Chair of the Brookings Institution Initiative on Energy and Climate, and he’s served as a Coordinating Lead Author of the Intergovernmental Panel on Climate Change, where he and I spent many hours together in various parts of the world – some of it enjoyable, some not.  Much of David’s research has been at the intersection of climate change science and policy.

You can listen to my conversation with David Victor here.

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David is delightfully outspoken on subjects about which he has considerable expertise, including the international dimensions of climate change policy.  In our conversation, he voices his concern about uncertainty surrounding climate policy at a time when many countries are directing or preparing to direct their resources into large-scale economic stimulus programs to help soften the economic blow of the coronavirus pandemic.  David notes that many questions remain at this time about public confidence in federal leadership and in the capacity for governments to act effectively.

“What I really worry about is that there’s been a huge test of government and that governments have varied enormously in their competence. And in particular, I’m deeply worried about the federal government in the United States,” he says. “And the contrast this time with the 2008-2009 financial crisis is really striking because back in 2008-2009, depending on how you count, up to 15% of the stimulus money went into low carbon trajectories. And a lot of it was spent well, and this time outside of Europe, we’re not seeing that. So that to me is the really big lesson emerging out of the pandemic that’s going to affect the future of energy and climate.”

He notes that “… the world is really looking to Europe more than the United States right now for guidance and a vision of how you would do large green infrastructure spending effectively.”  In particular, Victor points to the interesting work on climate and energy taking place in Norway.

“The Norwegians have shown, even for a small population of highly committed people, that you can make big bets on new technologies. And where those bets are successful, that in effect, you push the frontier and you steer the whole industry,” he said. “And so, Norway is a small country economically and in terms of population, but is engaged in leadership in a way that leadership might create followership.”

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It is fair to say that David Victor was not a fan of the Kyoto Protocol and its particular policy architecture, but he expresses guarded optimism that while the Paris Agreement, which has been ratified by 125 parties since its approval in 2016, has some flaws due to its structure, it is a first step toward an effective international effort to combat climate change.

“I expect that Paris is valuable because it’s there; it’s a city on the hill. It’s got goals that a lot of people are talking about. It’s got legitimacy, and that’s an enormous contribution that we’ve not had to date,” he remarks. “But then we should expect almost all the serious work’s going to happen in clubs of countries working outside Paris in ways that are consistent with Paris. And I think most of the diplomats are overly focused on Paris, and under focused on this – the real engines of progress.”

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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 David Victor is the fifteenth 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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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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New Publication on Chinese Climate Change Policy

Readers of this blog need not be reminded that climate change is a global commons problem and therefore necessitates cooperation at the highest jurisdictional level – that is, international cooperation among national governments – if it is to be adequately addressed. This points to the key role for national governments to put in place meaningful public policies, consistent with international cooperation.

But sub-national governments can also significantly advance efforts to mitigate climate change. Provinces and municipalities around the world have indeed undertaken initiatives – sometimes working together across national boundaries – to reduce greenhouse-gas emissions. This includes jurisdictions in the largest-emitting countries – China, the United States, and India – as well as in the European Union.

A New Publication Now Available on the Internet

We – the Harvard Project on Climate Agreements (HPCA) – have just released a new volume that examines sub-national climate-change policy in China.  The volume focuses to a considerable degree on carbon-pricing policy in China, including how China’s sub-national (pilot) emissions-trading systems can inform the emerging national carbon-pricing system.

The briefs in this volume – edited by Dr. Robert Stowe and myself – draw on presentations and discussion at a research workshop organized by the HPCA in Beijing on July 18 – 19, 2019. The workshop was hosted and co-sponsored by Tsinghua University’s Institute of Energy, Environment, and Economy, directed by Professor Zhang Xiliang. Workshop participants included 24 researchers and practitioners from China, Australia, Canada, India, Norway, the United Kingdom, and the United States. Chinese participants were based in Guangdong Province, Hubei Province, and Shanghai, as well as Beijing.  The agenda and participant list for the workshop are included at the end of the volume.

The volume – and the July 2019 workshop – are part of a larger initiative of the Harvard Project on Climate Agreements examining and comparing sub-national climate-change policy in China, India, the United States, and Canada. The Harvard Project is conducting a similar workshop in New Delhi in the summer of 2020 and will release a volume of briefs on sub-national climate-change policy in India in early 2021.

Overview and Framing

The volume begins with a brief by Zhang Xiliang and Zhou Li that details policies adopted by Chinese provinces and municipalities to address climate change. Ye Qi and Xiaofan Zhao then describe what they see as the most important drivers of climate-change policy in China, providing context for the volume.

Institutional Perspectives

Next, institutional perspectives are provided in four briefs by experts on center-provincial institutional dynamics in China, with applications to climate-change policy. Michael Davidson explores China’s “quasi-federalist” system, and discusses how this system might be leveraged to develop effective institutions for addressing climate change. Gørild Heggelund focuses on China’s national emissions-trading system (ETS).

Tan Xianchun provides a concise yet detailed analysis of China’s administrative systems and procedures for addressing climate change – both carbon pricing and other approaches to reducing emissions, including the results of modeling that estimates the potential impact of a range of “[l]ow-carbon measures and policies” in Chongqing municipality and Guangdong Province.

Providing the final institutional perspective, Christine Wong discusses how the implementation and enforcement of environmental policy in China have evolved over the last decade. She finds that although the central government places greater emphasis on environmental policy than in the past and has provided considerable financial support for implementation and enforcement, renewed financial constraints in a period of low economic growth may prompt sub-national officials to favor carbon pricing over more traditional top-down policy approaches.

Emissions Trading Systems in China:  Lessons for National Policy Design from the Pilots

Three contributors examine lessons for national policy design from experience with the pilot ETSs. Shaozhou Qi assesses the performance of the seven pilot ETSs. Tian Qi provides insights based on his study of Hubei’s pilot ETS, focusing on allowance allocation, as well as the closely-related topics of auction design and market-stability measures. Zeng Xuelan examines a range of GHG emissions-reduction policies in Guangdong Province, noting that Guangdong’s pilot ETS has been its “main mechanism for reducing provincial emissions.”

Zeng also notes the possibility of the central government terminating Guangdong’s ETS after lessons have been incorporated into the national carbon-pricing system.

The fate of the pilot ETSs more broadly is the subject of Valerie Karplus’s brief. She discusses three scenarios: “(1) coexistence, that is, maintaining separate sub-national trading systems alongside the national system; (2) partial integration, which would mean allowing credits from one system to be used in other systems; and (3) full integration, which would involve subsuming the seven sub-national pilots under a single national ETS.” Karplus discusses the tradeoffs among these options and then suggests an approach to strengthening the pilot ETSs that is somewhat independent of the path chosen.

Designing and Implementing China’s National ETS

Four briefs focus on the development of the national carbon-pricing system, though in each case with some reference to the sub-national pilots. Pu Wang identifies a set of important challenges to the implementation of the national system, concluding in part – as did Heggelund – that “institutional capacity related to the carbon market needs to be significantly enhanced at all levels, from the central government to the local level.”

We Libo discusses the results of a modeling initiative that explores sub-national distributional impacts of various trading-intensity and allowance-allocation scenarios. Zhang Jianyu presents ten policy recommendations for the implementation of the national system. Among these, he suggests that the pilot ETSs can continue to play a useful role after the national system is implemented, and that the central government should continue to support the pilots.

Finally, Fei Teng examines the important relationship between the power sector in China and the performance of the national carbon-pricing system. The power sector is highly regulated, though the central government is pursuing market-oriented reforms. Teng presents three options for passing through higher electricity costs resulting from carbon-pricing to electricity consumers, with one option including trading in generation rights.

Comparative Perspectives on Sub-National Policy

The final section of the volume includes three briefs providing cross-national comparative context on sub-national climate-change policy.

Radhika Khosla writes on India, Robert Stavins on the United States, and Katie Sullivan and Ellen Lourie on Canada.

Final Thoughts

Each of the seventeen briefs in the volume begins with several key points, and the seventeen sets of key points are compiled immediately following an introduction. We hope that this structure renders the insights, research results, and analysis contained in the briefs more readily accessible.

The Harvard Project on Climate Agreements is grateful to the Harvard Global Institute, which provides generous support for the initiative of which this volume and the July 2019 workshop in Beijing are part. We are also grateful for our ongoing collaboration with Professor Zhang Xiliang and his colleagues – a collaboration that has yielded insights that we hope prove useful to researchers and policy makers working to address the problem of climate change.

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