Saving planet, creating jobs are noble ideas—but by combining them, Green New Deal exacts too high a cost
The Green New Deal that Democrats unveiled last week is actually two deals: one to combat global warming, another to create millions of well-paid jobs for targeted groups.
Individually, both goals have their merits. But by combining them, the Green New Deal promises to make climate mitigation both absurdly expensive and deeply partisan and is thus more likely to set back than advance the climate cause.
The premise behind the Green New Deal is right. While the world may not spontaneously combust in 10 years, global carbon-dioxide emissions need to start dropping soon, by a lot, to keep temperatures from rising more than 1.5 degrees Celsius from 1800s levels, according to the Intergovernmental Panel on Climate Change. Increases beyond that raise the probability of extreme weather, deadly heat and rising sea levels.
Because the private market has no incentive to reduce carbon emissions, government intervention is necessary. But not all interventions are created equal, and the Green New Deal’s seem engineered to be as expensive as possible.
Consider its goal of massive public investment to achieve 100% renewable energy in as little as 10 years. Kevin Book, head of research at ClearView Energy Partners, a research firm, estimates replacing the 83% of current U.S. generation that is not renewable with solar photovoltaic, wind and biomass would cost $2.9 trillion—nearly a full year’s tax revenue.
This excludes any cost for interest, operations, maintenance, new transmission lines or compensation to private investors for writing off natural-gas and coal plants with plenty of useful life left. It assumes cheap battery storage that doesn’t yet exist. Even so, this works out to $83 to avoid one metric ton of carbon dioxide.
The Green New Deal’s plan to upgrade every building in the U.S. to “maximum energy efficiency” is even more questionable. A study by Meredith Fowlie, Michael Greenstone and Catherine Wolfram in the Quarterly Journal of Economics found the federal government paid an average of $4,585 each to weatherize homes in Michigan. Extrapolate that to 95 million homes nationwide, and the bill tops $400 billion. The cost of avoided carbon dioxide: up to $285 per ton.
To understand how high $83 to $285 per ton of carbon dioxide is, consider that Barack Obama’s economists put the economic harm of a ton of CO 2 at $50. Or that you can pay a power producer
- $6 to reduce emissions by one ton in New England,
- $15 in California, and
- $25 in the European Union,
based on emission permit prices in those jurisdictions, notes Mr. Greenstone, an economist at the University of Chicago.
Yet in the Green New Deal, trillion-dollar price tags are a feature, not a bug. That is because its mission is to create “millions of good, high-wage jobs” in “front-line and vulnerable communities.” The higher the price tag, the more jobs it creates. How to pay for it? Its Democratic sponsors would raise taxes on the rich and borrow the rest, including from the Federal Reserve, just as the U.S. did during World War II, dramatically boosting output and employment.
But in 1941, the U.S. had plenty of unused resources to mobilize: just 28% of prime-aged women had jobs. By 1945, 35% did and today, 74% do. (The data aren’t strictly comparable due to changing definitions.) The war effort still spurred intensive inflation pressure, contained only with wage and price controls. The U.S. is now close to full employment and its debts are far higher. Even in today’s world of low inflation and low interest rates, the scale of deficit spending the Green New Deal implies would likely push both higher.
Republicans and business groups have long fought even modest costs to mitigate climate change. Jacking up the price to finance left-wing Democratic priorities will only intensify their opposition. Indeed, Republicans and President Trump are itching to run against the Green New Deal. This guarantees inaction on climate unless Democrats win the White House, House of Representatives and 60 Senate seats.
What the U.S. needs is the Green New Deal’s sense of urgency combined with market mechanisms that incentivize carbon reduction at the lowest price, such as a carbon tax, carbon credits or tradable emission permits. This will also spur innovation that other countries can adopt to tackle their own emissions, which will be 88% of the global total by 2040.
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Leaders in America’s top 3 European Allies face Crisis
- Britain: Teresa May tries to manage a Brexit vote motivated by anti-immigration
- France: Emmanuel Macron faces rioting in the streets over a carbon tax
- Germany: Angela Merkel has to step down as leader amid backlash over middle east immigration
Last week, a long-awaited report from the United Nations’ scientific panel on climate change showed that the worst consequences of global warming would occur even sooner than previously thought. Here’s the story behind the findings.
On today’s episode:
Coral Davenport, who covers energy and the environment for The New York Times.
William D. Nordhaus, who was awarded a Nobel this year for his work on the economics of climate change.
A report from the United Nations concluded that some of the most severe effects of climate change could take hold as early as 2040, and that avoiding the damage requires a global economic overhaul. So, what’s next?
The Times fact-checked President Trump’s recent statements about climate change.
Exxon Mobil Corp. is committing $1 million over two years to promote a tax on carbon emissions by corporations, one of the few times an oil company has given money to make fighting climate change a political priority in Washington.
Exxon sees a carbon tax as an alternative to patchwork regulations, putting one cost on all carbon emitters nationwide, eliminating regulatory uncertainty hovering over Exxon’s business in states that might seek to target oil companies, the person said.
.. Exxon’s contribution will go to Americans for Carbon Dividends, a new group co-chaired by former Senate Majority Leader Trent Lott. It is promoting a carbon tax-plus-dividend policy first proposed by two former secretaries of state, James Baker III and George Shultz, last year. All three figures are Republicans.
The idea is to discourage companies from emitting carbon through the tax, but to avoid burdening consumers by returning the money to Americans through what the group calls a “carbon dividend” that it estimates could be as much as $2,000 annually per family.
On climate change issues, Exxon finds itself in unlikely opposition to many in the Republican Party, at a time the GOP holds the White House and majorities in Congress. Republican leaders there have often derided the idea of global warming and shown contempt for taxes as a solution.
While the Baker-Shultz plan is designed to be revenue-neutral by sending all of the money directly back to Americans, critics say it is too nuanced and complicated to be palatable.
.. “I don’t think the base would believe that, even if it were true,” said George David Banks, a former adviser to Mr. Trump on climate issues. “Not only are you asking the base to support climate policy, but you’re asking them to support a tax. You’re asking them to support a double whammy.”