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An Experienced Economist Reflects on Government Service, Carbon Pricing, and Climate Policy

Having served as the Deputy Assistant Secretary for Climate & Energy Economics in the U.S. Department of the Treasury in 2021-2022, Catherine Wolfram has some particularly relevant insights to offer on the development and implementation of climate change policy in the most recent episode of my monthly podcast. Wolfram is the Cora Jane Flood Professor of Business Administration at the Haas School of Business at the University of California, Berkeley, currently on leave at the Harvard Kennedy School. In the podcast, we discuss her time in government service and her thoughts and hopes for a carbon pricing scheme. You’ll find this and much more in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. I hope you will listen to our complete conversation here.

In this new podcast episode, Catherine Wolfram, who earned her PhD in Economics from MIT, begins by reflecting on her service in the Biden Administration, and she does so in very positive terms, saying that it was an “honor and thrill of a lifetime.”

“I would say the high point was definitely the work on the price cap on Russian oil. That was the main thing that I spent time on in the last 10 months of my time at Treasury, and was absolutely fascinating from so many different perspectives,” she says. “I learned a lot about foreign diplomacy, or I should say that I observed foreign diplomacy in action.”

During her time at the Treasury Department, Congress passed the Inflation Reduction Act, important legislation that authorizes $391 billion in spending on energy and climate change initiatives, making it the most important climate legislation ever enacted in the United States.

“A lot of the Inflation Reduction Act is being implemented through tax credits, and that’s Treasury’s purview, so [although] it was not my office within Treasury (it was another office, the Office of Tax Policy), I … [attended] many meetings about what started out as the Build Back Better Act and became the Inflation Reduction Act. So, that was really fun to see, and is certainly a momentous piece of legislation,” she remarks.

Despite the reliance on subsidies (tax credits) in the Inflation Reduction Act, Catherine says that she remains optimistic about the potential role of carbon pricing in climate change policy.

“I would not call carbon pricing dead,” she argues. “I could see it coming back in some form, maybe not the economy-wide carbon price that textbooks favor, but maybe something that starts, for instance, with the industrial sector … on a more limited scale.”

More broadly, Wolfram expresses optimism that the international community will figure out creative ways to adopt climate policies that will make a positive difference.

“I think if the G7 countries can get together and figure out how to put a price cap on Russian oil, [then] hopefully the G7 countries can get together and figure out good ways to use their presence in the international trade community to address climate change.”

However, Catherine also expresses concern about the possibility that an overreliance on tax credits and government subsidies in the design of climate policy could set back efforts to impose effective carbon pricing.

“I worry that there’s a future that evolves where the European Union gets pressure from its industry, and loses enthusiasm for its carbon price, and so the competitive pressures from industry that are seeing these subsidies over in the U.S., and thinking of moving to the U.S., that causes the EU to backtrack on climate policy, just because we have these different approaches to reducing emissions.”

For this and much, much more, I encourage you to listen to this 44^th episode 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:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.
Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
Maureen Cropper, Distinguished University Professor, University of Maryland.
Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.
Daniel Yergin, founder of Cambridge Energy Research Associates, and now Vice Chair of S&P Global.
Jeffrey Holmstead, who leads the Environmental Strategies Group at Bracewell in Washington, DC.
Daniel Jacob, Vasco McCoy Family Professor of Atmospheric Chemistry & Environmental Engineering at Harvard.
Michael Greenstone, Milton Friedman Distinguished Service Professor of Economics, University of Chicago.
Billy Pizer, Vice President for Research & Policy Engagement, Resources for the Future.
Daniel Bodansky, Regents’ Professor, Sandra Day O’Connor College of Law, Arizona State University.

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

Regulatory Skepticism and Technological Optimism from a Prominent Environmental Lawyer

Although I’ve featured economists in my podcast, I’ve also been privileged to host some top environmental lawyers and legal scholars, including: Sue Biniaz (now at the U.S. State Department), Ricky Revesz (at NYU Law School), Dan Esty (from Yale Law School, now at the World Trade Organization in Geneva), Jody Freeman (of Harvard Law School), and Jonathan Wiener (of Duke University’s School of Law).

That’s a diverse group in terms of gender, but I will acknowledge that it is not a very diverse group politically. In my latest podcast, I begin to make up for that with an environmental lawyer who has worked closely and held important positions in Republican administrations. But I did not invite him to the podcast because of his political background and viewpoint, but simply because he is one of this country’s leading and most prominent environmental lawyers. As I assume people of all political stripes will readily acknowledge, he’s both smart and articulate.

I’m talking about Jeffrey Holmstead, who served as Associate Counsel to the President in the George H.W. Bush administration, Assistant Administrator for Air and Radiation at the U.S. Environmental Protection Agency in the George W. Bush administration, and now leads the Environmental Strategies Group at Bracewell in Washington, DC. My conversation with Jeff Holmstead is featured in the latest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. Our complete conversation is here.

Despite his solid Republican credentials, Holmstead praises the Biden Administration’s early efforts to reduce greenhouse gas emissions in two specific ways.

“They have made very clear that climate change is one of their highest priorities, and they’ve actually done a couple of very important things,” Holmstead says. “Their first priority was in the transportation sector, and they finalized much more aggressive CO₂ emission standards for vehicles. And then they have proposed, but not yet finalized, a pretty aggressive approach to regulate methane emissions from oil and gas operations.”

As readers of this blog know, the Biden Administration has also promised to revise the Social Cost of Carbon, but Holmstead argues that its fate may rest with the courts, depending on how it is used.

“I think the courts have correctly said that in and of itself, that alone is not the type of action that is reviewable in court, and it won’t be reviewable until it’s used in a regulation. I think it will depend on the specific contours of the regulation that they’re doing,” he says. “All these regulatory programs have different standards that the agencies have to meet. And if it’s the kind of standard that allows them to consider benefits and costs, I think it depends on the specific context. And I think there will be some interesting litigation about that.”

Holmstead also remarks that the Securities and Exchange Commission’s proposal requiring public companies to provide certain climate-related disclosures in their registration statements and periodic reports is likely to run into significant legal challenges.

“The idea that the Securities and Exchange Commission would essentially be regulating greenhouse gases and they would do it in the form of a disclosure, but at least as proposed, it would be a pretty intrusive form of disclosure. And so, I think that there’s a fairly good chance that if the SEC finalizes what it proposed, that it’s likely to run into trouble in the courts,” he says.

Yet Holmstead also said in our conversation that he believes there is a “good chance” of having comprehensive climate change legislation in the United States fairly soon.

“I think there are many people in the business community that would like to have the certainty of legislation. And so, I’m still optimistic that we could see something like that in the relatively near future,” he remarks. “But … ultimately it seems to me that it’s a technology question. And until there is a way to provide people with electricity and to power mobility, that is at least close to being cost competitive with coal and oil, I think it’s going to be an uphill battle.

At the end of our conversation, Jeff Holmstead concludes with a note of technological optimism: “I think that there are technological breakthroughs that are at least on the horizon that could help us solve the problem. But ultimately for me, climate change is a technology issue and not a regulatory issue.”

For all this and much more, I hope you will listen to my compete conversation with Jeffrey Holmstead, which is the 38^th episode in 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:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.
Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
Maureen Cropper, Distinguished University Professor, University of Maryland.
Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.
Daniel Yergin, founder of Cambridge Energy Research Associates, and now Vice Chair of S&P Global.

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

Who Better to Reflect on the “Global Energy Crisis”?

Post-pandemic demand for energy combined with the war in Ukraine and subsequent oil and gas shortages have created a global energy crisis. That’s the core assessment offered by global energy expert Daniel Yergin in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. Our complete conversation is here.

It would be much too easy for a New York Times crossword puzzle to include the clue, “Twelve letters for a world-renowned global energy expert,” because the absolutely obvious answer would be “Daniel Yergin.” So, I was delighted to host Dan for my most recent podcast. As you probably know, in these podcasts, I converse with leading experts from academia, government, industry, and NGOs, who are working at the intersection of economics, energy, and environmental policy. Dan Yergin surely belongs in this group.

He’s known as an author, historian, educator, energy analyst, and the founder of Cambridge Energy Research Associates (or CERA), which was acquired by IHS Markit in 2004, which itself recently merged with S&P Global, of which Yergin is now Vice Chair. To some audiences, Dan is best known for his books, including The Prize: The Epic Quest for Oil, Money, and Power (1991 – Pulitzer Prize), The Quest: Energy, Security, and the Remaking of the Modern World (2011), and The New Map: Energy, Climate, and the Clash of Nations (2020).

But the book that first brought this remarkably productive gentleman to my attention was Energy Future (1979, co-authored with the late Professor Robert Stobaugh of Harvard Business School).

It’s striking that in his most recent book, “The New Map: Energy, Climate, and the Clash of Nations” (2020), Yergin writes prophetically that Ukraine would soon become a significant source of tension between Russia and the West.

“I could see that Putin did not accept the outcome of the end of the Cold War and he said Ukraine’s not a country. And it tied together geopolitics and energy in a very vivid way. And it just seemed to me that a collision was going to come,” Yergin says. “I wouldn’t have imagined a war that would go on more than a hundred days specifically, but I just could see that this was going to happen.”

He observes that the war in Ukraine, coming on the heels of the post-pandemic surge in demand, has further squeezed energy supplies around the world.

“We have … moved into a period of … shortage,” he says. “I think that right now at this point we’re in a pretty dire short-term energy situation. In fact, I would say that since last October, we’ve been in a global energy crisis.”

Yergin says he believes Russian President Vladimir Putin is seeking to test the strength and resolve of the West with his actions in Ukraine.

“It seems to me that the situation is going to get worse over the next several months. That’s because it’s not only the question of markets now and investment, but it’s also this clash with Russia, and Putin is doing what Russia … and the Soviet Union did not do for half a century. He is manipulating energy supplies to make the situation in Europe more difficult by cutting back on gas. And his strategy is pretty clear – which is to create shortages in Europe, which will cause fissures in the Western unity on Ukraine so that the Alliance falls apart.”

The energy crisis, Yergin notes, is forcing many governments to temporarily pause efforts to reduce CO₂ emissions with the short-term goal of increasing oil and gas supplies to offset the loss of Russian fuel.

“Natural gas is in short supply globally, and coal is in short supply, and you can’t build enough wind turbines and solar quickly enough to accommodate for that. And politicians react to voters, and voters react to their pocketbooks when these prices get as high as they are,” he states.

Yet Dan Yergin also says he believes that the clean energy transition is continuing to gain momentum, in part due to the current crisis.

“Europe has come out with even a stronger commitment to renewables. And so, I think that the longer-term outcome of this is an acceleration of renewables, renewable electricity as the longer-term alternative. So that’s why you’ve got to deal both with the short-term crisis, and at the same time lay the basis for a different kind of future,” he explains.

For all this and much more, I hope you will listen to my compete conversation with Daniel Yergin, which is the 37^th episode in 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:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.
Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
Maureen Cropper, Distinguished University Professor, University of Maryland.
Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.

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