Environmental Policy Archives - Page 12 of 73 - An Economic View of the Environment

The Social Cost of Carbon Redux

We find ourselves in a period when concerns about climate change impacts are increasing (see the report just released of the IPCC’s AR6 WG3 Summary for Policymakers), federal climate legislation seems less and less likely, the U.S. Supreme Court may significantly restrict EPA’s authority to regulate greenhouse gases, and other U.S. courts are at least temporarily preventing the administration from using the Social Cost of Carbon. In the midst of all this, it’s worthwhile thinking critically and dispassionately about the benefits and costs of environmental protection. There is no one better to reflect on this than my podcast guest, Maureen Cropper, Distinguished University Professor of Economics at the University of Maryland. You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs. Maureen Cropper fits well in this group. In addition to her professorship at the University of Maryland, she is a Senior Fellow with Resources for the Future, a (very active) member of the National Academy of Sciences, and a Fellow of the Association of Environmental and Resource Economists.

She has long focused her research on valuing environmental amenities (particularly in regard to environmental health effects), the discounting of future health benefits, and the tradeoffs implicit in environmental regulations. Her current research focuses primarily on the costs and benefits of air pollution control efforts in India, and on the valuation of climate amenities.

When I ask Maureen Cropper to assess the Biden Administration’s environmental and resource policies, she remarks that it seems to be heading in the right direction, at least on one important component.

“I do think that there has been momentum to further the cause of estimating and using the social cost of carbon. After all, on Biden’s first day [in office], he actually reinstated the Interagency Working Group, which had been disbanded by President Trump and … announced that we were going to make progress in revising the social cost of carbon. I do think that a lot has been done along those lines,” she says. “Although … what we see and how it’s used may be affected, is likely to be affected … by recent [court] rulings.”

Current estimates of the social cost of carbon range between 50 and 60 dollars a ton, but Cropper notes that it could be increased to 100 dollars per ton or more if the discount rate is changed from three percent to two percent.

She goes on to express some doubt about the effectiveness of current U.S. climate policies, noting that she is “not particularly optimistic about the rate at which greenhouse gas emissions are being reduced.” But she also expresses her admiration for recent youth movements of climate activism.

“I actually do see the attitudes that they have which really are very encouraging to me in terms of what’s happening in the country as a whole,” she says. “It does seem like a very good indicator perhaps, or bellwether one hopes of things to come.”

For this and much more, I hope you will listen to my compete conversation with Maureen Cropper, the 33^rd 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.

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

Energy, Climate Change, and U.S. Regulatory Policy

Long before there was serious consideration given in the United States (or other countries) to enacting public policies to address the risk of climate change, regulatory policies existed in the electric power and other energy sectors, as well as in areas as diverse as banking, commercial airlines, trucking, railroads, and telecommunications. There is no one who is better equipped to place recent developments in climate change policy into this historical context of U.S. regulation than my podcast guest, Paul Joskow, the Elizabeth and James Killian Professor of Economics emeritus at MIT and former President and CEO of the Alfred P. Sloan Foundation in New York City. You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs. Obviously, Paul Joskow fits very well within this group, as a respected international expert and renowned scholar on myriad topics, including industrial organization, energy and environmental economics, and regulatory policy. During his years at the Sloan Foundation, he launched several new programs in economics, and a program in energy and the environment.

Paul is the former chair of the MIT Department of Economics and director of the MIT Center for Energy and Environmental Policy Research. He is also a Distinguished Fellow of the American Economic Association, a Fellow of the Econometric Society and the American Academy of Arts and Sciences, a Member of the Council on Foreign Relations, and – I’m pleased to say – an Associate Scholar of the Harvard Environmental Economics Program.

James Poterba, Nobel Laureate Peter Diamond, Paul Joskow, and Olivier Blanchard at the Nobel Banquet, Stockholm, Sweden, December 2010.

In discussing recent changes in regulatory policy affecting electric power and other energy sectors, Joskow reflects on the fact that “the big change that has taken place in the last 20 or 25 years has been restructuring these industries so that we could rely more on competition and less on regulation. It started with the natural gas industry and the oil industry, and then during the 1980s and 1990s, and ultimately around 2000, it resulted in restructuring and the creation of competitive wholesale electricity markets and retail competition in many U.S. states, in Europe, and in other countries.”

When I ask Paul how current political polarization is affecting climate change policy in the United States, he responds that it is having a “significant effect on the ways in which the electric power sector in the U.S. is adapting to climate change and implementing policies to mitigate climate change. And because of partisanship, there’s a lot of difference between [what’s happening in] the blue states and the red states.”

Joskow gives the Biden Administration mixed reviews on climate policy in its first year in office.

“I think the administration has its heart in the right place in the sense that we need to adopt policies that will mitigate, reduce, and eventually eliminate greenhouse gas emissions. They’ve adopted policies which I would consider to be largely non-market-based policies. They’ve resisted pricing carbon emissions. And I think that significantly complicates moving forward in an efficient way,” he says. “The absence of a national policy makes it even worse because rather than having a coherent U.S. policy, we have states that have adopted their own policies and states that have resisted any policies, and that’s become kind of a mess in my view.”

Paul also says that while he is pessimistic about the possibility that the U.S. will succeed in adopting a coherent greenhouse gas mitigation policy over the next few years, he is more confident that the Europeans and Chinese will make progress on that front, and that in the U.S. and elsewhere there are market forces at work that will help in the long run, particularly the declining costs of wind and solar power.

“Work we’ve done at MIT suggests you get quite a bit, in the long run, of diffusion of wind and solar into the system just on straight economic grounds. There’s a lot of R&D going on [in] other technologies and electricity that do not produce CO₂ emissions,” he notes. “There’s interest in small nuclear plants, and there’s interest in alternative fuel cycles, the Allam [power] cycle, which basically uses CO₂ to drive a turbine and then sequesters it. There’s work going on in carbon capture and sequestration.”

But political reality intrudes, as Paul Joskow observes, “So, there’s a lot of stuff going on, but I think we’re suffering, especially in the U.S., from the lack of a really coherent set of policies to which the entire country is committed.”

For this and much more, I hope you will listen to my complete conversation with Paul Joskow, the 32^nd 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.

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

Thinking about the Institutional Dimensions of Climate Change Policy

Most economists tend to neglect the institutional and political dimensions of proposed climate change policies, whereas political scientists, policymakers, and stakeholder groups frequently give primary attention to these considerations. This is demonstrated by my recent podcast conversation with Navroz Dubash, professor at the Centre for Policy Research in New Delhi, and a Coordinating Lead Author of the Sixth Assessment Report of the Intergovernmental Panel on Climate Change. You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.” Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs. Navroz Dubash fits well within this group, as a respected international expert on the politics of climate change policy and governance, the political economy of energy and water resources, and the regulatory state in the developing world. In addition, he was previously a senior associate at the World Resources Institute and a policy analyst at the Environmental Defense Fund.

In discussing pragmatic frameworks necessary for the implementation of effective climate change policy, Dubash explains why international institutions are absolutely essential.

“Climate change in a sense is now a problem with a clock. We have a ticking clock if you’re going to meet two degrees, and even more so if you meet [the goal of limiting the increase in global temperatures below] 1.5 degrees. It’s not enough for every country to do what they can. We have to be measuring progress against what is determined to be necessary by science. So, we have to have some process through which policies and actions are assessed and evaluated.”

This is where, Dubash says, international institutions and rules have a critical role to play.

“What is the mechanism through which future [emissions reduction] targets translate into current action? There needs to be some kind of interlinking mechanism through which we both decide what target is reasonable, as well as think back to what we have to do today in order to achieve those targets. And if there are obstacles to that action, how we overcome those obstacles? All of those tasks really require institutions,” he says.

I ask Navroz to talk about the differences between China and India, since they are sometimes (incorrectly) lumped together in conversations about climate change. He describes the differences in the context of both countries attempting to reduce their emissions in line with the goals of the Paris Climate Agreement.

“In a sense, China has now over the last 20 years built up its infrastructure to the point where it can start thinking about in a sense what the transition is to a low carbon future. India has actually not built up its infrastructure. And we are an interesting place because our emissions are likely to grow for a while longer in order to meet development needs. Now, the trick is going to be how can India do this with a shallower increase in emissions than China exhibited?,” he says. “To unwind a coal or fossil economy actually will have ripple effects throughout the larger political economy of India. And so that it’s not just the economic costs that matter, but also the transaction costs.”

Navroz Dubash remarks that the long-term potential for climate policy to succeed depends heavily on the internal politics in nations that have voluntarily pledged under the terms of the Paris Agreement to reduce their carbon emissions in coming years.

“I think the positive part of Paris for me was that it essentially recognized that progress on climate change is not going to come because of hectoring or peer pressure at the international level. It’s going to come because national politics in country after country shift, where countries find ways of telling a story about how low carbon futures are good for them economically and can sell that politically to their own people. And Paris basically gave countries space to figure out how to tell that story and make it happen.”

For this and much more, I hope you will listen to my complete conversation with Navroz Dubash, the 31^st 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.

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