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It's the Economy, Stupid
Achieving Major Climate Benefits through COVID Stimulus Will Require a Shift in Mindset
Ted Nordhaus and Alex Trembath
Mar 31, 2020
The economic rescue and recovery package that
Congress passed and President Trump signed over the weekend included
something for almost everyone. Two trillion dollars to massively expand
unemployment and sick leave benefits, provide aid to states and
hospitals on the frontlines of the epidemic, make loans for small
businesses, bailout Boeing and the airlines, and provide up to a half
trillion dollar loan guarantee program for major corporations.
One
thing it didn’t include, though, was renewable energy tax credits. Or
fuel economy and carbon offset requirements for the airlines and cruise
lines that the federal government is bailing out. Or restrictions on
loans and other support for the oil and gas industry.
Green groups demanded all of these things and several of them were even briefly included in
the House of Representatives version of the legislation. But they were
quickly abandoned as it became clear to Democrats that holding up a
desperately needed economic rescue package in the name of climate action
was an untenable proposition.
Climate hawks and environmental advocates will surely try again. 350.org founder Bill McKibben has proposed conditioning
But
environmental advocates might want to take a hard look at what just
happened and consider whether this sort of interest group politicking is
really what the present moment demands. It’s not that there won’t be
new opportunities to include various clean energy investments in future
stimulus legislation. Those measures will likely be more focused on
recovery than arresting an economy in freefall and there are many clean
energy and climate investments that are clearly both worthy investments
in their own right and that can help put the American economy on a
stronger footing as it comes back to life.
But
efforts to frame the stimulus as a zero-sum choice between funding
clean energy or the fossil economy will backfire. Like it or not, the US
economy is still heavily dependent upon fossil fuels. Any effort to
keep the US economy afloat during the coming months of enforced economic
inactivity will, unavoidably, entail rescuing the fossil energy
economy. Demands to hold up the recent rescue package over bailouts of
the oil, gas, and airline industries were, correctly, perceived as
obstructionist. In the midst of a public health and economic apocalypse,
promises of a just transition ring empty for Americans who
understandably just want their jobs back. In an emergency, a bird in
hand is still worth two in the bush.
If,
by contrast, climate advocates are able to rethink their priorities and
objectives in the context of the current crisis, far reaching and
unprecedented action to remake entire sectors of the US economy and
deploy low-carbon technology and infrastructure may be possible. But
that will require climate hawks to recognize that even under much better
circumstances, climate change was never the top tier issue that many
imagined it to be.
While
a booming economy and thermostatic response to the Trump presidency
inflated polling numbers among some constituencies, even most Democrats
knew the deal, as Joe Biden would say. Leading Democratic presidential
candidates offered ambitious sounding climate plans to satisfy
environmentalists. But that was just a sidelight. Everybody knew that
the primary would be contested along traditional themes of health care,
wages, jobs, and inequality.
This
proved to be the case. Rank and file primary voters cared little about
the candidates climate positions so long as they proposed to do
something. Washington State Governor Jay Inslee, who predicated his
entire campaign on climate change flamed out early. But for his personal
fortune, billionaire Tom Steyer, who positioned himself similarly,
would have too. In the end, Vermont Senator Bernie Sanders, who offered
up a $16 trillion climate plan and
proposed to nationalize much of the electricity sector, was swept away
by Biden, who launched his campaign promising a moderate climate policy,
one he modestly upgraded in the wake of scorching criticism from climate advocates.
All of this transpired, notably, in the Democratic primary and before the
Covid-19 pandemic brought normal social, political, and economic life
to a halt. If it wasn’t already clear before the crisis, it should be
clear now that climate remains a second-tier concern for most Americans.
For the foreseeable future, the pandemic response, the economy, and jobs will be the paramount concern.
Under
these conditions, the best opportunities to advance climate objectives
will be as co-benefits of investments and policies that credibly offer
relatively short-term economic or jobs benefits, and build a foundation
for longer-term economic opportunity. Realizing these opportunities will
require more than simply different messaging and rather a fuller
reformulation of climate and energy related policy and advocacy efforts.
A
major push to invest in critical infrastructure necessary for both
climate mitigation and adaptation is entirely plausible as new stimulus
efforts move forward in the coming months. But that will require the
environmental community to abandon the posture it adopted after the
passage of the Obama Administration’s green stimulus and the failure of
federal cap and trade legislation a decade ago. As the administration
shifted its focus to regulating greenhouse gas emissions via executive
action, green groups shifted their focus to obstructing fossil energy
infrastructure project by project and promoting renewable energy
mandates at the state level.
With
major federal investment back on the table, green groups will need to
refocus their efforts on convincing policy-makers of the economic case
for building more low-carbon infrastructure as part of the economic
recovery. Environmentalists will also need to ask some hard questions
about whether they are serious enough about rapidly deploying low-carbon
infrastructure to allow for planning, permitting, and siting of that
infrastructure to be expedited so it can meaningfully contribute to the
recovery.
A
stimulus and recovery program that includes major investments to
upgrade the grid, build long distance transmission, rail and transit
infrastructure, seawalls, flood channels, water systems, and much else
will surely bring a fair amount of road, highway, and pipeline
investment along for the ride. But what makes this moment of crisis,
emergency, and recovery unique, as the record stimulus passed in a
matter of days virtually unanimously just demonstrated, is that
previously unthinkable levels of public investment will be possible in
the coming months. There will be time in the coming years to get back to
fighting fossil fuels. The imperative right now, in this extraordinary
moment, is to increase the total spend and get clean energy and other
climate friendly infrastructure and technology into forthcoming stimulus
legislation.
There
are also extraordinary opportunities to leverage bailouts of energy and
carbon intensive sectors of the economy for a long-term energy
transition. Green groups attempted to hold up bailouts of the aviation,
cruise ship, and oil and gas industries until those industries made
various commitments to green up their operations. But the main event is
not environmental conditions around bailouts but public equity in the
industries that taxpayers are bailing out. As was the case with the auto
industry after the financial crisis, public ownership of major
industries will take years to unwind, offering the next administration
and Congress critical opportunities to retool those industries while
they are in public hands.
Imagine
a major economic recovery package early next year to recapitalize and
retool the auto, aviation, shipping, steel, manufacturing, and electric
utilities industries for a globally competitive and low-carbon future.
With substantial public ownership of those industries and public
borrowing costs near zero or even negative, taxpayers can invest in that
future at low cost and recover much or all of it as public equity
positions are unwound over the longer term. Taxpayers came out ahead in
the auto industry bailout and this should serve as precedent for how we
approach bailouts in the current crisis.
These
investments should not centrally be made on climate grounds. There is
ample economic justification to retool key American industries to
compete in a changing global economy without attempting to shift the
focus back to climate change at a moment when there is little demand for
climate policy. Deep economic downturns such as the one we are
presently beginning almost always bring substantial shifts to national
economies. The sectoral composition of the American economy, the markets
it is able to compete in, the sorts of supply chains it supports and
depends upon are likely to look different at the end of this crisis than
they did at the beginning. Repositioning key American industries to
compete in that future economy will bring substantial long term
opportunities for the US economy (and the climate) if we can get clear
now about what those opportunities actually are.
Doing
so will demand that environmentalists lift their sights beyond the
usual laundry lists of tax credits, mandates, and regulations that
continue to characterize business as usual climate advocacy. The
economic crisis and suspension of normal order creates opportunities for
major investments in infrastructure and key US industries that are
simply not available under the guise of traditional climate policy.
Retooling
America for a prosperous and low-carbon future, in this way, will
require green groups and climate advocates to retool their own agenda
and politics first. Environmentalists will need to spend more effort
making the economic case for the infrastructure they want to build and
less time making the climate case against infrastructure they want to
stop. This moment demands imagination, creativity, and flexibility, not
dogmatism and literalism. Climate progress will be achieved over the
coming months by working with efforts to rescue and stimulate the
American economy, not by extracting concessions from those efforts.
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Ted Nordhaus, Founder and Executive Director, Breakthrough Institute, 436 14th St, Suite 820, Oakland, CA 94612
My cell phone is 510-410-8011
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Ted Nordhaus, Founder and Executive Director, Breakthrough Institute, 436 14th St, Suite 820, Oakland, CA 94612
My cell phone is 510-410-8011
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