Tag: environmental justice

Has Climate Policy Moved Beyond Carbon-Pricing?

Given the recent history of the Biden administration with its reliance on subsidies in its massive climate legislation, the Inflation Reduction Act, it is natural to ask whether liberal climate policy has moved beyond carbon-pricing instruments, at least in the United States.  To discuss this and related issues, I was fortunate to be joined in the latest episode of my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” by Kenneth Gillingham, Professor of Economics at the Yale School of the Environment.  Please listen to our full conversation here.

With experience as a senior staff economist at the White House Council of Economic Advisers, Gillingham is a leading energy and environmental economist whose research draws from the fields of applied microeconomics, behavioral economics, industrial organization, and integrated assessment modeling of climate change.  Prior to joining the faculty at Yale, he spent two years as a research assistant at Resources for the Future.

“The tools of economics are incredibly powerful for helping you understand how to appropriately manage the environment and also the effects of many different policies, actions, technologies… both on the environment but also more broadly on human wellbeing,” Gillingham says in our conversation.

Much of Ken’s work has focused on carbon pricing mechanisms, which many economists believe must be leveraged appropriately to reduce emissions and mitigate the impacts of climate change.  In our chat, I ask him whether consideration and implementation of carbon-pricing in the United States has peaked, with recent attention from the Biden administration having focused almost exclusively on the use of subsidies.

He responds:  “I do recognize there are real and very strong political forces that work against carbon pricing, but I don’t believe that it’s a foregone conclusion that we will never have carbon pricing. I do recognize that it’s somehow often politically easier to give subsidies than it is to tax someone, but as we’ve seen with the [Trump administration’s] One Big Beautiful Bill, those subsidies may not be that durable either. And at the end of the day, the logic of carbon pricing is so powerful and so strong and the evidence behind it where we’ve seen it working in so many places that it has to remain on the table.”

Ken Gillingham believes that carbon pricing mechanisms will become more politically viable when they are perceived as revenue generators with potentially important health benefits.

“You need to build a coalition, and you’re going to have a set of people who say, ‘Look, this is going to help us address climate change.’ It may also have co-benefits and help us address a set of other co-pollutants, reduce asthma cases, et cetera. And of course it’s not the direct way to do that, but it will do that as a co-benefit,” he says. “You put all of that together along with those who say, ‘We’re desperate, we need new revenues, we are in a tight budget situation.’ It’s possible, I believe, to build that coalition.”

Gillingham also addresses questions related to the distributional implications of climate policies, specifically the impacts of carbon pricing on lower-income households.

“You can make an argument… that carbon pricing is hurting poor people,” he remarks. “You raise fuel prices, you really do cause quite a bit of unrest. And I think that that has to be addressed, but the key thing for carbon pricing to work, you maintain the price… You would have to find ways in which there’s still an incentive for everyone – low income, middle income, high income – to reduce emissions. They still face that price, but you can redistribute some of that revenue back in a way that is means tested or related otherwise to income.”

At the end of our conversation, Ken Gillingham offers some sage advice to young people considering studying environmental economics.

“It is a fascinating, amazing field that draws together knowledge across a broad range of disciplines. It is an economics field but it’s not just economics. You need to know much more, and that just keeps it incredibly interesting,” he states. “There are an endless number of tradeoffs that will always be made. This field will always be relevant. And so, if you’re interested in the environment and if you’re interested in thinking carefully about tradeoffs and understanding how policies actually work in the real world and influence wellbeing and welfare, I would say that environmental economics is a great path to take.”

For this and much, much more, I encourage you to listen to this 75th 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.
  • Catherine Wolfram, Cora Jane Flood Professor of Business Administration, Haas School of Business, University of California, Berkeley, currently on leave at the Harvard Kennedy School.
  • James Stock, Harold Hitchings Burbank Professor of Political Economy, Harvard University.
  • Mary Nichols, long-time leader in California, U.S., and international climate change policy.
  • Geoffrey Heal, Donald Waite III Professor of Social Enterprise, Columbia Business School.
  • Kathleen Segerson, Board of Trustees Distinguished Professor of Economics, University of Connecticut.
  • Meredith Fowlie, Professor of Agricultural and Resource Economics, U.C. Berkeley. 
  • Karen Palmer, Senior Fellow, Resources for the Future.
  • Severin Borenstein, Professor of the Graduate School, Haas School of Business, University of California, Berkeley.
  • Michael Toffel, Senator John Heinz Professor of Environmental Management and Professor of Business Administration, Harvard Business School.
  • Emma Rothschild, Jeremy and Jane Knowles Professor of History, Harvard University.
  • Nathaniel Keohane, President, C2ES.
  • Amy Harder, Executive Editor, Cypher News.
  • Richard Zeckhauser, Frank Ramsey Professor of Political Economy, Harvard Kennedy School.
  • Kimberly (Kim) Clausing, School of Law, University of California at Los Angeles
  • Hunt Allcott, Professor of Global Environmental Policy, Stanford Doerr School of Sustainability.
  • Meghan O’Sullivan, Jeane Kirkpatrick Professor of the Practice of International Affairs at Harvard Kennedy School.
  • Robert Lawrence, Albert Williams Professor of International Trade and Investment, Harvard Kennedy School.
  • Charles Taylor, Assistant Professor of Public Policy, Harvard Kennedy School.
  • Wolfram Schlenker, Ray Goldberg Professor of the Global Food System, Harvard Kennedy School.
  • Karen Fisher-Vanden, Professor of Environmental & Resource Economics, Pennsylvania State University
  • Max Bearak, climate and energy reporter, New York Times
  • Vijay Vaitheeswaran, global energy and climate innovation editor, The Economist
  • Joseph Aldy, Teresa & John Heinz Professor of the Practice of Environmental Policy, Harvard Kennedy School
  • Nicholas Burns, Roy and Barbara Goodman Family Professor of the Practice of Diplomacy and International Relations, Harvard Kennedy School
  • Elaine Buckberg, Senior Fellow, Salata Institute for Climate and Sustainability, Harvard University
  • Anna Russo, Junior Fellow, Harvard University
  • John Podesta, Advisor to Presidents Clinton, Obama, and Biden
  • Catherine Wolfram, William Barton Rogers Professor of Energy Economics, MIT Sloan School of Management
  • Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
  • Matthew Kahn, Provost Professor of Economics, University of Southern California

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

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Electricity Sector Regulation, Carbon Pricing, and Climate Policy

In the United States, Europe, China, India, and many other parts of the world, when policymakers and others consider ways to reduce CO2 emissions to help address climate change, major attention is frequently given to the electric power sector, partly because of its standing as the first or second largest source of emissions, and partly because it frequently offers low-hanging fruit, that is, low-cost abatement opportunities.  In the most recent episode of my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I host an economist with three decades of experience studying the electricity sector, and making important contributions to the design of new institutions and appropriate regulations. 

I’m referring to Karen Palmer, a Senior Fellow at Resources for the Future in Washington, D.C., where she directs the Future of Power Initiative.  Karen continues to carry out valuable research, participate in government panels, and recently served as President of the Association of Environmental and Resource Economists.  The podcast is produced by the Harvard Environmental Economics Program.  You can listen to our complete conversation here.

Dr. Palmer, who is renowned for her research on the U.S. electric power sector, shares her insights on electricity regulation and deregulation, carbon pricing, and climate change policy.  She has spent almost 34 years at Resources for the Future (RFF), having initially been drawn to it at a time when governments were taking early steps to deregulate the electric power sector.

“I came here because the overlaps in terms of regulation in my prior research in graduate school and what happens in electricity and also to a certain extent natural gas were evident, but things were definitely changing in both natural gas and electricity sector early during my [early] time here,” she says.

In 1996, Palmer and several colleagues wrote a book titled “A Shock to the System: Restructuring America’s Electric Industry,” which served to inform policy debates then taking place about the sector’s transformation.

“As the electricity sector started to introduce more competition in terms of who was going to actually deliver electricity, it became clear that there are a lot of challenges in terms of policy and pricing and how markets function that remained open and could use some informing,” she remarks.

Turning to the present day, Palmer observes that the Biden Administration’s energy and climate policy relies primarily on subsidies to encourage the use of clean electricity and other clean power sources, but hasn’t yet given up on efforts to use other policy tools to stimulate positive change.

“The fact that they weren’t able to fully price carbon doesn’t mean that there’s not going to be efforts to address emissions from emitting sources, which aren’t really targeted under the subsidies directly,” she argues. “We have seen the proposed form of the third try at using the Clean Air Act to regulate emissions from existing and new fossil fuel generators. There’s not only the carrot, but there is a bit of a stick.”

“Going beyond the federal level … there’s a lot of activity happening in the states on both fronts, again, in terms of subsidizing clean sources of power [and] also imposing increasingly prices on power producers. As economists, we like carbon pricing because it’s efficient. We often pose this dichotomy between … we either price carbon or we subsidize clean energy. I think that’s kind of a false dichotomy, and that policies are going to build both ways from both ends,” she continues.

Finally, acknowledging the increasingly important role played by the concept of environmental justice in climate policy considerations and debates, Palmer says that policymakers must be sensitive to addressing past harms and mitigating future harms born by those least able to afford them.

“As we look to decarbonize the economy more broadly, the costs of electricity are going to play an important role in terms of people’s incentives to adopt or to do things that will likely be necessary to get rid of fossil fuel use in buildings, like adopting heat pumps and electrifying other energy end uses such as vehicles,” she says.

“Keeping electricity prices low in general or the role that electricity prices will play in general will be part of that. But also, there are important upfront costs associated with doing these things and adopting these new technologies, which really substitute more capital costs and less energy costs. Because not only are they electrified, but they’re often extremely efficient,” Karen Palmer explains. “Finding ways to make that work across the board for all types of consumers, including low-income consumers and historically disadvantaged communities, is going to be an important part of the policy puzzle.”

For this and much, much more, I encourage you to listen to this 50th 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:

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

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Studying the Real Impacts of Climate Change Policies

Over the past three years, in my podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve held conversations with many long-time leaders in the world of environmental economics and policy.  But that has meant, quite naturally, that I have most frequently engaged with people – like me – in the grey-haired set.  So, I was particularly pleased to welcome to my most recent podcast someone who is decidedly younger than most of the people I’ve previously interviewed, but who – I hasten to add – is nevertheless a highly accomplished scholar, a full professor at the University of California, Berkeley, and continues to carry out important research.  I’m referring to Meredith Fowlie, Professor of Agricultural and Resource Economics and Co-Director of the Energy Institute at Haas, at U.C. Berkeley.  In addition, Meredith is a Research Associate at the National Bureau of Economic Research.  The podcast is produced by the Harvard Environmental Economics Program.  You can listen to our complete conversation here.

Fowlie has worked extensively on the economics of energy markets and the environment, with investigations of the real-world applications of market-based environmental regulations, the economics of energy efficiency, the demand-side of energy markets, and energy use in emerging economies. Her work has appeared in the American Economic Review, the Journal of Political Economy, Quarterly Journal of Economics, the Review of Economics and Statistics, and other leading academic periodicals.

She received her B.Sc. degree in International Agriculture and Development from Cornell University in 1997, an M.Sc. in Environmental Economics from Cornell in 2000, and her PhD in Agricultural and Resource Economics from U.C. Berkeley in 2006.  Before joining the faculty at U.C. Berkeley, she was an Assistant Professor of Economics and Public Policy at the University of Michigan.

Meredith is well known for her research on how environmental regulations have worked in practice.  One prominent example is her 2018 QJE paper co-authored with Michael Greenstone and Catherine Wolfram (both previous podcast guests), “Do Energy Efficiency Investments Deliver?: Evidence from the Weatherization Assistance Program,” which examined the efficacy of the federal Weatherization Assistance Program, which works with local energy services providers installing energy efficiency measures.  The research was both important and controversial.

“What we found was that the energy savings were less than half of what engineering projections had anticipated. So, that was a disappointing finding. It just meant that we weren’t getting the savings that the models projected and that the program wasn’t delivering as hoped,” Fowlie remarks. The reason the paper was controversial, she notes, is that the findings did not align with what lawmakers had expected.

Fowlie celebrates the work of her research assistant on that project, Erica Myers, who demonstrated in subsequent research how some relatively simple weatherization program adjustments could have significant upsides.

“[In her research, Myers found] that if you incentivize the workers who are making these improvements on the home, such that their compensation depends partly on the performance, you can significantly increase the effectiveness of those investments. And she has also been able to identify those investments that perform the best in order to help target some of these weatherization investments,” Meredith notes.

As I noted above, the impacts of such government regulation have been the focus of much of Fowlie’s research. In the podcast, she emphasizes that market outcomes often deviate from what is anticipated, because of the unexpected impacts of economic incentives, something policymakers need to pay close attention to when seeking and designing policy solutions to climate change.

“When we think about the industries that are on the front lines of climate change – that’s electricity; it’s natural gas; it’s insurance – a lot of these sectors and firms are subject to [previous] economic regulation. Regulators determine what investments get made, how costs get recovered, what prices get set. And I’m increasingly seeing that less as a bug and more as a feature. We have these economic regulatory tools at our disposal, and if we start thinking about them like climate policy tools, we can actually get a fair bit of leverage out of those tools,” she says. “I’m thinking about how public utility commissions set electricity rates in particular, and thinking about how those regulatory decisions have pretty profound implications for how we mitigate climate change and who pays the price.”

I also asked Meredith Fowlie for her thoughts on the topics of “environmental justice” and “just transition.”

“I’ve been thinking about these elevated concerns in a number of respects. One is, who is paying for climate mitigation and adaptation? These are needed investments, but how we make these investments has some implications for who ends up paying, and sometimes that’s unintentional,” she notes. “Part of my research is thinking about how we’re paying for climate mitigation and adaptation, and who ends up paying the cost. A second concern is cap-and-trade programs and the environmental justice concerns about those programs, particularly in California, and program design changes we could consider making in light of those concerns.”

At the end of our conversation, when we turn to the current youth movements of climate activism, Meredith expresses her admiration for the ways in which they are focusing attention on important issues.

“There’s a sense of urgency among the students I teach that I think is important and I want to encourage.  I have learned a lot talking to them about their concerns and their impatience and their frustration. And I hope they’ve also learned from me about some of my concerns with how they want to move forward and what approaches they want to take,” she stated. “There’s certainly a youthful energy in terms of the level of commitment they’re bringing, but I think it’s going to change the trajectory of many, many youth who are going to have a really profound impact on how we tackle the [climate change] problem in future generations.”

For this and much, much more, I encourage you to listen to this 49th 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:

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

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