Bringing Ambition and Pragmatism to Climate Change Policy

In the world of environmental policy, it is frequently the case that pragmatism and effectiveness are framed as being at odds with passion and ambition.  Even more so, in the realm of climate change, it is the rare individual who can successfully merge ambition and pragmatism in the pursuit of intelligent and effective public policy.  Richard Schmalensee, my guest in the newest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” is just such a person.

In my conversation with Dick Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology, he reflects on his many years working on environmental policy in public service and in academia.  Abundant insights arise, including important lessons for current climate policy deliberations in the United States, Europe, China, and other countries.

Professor Schmalensee was Dean of the MIT Sloan School of Management for 10 years, and Director of the MIT Center for Energy and Environmental Policy Research for 12 years.  Before and during those years, his research and teaching were in multiple areas of application of industrial organization, including antitrust, regulatory, energy, and environmental policies.

He is a Fellow of the Econometric Society and the American Academy of Arts and Sciences, a Director of the National Bureau of Economic Research, and Chairman Emeritus of the Board of Directors of Resources for the Future.  And I’m pleased to say that Dick is also an Associate Scholar of the Harvard Environmental Economics Program, and in recent years, has been my frequent co-author (for example, here, here, and here).

In addition to all of this, during a leave of absence from MIT, he served as a Member of the President’s Council of Economic Advisers in the George H.W. Bush administration.

Professor Schmalensee in his home study in Boston, 2020

In this latest Podcast episode, our conversation begins with Dick’s upbringing in a small town in southern Illinois, his move east to college and graduate school at MIT, his dissertation research, and the professional path that took him after receipt of his Ph.D. degree, first to California, and then back east to MIT’s Sloan School of Management.  We turn to his career in regulatory economics and policy – both his scholarly research and his close involvement in policy development and implementation, where he was “in the words of ‘Hamilton,” in the room where it happened.” 

Speaking at the Harvard Kennedy School, 2020

You won’t be surprised that we take time to focus on:  the pathbreaking cap-and-trade program launched by the Clean Air Act Amendments of 1990; and political changes in the United States that have moved environmental policy from being a truly bipartisan issue to a partisan one in today’s highly polarized politics.  Much of our conversation is about the current state of climate change policy – and policy research – both domestically and globally.

Delivering Keynote Address at the Toulouse School of Economics, 2017

Throughout the interview, Dick is at home in his disarming style of candid conversation, with no punches pulled.  He terms current U.S. climate change policy “a disaster,” saying it was a mistake “walking away from Paris, walking away from any sense that it’s important that we deal with our emissions and indeed walking away from the potential federal role in helping states and localities adapt to change.”

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

My conversation with Dick Schmalensee is the eleventh 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.


A Blast from the Past: U.S. Climate Policy Then and Now

We have just released the newest episode of our podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  In this latest episode, I engage in a conversation with Joseph Aldy, my Harvard colleague, and an individual with considerable experience at multiple levels and capacities in the U.S. government, including in the White House during the Obama Administration, with the common theme in Joe’s government service being substantial focus on the economic dimensions of energy and environmental policy.











Joe is a Professor of the Practice of Public Policy at the Harvard Kennedy School, a University Fellow of Resources for the Future, and a Faculty Research Fellow of the National Bureau of Economic Research.  At Harvard, he is also the Faculty Chair of the Regulatory Policy Program in the Mossavar-Rahmani Center for Business and Government, a Faculty Fellow of the Harvard Environmental Economics Program, and co-founder with me – when he was working full-time at Resources for the Future – of the Harvard Project on Climate Agreements.

Professor Aldy worked in the White House during the first two years of the Obama Administration, helping direct the administration’s climate change policy while serving as Special Assistant to the President for Energy and Environment.  In this new podcast – which I very much hope you’ll check out – he remarks that, “the most challenging aspect of the job was recognizing that your to-do list at 7:30 or 8:00 in the morning may get wiped out by something unexpected that happens later that day.” As an example, he references the Deep Water Horizon oil spill in April 2010, which eventually resulted in new government regulations designed to reduce the risk of such accidents in future years.

In addition to reflecting on Joe’s experiences in the Clinton and Obama administrations, much of our conversation also touched on what can be expected from today’s international climate negotiations under the United Nations Framework Convention on Climate Change (UNFCCC) and its Paris Agreement, and from the U.S. government today and in future years.

In the international domain, Aldy characterizes the Paris Climate Agreement of 2016 as providing a solid framework for significant international cooperation and progress.  “It says something that we have every country in the world or virtually every country in the world pledging to do something to reduce their emissions,” he says. “I think that is a great first step.”

Turning to domestic U.S. efforts to address climate change, Joe is considerably more skeptical, given the current political context:  “Until there are members of Congress or Senators who fear that by being silent on the issue or actively opposing taking action to combat climate change, until they see real political cost at the polls, I think it’s hard to imagine there being a bipartisan future.”

All of this and much more is found in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Listen to this latest discussion here, where, by the way, you can also find a complete transcript of our conversation.

My conversation with Joe Aldy is the seventh 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.


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.