The Unrealistic Economics of the Green New Deal

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
just

  • $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.

Germany’s experience is illustrative. In 2000 it began targeting subsidies to renewable power and by 2017, renewables’ share of power consumption had risen fivefold to 38%. Because renewable generation was initially so small, the subsidies weren’t that burdensome, says Michael Pahle of the Potsdam Institute for Climate Impact Research. The priority, he says, was spurring innovation to drive down costs. But, he says, as renewables became much larger, cost became much more worrisome.

In 2015 Germany introduced reverse auctions, in which producers bid to supply energy at the lowest possible subsidy. By attracting the lowest-cost supply, this has driven solar photovoltaic prices down by half. Some bids have required no subsidy at all.

Even so, because Germany is phasing out nuclear power and hasn’t targeted transport, industry and agriculture emissions, it is behind on its emissions reductions. This underlines the need for an economywide carbon price, Mr. Pahle says. That is a lesson Americans should learn now, not after they’ve spent trillions on a Green New Deal.

The New Language of Climate Change

Scientists and meteorologists on the front lines of the climate wars are testing a new strategy to get through to the skeptics and outright deniers.

PHOENIX—Leading climate scientists and meteorologists are banking on a new strategy for talking about climate change: Take the politics out of it.

That means avoiding the phrase “climate change,” so loaded with partisan connotations as it is. Stop talking about who or what is most responsible. And focus instead on what is happening and how unusual it is—and what it is costing communities.

The strategy is being increasingly employed in more conservative regions of the country, where climate doubt still runs deep—even if there are signs of cracks in the resistance thanks to the pummeling pattern of highly unusual and costly weather events.

“They see it firsthand,” Robert Mark Simpson, a professor of geography at the University of Tennessee at Martin, told me. “There is a sort of acknowledgment that the climate is changing. They just don’t think humans are that impactful. [They think blaming humans is] a conspiracy to overthrow the U.S. economy.”

Simpson attended the conference at the Phoenix Convention Center to outline his three-year effort to educate farmers about climate change in western Tennessee and eastern Kentucky, where at some dinner tables the term remains a political curse word. Tennessee just elected a leading climate change doubter, Marsha Blackburn, to the U.S. Senate.

It’s a tall order. So, he is also trying another tack to reach the political and religious conservatives for which farming has been in the family for generations: warning that the family business might be in jeopardy—sooner than they might think.

Will they be able to farm here 30 to 40 years from now?

Another line of argument he has found to appeal to conservatives’ personal connection to nature.

“Many are hunters and fishermen. They are really tied to the environment,” Simpson said. He finds he can reach them by trying to tap into their belief that “we’ve been given stewardship” of the Earth.

But the political headwinds that he and others are up against—especially in red states where political leaders are unwilling to accept the scientific consensus that human activity is playing an outsize role in the changing climate—were on display last weekend.

As winter storms bore down on large swaths of the country, Trump took to Twitter to warn Americans to “be careful and try staying in your house. Large parts of the Country are suffering from tremendous amounts of snow and near record setting cold.”

Nowhere is the challenge of convincing the doubters without being labeled a partisan or environmental zealot greater than in the ranks of broadcast meteorologists. Local TV weather experts were among the last holdouts in the scientific community to accept the consensus that humans are responsible for climate change—so much so that in 2014 then-President Barack Obama met with some of them as part of his effort to sell his environmental policy agenda.

“I think a lot of the broadcasters were concerned that there was such a political divide within the population and if they were very vocal of any aspect of climate change some subset of their audience would not view them with a level of trust,” Keith Seitter, a meteorologist and the American Meteorological Society’s executive director, told me.

Now, some 600 broadcast meteorologists, out of an estimated 2,200 in the United States, are working with Climate Matters to craft new ways to tell their viewers about climate change.

“I have changed my presentation a bit,” Jim Gandy, chief meteorologist for the CBS affiliate in Columbia, S.C., told me. “I used to start with the science. Now I try to show them how it is changing and then I go into why it is changing. That may be a more effective approach. I share the raw data with them that has not been ‘manipulated’ and it throws them for a loop.”

Even in viewing areas considered Democratic strongholds, talking about climate change can be risky.

“You have to be careful,” Bob Ryan, a longtime television meteorologist in Washington who was the first network meteorologist, told me. “If you get into policy you are getting into political quicksand. People don’t want to be lectured to. That doesn’t accomplish anything.”

So he too is in the habit of explaining related weather events in the context of how much more often they are occurring than in the past. “Ellicott City has had a number of 500-year flood events in recent years,” he cites as one example, referring to the Baltimore suburb.

What Can a Technologist do about Climate Change?

The article “What Can a Technologist do about Climate Change?” [0] by Bret Victor is one of the best things I’ve read in regards to this issue. Not only is it incredibly interesting but it’s also massively inspiring.

If climate change doesn’t take your fancy as a cause, 80000 Hours have put a lot of research into this list of the world’s most pressing problems [1]. Maybe you would like to help tackling one of those.

[0] http://worrydream.com/#!/ClimateChange [1] https://80000hours.org/problem-profiles/

Could an Amy Klobuchar Solve Democrats’ Dilemma?

They seek a presidential candidate who appeals to both their liberal coastal base and to Midwestern working- and middle-class voters

When asked recently who Republicans should fear most in the 2020 presidential campaign, two prominent GOP figures, both women speaking independently of each other, gave the same response: Sen. Amy Klobuchar of Minnesota.

A third Republican, a male, asked which kind of candidate Democrats should want, replied: “They need a boring white guy from the Midwest.”

So, there you have it: The dream ticket of Amy Klobuchar and Sen. Sherrod Brown of Ohio. Case closed, cancel the primaries, on to the general election.

So if all that creates an opportunity for Democrats in 2020, here’s their dilemma: Can they pick a candidate who can blend the party’s conflicting impulses?

This may seem a long ways off, but the reality is that most Democrats thinking of running for president—and the number probably runs into the 20s—plan to make their decision over the next several weeks, so they can move out starting in early 2019.

As this drama begins, the key question is whether the party will find somebody who appeals both to its coastal base dominated by progressives, upscale college graduates, millennials and minorities, or choose someone who is more appealing to traditional working- and middle-class voters in industrial Midwest states such as Pennsylvania, Wisconsin and Michigan, all of which helped Democrats reclaim the House in this year’s mid-term elections.

.. The winning lottery ticket, of course, goes to somebody who can appeal to both. And that’s why Ms. Klobuchar’s name—and profile—attract attention. She’s a woman, obviously, which is important at a time when newly energized women are a growing force within the party. She pleased her party base in the hearings on the Supreme Court nomination of Brett Kavanaugh when she challenged him about his use of alcohol, but did so in a sufficiently calm and understated manner that she won an apology from Mr. Kavanaugh after he initially responded angrily.

.. She also won re-election this year with more than 60% of the vote in the one state Trump forces lost in 2016 but think they have a legitimate chance to flip their way in 2020.

.. The question is whether she or anyone can put together a policy agenda that pleases both party liberals, who are pushing for

  1. a Medicare-for-all health system,
  2. the demise of the Immigration and Customs Enforcement system and an
  3. aggressive new climate-change action plan, and more moderate Midwestern voters, who may be scared off by all of those things.

Ms. Klobuchar’s policy priorities may suggest a path. To address health care, the top priority of Democratic voters, she advocates a step-by-step approach, one that seeks to

  • drive down prescription drug costs by opening the door to less-expensive drugs from Canada,
  • protect and improve the Affordable Care Act, and
  • expand health coverage by considering such steps as allowing more Americans to buy into the Medicare system.

.. She’s talked of a push to improve American infrastructure that would include expanding rural Americans’ access to broadband service, paying for it by rolling back some—though not all—of the tax cuts Republicans passed last year. She pushes for more vigorous antitrust enforcement, more protections for privacy and steps to curb undisclosed money in politics

.. For his part, Sen. Brown, a liberal who this year won Ohio as it otherwise drifts Republican, offers a working-class-friendly agenda that combines progressive impulses for government activism to drive up wages with Trumpian skepticism about trade deals and corporate outsourcing.