Vision for Energy Transition

In our podcast series, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” I’ve had the pleasure of engaging in conversations over the past three years with a number of truly outstanding economists who have carried out important work in the realm of environment, energy, and resource economics, and also served in important government positions, and my most recent podcast episode is no exception, because I’m joined by James Stock, the Harold Hitchings Burbank Professor of Political Economy at Harvard, where he is also Harvard’s inaugural Vice Provost for Climate and Sustainability, and the Director of the new Salata Institute for Climate and Sustainabilty.  Also, Jim served as a Member of President Obama’s Council of Economic Advisers, where he focused on macroeconomics and energy & environmental policy.

In the podcast, we discuss the arc of Jim’s economic research, including on energy and climate change, his government service, his thoughts on the current state of climate change policy, as well as new his new role directing the Salata Institute at Harvard.  You’ll find this and much more 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.  I hope you will listen to our complete conversation here.

It is striking that when talking about recent developments in U.S. climate policy, particularly over the past year, Jim Stock is really quite positive.

“The nation has made huge progress over [the course of] 2022 with the passage of the Inflation Reduction Act,” he said. “This is a huge piece of legislation. It’s really going to set the stage for driving substantial emission reductions, especially in the power sector. So that’s fantastic, [and] we all have to applaud that passage.”

Jim also commends the U.S. Congress for its bipartisan infrastructure bill which includes – among many other things – some $5 billion over five years to help states create a network of electric vehicle charging stations.  But even with such significant pieces of legislation, Stock acknowledges that the most optimistic projection for emission reductions in 2040 relative to 2005 is only about 40 percent.

“So, it’s not even a glass half-full situation,” Stock remarks. “We’ve done this huge amount of work and we’ve passed this really important legislation, but we’re only at 40 percent reduction. There is so much more work that needs to be done, and I think a big part of that work is actually figuring out what the right agenda is.”

Part of the agenda, Stock says, is determining what actions need to be taken at all levels of government and business to achieve meaningful progress. But the potential for significant progress is possible, he argues, because of the tremendous technological advancements in recent years.   Interestingly, Jim Stock thus explains the reliance in the Inflation Reduction Act on “carrots” (subsidies), as opposed to “sticks,” not just on the basis of political feasibility, but also on the reality of technological change.

“If you think back to 2005 … there really weren’t good alternatives to coal and natural gas in the power sector, and electric vehicles were ridiculously expensive, and we just didn’t have the technology.  Today everything is totally different, where we are looking at technologies, whether they’re light duty vehicles or solar or wind, and now increasingly batteries, even grid storage batteries, are really becoming at a much better cost point and are actually beating out their fossil fuel alternatives. So now the question is, what can we do to spur that?  At this point, subsidies can be very effective.”

I also ask Jim about his recent appointment as director of the Salata Institute, and he responds by noting that it reflects Harvard’s commitment to pursue pragmatic solutions to the climate problem and communicate them to policymakers and the general public.

“The mission of the Institute is to harness the strengths and abilities and powers of Harvard University and its scholars and students to press forward viable solutions and practical solutions in an impactful way in the real world,” he says, emphasizing that the challenge reaches across multiple disciplines. “It spans economics. It spans the sciences. It spans health and spans business, and so you need to have expertise drawing from across the different parts of the university and different fields to really be able to make progress.”

For this and much, much more, I encourage you to listen to this 45th 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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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.

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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 38th 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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