Reflecting on Economics, Politics, and Climate Policy

Addressing climate change with meaningful policy action will be neither cheap nor easy, but presently the greatest barrier to action in the United States is not technological, nor perhaps even economic, but fundamentally political.  This becomes a theme in my latest podcast, where I engage in a wide-ranging conversation about economics, politics, and climate change with Gernot Wagner, Clinical Associate Professor at New York University, and former staff economist at the Environmental Defense Fund.

You can hear our complete conversation in the podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I converse with very well-informed people from academia, government, industry, and NGOs.  Gernot Wagner fits well in this group, with experience in academia, industry, and the NGO world.

Wagner, whose career also includes time spent as a consultant at the Boston Consulting Group and a journalist at the Financial Times, brings to his thinking about the economics of climate change policy a rich and varied set of perspectives gained through his years of multi-sectoral experience.  

He is a graduate of Harvard College, where he took my environmental economics course as a freshman (and then proceeded to receive the highest grade in the class).  In addition, I had the privilege of serving as chair of Gernot’s dissertation committee when he received his Ph.D. in Political Economy and Government from Harvard in 2007.

Gernot Wagner is author of two books, “But will the Planet Notice: How Smart Economics Can Save the World?,”and “Climate Shock: The Economic Consequences of a Hotter Planet,” which he co-wrote with the late Harvard Professor Martin Weitzman, whom he had met his first week on the Harvard campus as a freshman in 1998.

“I went to meet Marty on a Thursday that week,” Wagner recalls in our podcast conversation. “I remember Marty sitting me down and first of all, taking me seriously…much like you did. You did try to dissuade me from taking your class, but then I ended up taking it later that year. But Marty sat me down and guided me through, maybe in an attempt at dissuading me frankly of wanting to become an environmental economist or academic.”

In my podcast conversation with Gernot, we turn to the topic of current-day climate policy, and Wagner sounds cautiously optimistic about the chances that the United States will meet the Biden Administration’s recently announced commitment to reduce CO2 emissions by 50-to-52 percent below 2005 levels by the year 2030, saying that it would be technically and economically feasible, although politically difficult.

“I’d like to think I can make a cogent argument for why it will happen, and this administration is uniquely positioned to make it happen. And the approach it is taking seems to be on the right path,” Wagner says, while also admitting that it will be a challenge for the administration to get any meaningful climate policy through a divided Congress.

Wagner also expresses his hope for establishing a carbon price of between 60 and 300 dollars per ton to provide incentives for companies and industries to reduce CO2 emissions. Exxon, he notes, has recently come out in support of a carbon price of 50 dollars per ton, but Democrats in Washington are not satisfied with that proposal.

“The progressives in the House wants something that has a higher price equivalent. The Biden Administration might be slightly less ambitious on that front,” he says. “All of it is still much more ambitious than the…simple 50 dollar per ton of CO2 carbon tax.”

At the end of our conversation, I ask Wagner for his thoughts on the youth climate movements that became prominent in 2019.

“What we do see is amazing action in the right direction, on a whole lot of different dimensions,” Gernot remarks. “Now we are back to – what should this movement push for? And frankly, now we are back to the raw politics of it all. It’s very, very difficult to see – the one simple approach that will just solve it all. That basically doesn’t exist. It exists in theory, maybe. Not in practice.”

My complete conversation with Gernot Wagner is the 24th 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:

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

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Reflecting on Federal Regulatory Policy and the Future of Electric Vehicles

As I’ve discussed previously, the political barriers that exist in the U.S. Congress to the enactment of significant new climate change legislation will likely force the Biden administration to turn, at least in some cases, to regulatory approaches.  This is in addition to the numerous government subsidy programs that are part of the administration’s infrastructure plans, some of the most important of which are for diffusion of electric vehicles (EVs).

So, this is a particularly opportune time to reflect on the role of federal regulatory policy, as well as the outlook for EVs.  For that purpose, an exceptionally qualified observer is my newest podcast guest, Dr. John Graham, Dean Emeritus and Professor at the Paul O’Neill School of Public and Environmental Affairs at Indiana University, and former Administrator of the Office of Information and Regulatory Affairs (OIRA) in the U.S. Office of Management and Budget (OMB).

You can hear our complete conversation in the podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  John Graham obviously fits perfectly in this group, with tremendous experience both in academia and government.

John Graham is Dean Emeritus – and still a professor – at the Paul O’Neill School of Public and Environmental Affairs at Indiana University.  Previous to that, he was Dean of the Pardee RAND Graduate School in Santa Monica, California.  And before that, he served in the George W. Bush administration as the Administrator of OIRA.  And prior to that, he was a professor at the Harvard T.H. Chan School of Public Health in Boston, where he founded the Harvard Center for Risk Analysis.

In our podcast conversation, Dr. Graham offers his thoughts on Regulatory Impact Analysis, federal energy policy, domestic climate change policy, and electric vehicles.  He also talks about his early experiences in the Bush 43 White House, where he and his team had to make the case to the President to increase the stringency of Corporate Average Fuel Economy (CAFE) Standards at a time when the Vice President was opposed.

“We had to actually go into the Oval Office and make our case to President Bush. And when I did so, it was apparent that the president and the vice president were not totally on the same page on this issue, but we were able to persuade the president to move forward and we did so, and now it’s a very important part of the program that the federal government has on fuel economy and on carbon dioxide control,” he says.

Graham, whose Ph.D. dissertation was on the topic of automobile airbag technology, also discusses his new book, “The Global Rise of the Modern Plug-In Electric Vehicle: Public Policy, Innovation, and Strategy,” which outlines the significant ways in which the wide use of electric vehicles will influence our daily lives, economies, urban air quality, and global climate change.

“When I was working for George W. Bush, we were very convinced that the electric vehicle was not a very cost-effective technology, and we resisted strongly California’s efforts to mandate so-called zero-emission vehicles, and they really had in mind electric cars,” Graham explains. “But what has happened is the spillover of lithium-ion battery technology from consumer applications to the auto industry, [and the extent to which it] is now creating enormous excitement and innovation in the auto sector, and that’s the stimulation for the book.”

Graham predicts that electric vehicles will play a significant role in the future of transportation.

“The transition from the internal combustion engine to electric propulsion is in fact underway and irreversible seeds have been set to make this happen. However, the pace of the transition is going to move at very different rates in different parts of the world, and a lot of this depends as much on politics as it does on markets,” he says.

John Graham explains that Norway is leading the world with electric vehicles, making up 80 percent of the nation’s new car fleet. That compares to ten percent in Germany and the UK, and approximately three percent in the United States. Production in the USA will grow, Graham argues, once appropriate government policies are in place.

“This is one of these cases I find it fascinating where the industrial policy strategies, which many Western economists regard as in disrepute … are in fact the standard approach to making a big change in an industry like this, and I think that’s what’s going to have to happen. Now the details about whether the Biden Administration gets it right, it’s far too early to judge.”

My complete conversation with John Graham is the 23rd 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:

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

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A New Day for U.S. Climate Change Policy?

There is certainly much enthusiasm and great expectations on both sides of the Atlantic Ocean regarding what can be expected from the new U.S. administration’s climate change policy.  I offered somewhat modest expectations in an essay posted at this blog in mid-January before the Biden-Harris team was inaugurated.  But now – in early April – major appointments have been made, executive orders announced, and new policies floated.  So, this is a good time take a preliminary look at what has been accomplished in the first 10 weeks or so of the administration.

For that purpose, an exceptionally qualified observer is my friend and colleague, and most recent podcast guest, Jody Freeman, the Archibald Cox Professor of Law at Harvard Law School, where she founded both the Environmental and Energy Law Program and the School’s Emmett Environmental Law Clinic (which was directed for many years by Wendy Jacobs, who sadly passed away in February after a long illness).

Professor Freeman worked in the Obama administration, and before that she was closely involved in the Massachusetts vs. EPA court case that eventually led – via a U.S. Supreme Court decision – to EPA’s endangerment finding in the Obama years, which precipitated policy action on climate change under the authority of the Clean Air Act.  You won’t be surprised that she pulls no punches in her comments on the Trump administration’s moves in the environmental realm, nor in her judgments and hopes regarding the Biden administration.  You can hear our complete conversation in the Podcast here.

In these podcasts – “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program – I talk with well-informed people from academia, government, industry, and NGOs.  Jody Freeman very much belongs in this group, as one of the world’s leading authorities on environmental law, a former Federal government official, and a participant in deliberations in private industry.

Jody Freeman has this to say about the previous administration:

“The Trump Administration unraveled, weakened, or rescinded every climate regulation that the Obama Administration had put in place. And they went beyond that to weaken many other environmental rules too. And so, it’s an across-the-board effort to pull environmental protection back as much as possible and weaken the agencies that are responsible for putting rules in place to protect public health and to address climate change.  In environment, climate, energy, it’s really hard to think of a major policy that was left untouched.”

On the other hand, Professor Freeman commends the Biden Administration’s early actions to reverse much of the climate policy damage caused by the previous administration.

“The president signed two sweeping executive orders on climate change within the first month. And they encompass everything you could possibly do with the agencies of the federal government, from how the Treasury Department finances overseas projects to how the Agriculture Department sends money to farmers. The administration is on the hunt for all of the policies that any agency can use to support its clean energy agenda.”

However, looking ahead, she recognizes that the Biden administration probably does not have the necessary votes in the Senate to pass any meaningful legislation placing a price on carbon.  Short of that, she says there are many other actions the administration can take on climate and energy policy.

“Presidents like to use executive branch power. So, you can count on the Biden Administration to be trying to deploy all of the levers, all of the tools that it can use. And they include adopting new rules … for power plant emissions of CO2, adopting new rules for car and truck emissions, adopting sector by sector rules that EPA has the authority to do.  There are other agencies too, like the Department of Energy, which sets appliance efficiency standards. The Department of the Interior regulates extraction of oil and gas on public lands. You’ve already seen them freeze new leases on public lands, and they’re going to favor wind and solar siting on public lands.”

When I ask her about the negative perception of the fossil fuel industry among many climate policy advocates in the United States, Professor Freeman, who sits on the Board of Directors of ConocoPhillips, remarks that there are signs of progress on the horizon.

“I think the industry is in a moment of transition. I do see, for example, the European oil and gas companies are already making pledges and investments in alternative business models.  By no means are we down the road far enough or fast enough, but you can see that they’re starting to think about becoming different kinds of companies over time. And I think the U.S. companies are following suit.”

My complete conversation with Professor Freeman is the 22nd 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:

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

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