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An Expression of Hope and Frustration re Climate Change Progress

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 significant number of truly outstanding economists who have carried out important work in the realm of environmental, energy, and resource economics. My most recent guest is no exception, because I am joined by Geoffrey Heal, the Donald Waite III Professor of Social Enterprise at Columbia Business School, where he previously served as Senior Vice Dean, essentially the chief academic officer of the School.

More to the point, Geoff Heal is the author of 18 book and some 200 articles, a Fellow of the Econometric Society and the Association of Environmental and Resource Economists, where he served as President. And Geoff has also held – and continues to hold – important advisory and other positions with governmental, multi-governmental, and non-governmental organizations. I hope you will listen to our complete conversation here.

Among his writings is the pathbreaking 1979 book “Economic Theory and Exhaustible Resources,” co-authored with Partha Dasgupta, which is widely viewed as a seminal work in the field of resource and environmental economics. I asked Geoff how the book came about.

“Partha and I enjoyed collaborating, and I think it’s something that we just felt sort of intellectually compelled to write because we felt the time was right and we felt that we could make a contribution … particularly acting together,” Heal remarks. “But I don’t think we had any sense of the impact it would have, quite frankly. And I find students still reading it today, which is quite remarkable.”

Heal also addresses the question of how much the field of resource and environmental economics has changed during his time in academia over the past 40 years.

“The field has been transformed, hasn’t it? I mean, in the last decade or so, it’s been transformed into a much more empirical field than it was before that. What they call the ‘credibility revolution’ in economics has taken hold in environmental and resource economics,” he said. “We’ve got a vast number of papers using interesting novel data sets to look at climate impacts or regulatory impacts, and I think they’ve increased our understanding of the impact of environmental issues and environmental policies… considerably.”

Serving as a Coordinating Lead Author in Working Group III of the Intergovernmental Panel on Climate Change’s (IPCC) Fifth Assessment Report, which was finalized in 2014, Heal had a front row seat in the analysis of climate change policy. That said, he admits he is a bit frustrated with the pace of collective efforts to reduce greenhouse gas emissions and combat the effects of global climate change.

“I think that we know a lot about how to solve the climate problem. I think the technologies that we need to solve it are largely, perhaps not totally, but largely available… So, I think we know how to move to an electric grid which is powered entirely without fossil fuels,” he states. “We have a lot of the pieces available. We’re not just deploying them fast enough to reach the targets that we think we need to reach …so I find that frustrating. We’re very close to being able to achieve the goal, but we’re not actually doing what we need to do.”

When I ask Geoff Heal why current climate policies don’t seem to be accomplishing their goals, he cites politics.

“It’s the enormous influence of the fossil fuel industry and the sense of mostly some conservatives that this is a plot to increase the powers of the state. And of course, the Ukraine war has really been a major problem too, because it’s caused Europeans to move away from natural gas and in some cases back to coal, which is a terrible piece of backsliding, and it’s understandable under the circumstances, but it’s very regrettable from the climate perspective,” he says. “The Ukraine war, I hope, is a temporary phenomenon, whereas the power of the fossil fuel industry and the sort of conservative misapprehensions about what climate change is all about, I think are more real and more enduring.”

For this and much, much more, I encourage you to listen to this 47^th 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

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

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.

The Future of European Climate Change Policy

In my previous blog post, on January 14^th, I offered my personal views regarding “International Climate Change Policy & Action in the Biden Administration.” Today, I’m pleased to turn to a parallel assessment of future European climate change policy by Ottmar Edenhofer, a greatly-accomplished German economist, admired by academics, as well as leaders in government, industry, and non-governmental organizations.

Professor Edenhofer’s presentation, “The European Green Deal – Reform or Regulatory Tsunami?” and our subsequent discussion is the most recent webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA). As you know, in this webinar series we feature leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. A video recording (and transcript) of the entire webinar is available here.

Ottmar Edenhofer is Professor of Economics at the Technical University of Berlin, the Founding Director of the Mercator Research Institute on Global Commons and Climate Change, and Co-Director and Chief Economist of the Potsdam Institute for Climate Impact Research. He has been a major contributor to scholarship on the economics of energy and climate change, and served as Co-Chair of Working Group III of Fifth Assessment Report of the Intergovernmental Panel on Climate Change, where I had the pleasure of working under his leadership. He is a key advisor of the German Government, as well as the European Union. He holds a Ph.D. in economics and a B.A. degree in philosophy (a pairing of degrees which – I’m delighted to say – he and I share).

In his presentation and the discussion that follows, Ottmar Edenhofer offers a frank assessment of the European Green Deal’s potential to significantly address the impacts of global climate change.

“It’s a very good time to talk about the European Green Deal because now the prospects that United States and Europe could work closer together on climate change or climate policy and energy policy are very good,” Ottmar notes, referring to the change in U.S. administrations and recent remarks by European Commission President Ursula von der Leyen reaffirming the European Union’s (EU’s) intent to reduce its target for emission reductions from 40 percent to 55 percent by the year 2030 and to achieve net carbon neutrality by the year 2050.

Calling it a “huge task,” Edenhofer outlines the actions that would need to occur to achieve such ambitious goals, including enhanced efforts to decarbonize the power sector, accelerated electrification for end-users, increased investments in bio-energy and semi-synthetic fuels, and advancements in carbon dioxide removal technologies. Using the EU’s climate policy impact assessment as a framework, he walks us through three different policy scenarios, ranging from one that relies heavily on regulation to one structured primarily around carbon pricing.

Characterizing the heavily regulatory approach as a “high-risk scenario,” he instead promotes the idea of an “intermediate step” in a which a mix of policy measures and carbon pricing are deployed to move toward the goal of a 55-percent carbon emissions reduction, and toward a longer-term strategy of using carbon pricing alone as the primary driver in CO₂ reduction efforts.

“The crucial question therefore is, how can we design this intermediate step, and this is really the most important debate around this reform proposal,” he says, noting that several issues would need to be addressed. “The intermediate step has to address the distributional issues and guarantee the stability and manage the political economy challenge between the sectors.”

Professor Edenhofer suggests that the intermediate step that may gain the political support necessary to succeed would be one that would allow for two separate emissions trading systems – one for the energy and industry sector, and the other for transportation and buildings.

“Meanwhile we could define gateways between these two systems. “Creating such gateways might have a two-fold effect – the first one is that market participants already anticipate that there are gateways and they anticipate these enterprise expectations, and this could lead to a convergence of the different prices across the sectors. And secondly, this is a starting point to manage the division of labor among the sectors, and this could be a credible pathway toward a carbon-price scenario when we have one ETS with one credible CO₂ price scenario.”

In his presentation, Edenhofer also acknowledges the role that fiscal federalism could play in affecting the future direction of climate policy in Europe. While arguing that carbon pricing could generate roughly 800 billion euros between now and 2050, he notes that the funding base would shrink over time as emissions decrease, and therefore would not serve as a stable revenue source. He has answers for this challenge as well.

After his presentation, Professor Edenhofer responds to questions from the virtual audience of more than 200 people. One question focuses on the impact of the new Biden-Harris Administration in Washington on global efforts to address climate change.

“The good thing is they are back in the Paris Agreement. The announcement alone that the U.S. is committed has already helped.”

All of this and much more can be seen and heard in the full webinar here. I hope you will check it out.

Previous webinars in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition,” Joseph Stiglitz’s reflections on “Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery,” Joe Aldy describing “Lessons from Experience for Greening an Economic Stimulus,” and Jason Bordoff commenting on “Prospects for Energy and Climate Change Policy under the New U.S. Administration.”

The next bi-monthly HPCA Conversation on Climate Change and Energy Policy will take place in March. You can register in advance for that event at the HPCA website.