06/24/2021

A bold new plan to tackle climate change ignores economic orthodoxy

Green New Dealers reckon the secret lies in making the economy both greener and more equitable. Their plan remains ill-defined, though Democrats are expected to release draft legislation that may provide more details soon. But its primary aims are clear. It proposes a move to 100% clean and renewable energy within a decade or two, and to zero net emissions by mid-century. Carbon prices might be included, but the emphasis is elsewhere. Supporters describe massive public investment to overhaul energy and transport infrastructure; extensive state support for green industries, with the goal of turning America into a leading exporter of clean technologies; and large-scale efforts to help workers through training, job-placement schemes and perhaps a federal job guarantee (essentially, a promise of public work to anyone involuntarily unemployed). Supporters are vague on costs and funding. But decarbonising the economy so quickly would certainly require vast sums, some of which would probably be raised by borrowing, and some, almost certainly, by taxes on the well-off.

Why bundle together the seemingly unrelated issues of climate change and economic inequality? To some, the appeal rests in political economy. Any plan to free an industrialised economy from fossil-fuel dependence will create losers. To succeed politically, it must mobilise groups of winners more powerful and passionate than those losers. Plans to tax carbon and pay out the revenue as a dividend might seem appealing; what voter could resist cash rebates? But the benefits, from lowering emissions to paying out dividends, are shared broadly and thinly, while the costs are concentrated on a few politically powerful industries. A carbon refund of $100 per month might be too small to mobilise a critical mass of voters, while the associated tax would prompt a no-holds-barred campaign by deep-pocketed fossil-fuel firms. A Green New Deal, in contrast, might promise sufficient goodies to sufficiently organised interest groups, such as labour unions and domestic manufacturers, to gather a winning political coalition.

To others, the Green New Deal is something more revolutionary. Roosevelt saw the Depression as both a threat to liberal democracy and the product of an economic system that put profits ahead of the welfare of the working man. Similarly, left-wing activists view climate change as the result of unbridled capitalism. They aim to solve it by redistributing economic and political power.

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