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 44th 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.