Month: December 2019

Imagining A World Without Capitalism

Anti-capitalists had a miserable year. But so did capitalism.

While the defeat of Jeremy Corbyn’s Labour party in the UK this month threatened the radical left’s momentum, particularly in the US, where the presidential primaries loom, capitalism found itself under fire from some unexpected quarters.

Billionaires, CEOs, and even the financial press have joined intellectuals and community leaders in a symphony of laments about rentier capitalism’s brutality, crassness, and unsustainability. “Business cannot continue as usual,” seems to be a widespread sentiment even in the boardrooms of the most powerful corporations.

Increasingly stressed and justifiably guilt-ridden, the ultra-rich – or those with any sense, at any rate – feel threatened by the crushing precariousness into which the majority are sinking. As Marx foretold, they form a supremely powerful minority that is proving unfit to preside over polarised societies that cannot guarantee non-asset owners a decent existence.

Barricaded in their gated communities, the smarter among the uber-rich advocate a new “stakeholder capitalism,” even calling for higher taxes on their class. They recognise the best possible insurance policy in democracy and the redistributive state. Alas, at the same time, they fear that, as a class, it is in their nature to skimp on the insurance premium.

Proposed remedies range from languid to ludicrous. The call for boards of directors to look beyond shareholder value would be wonderful if it were not for the inconvenient fact that only shareholders decide directors’ pay and tenure. Similarly, appeals to limit exorbitant power of finance would be splendid were it not for the fact that most corporations answer to the financial institutions that hold the bulk of their shares.

Confronting rentier capitalism and fashioning firms for which social responsibility is more than a marketing ploy requires nothing less than re-writing corporate law. To recognise the scale of the undertaking, it helps to return to the moment in history when tradable shares weaponised capitalism, and to ask ourselves: Are we ready to correct that “error”?

The moment occurred on September 24, 1599. In a timbered building off Moorgate Fields, not far from where Shakespeare was struggling to complete Hamlet, a new type of company was founded. Its ownership of the new firm, called the East India Company, was sliced into tiny pieces to be bought and sold freely.

Tradable shares allowed private corporations to become larger and more powerful than states. Liberalism’s fatal hypocrisy was to celebrate the virtuous neighborhood butchers, bakers, and brewers in order to defend the worst enemies of free markets: the East India Companies that know no community, respect no moral sentiments, fix prices, gobble up competitors, corrupt governments and make a mockery of freedom.

Then, toward the end of the 19th century, as the first networked mega-companies – including Edison, General Electric, and Bell – were formed, the genie released by marketable shares went a step further. Because neither banks nor investors had enough money to plough into the networked mega-firms, the mega-bank emerged in the form of a global cartel of banks and shadowy funds, each with its own shareholders.

Unprecedented new debt was thus created to transfer value to the present, in the hope of profiting sufficiently to repay the future. Mega-finance, mega-equity, mega-pension funds, and mega-financial crises were the logical outcome. The crashes of 1929 and 2008, the unstoppable rise of Big Tech, and all the other ingredients of today’s discontent with capitalism, became inescapable.

In this system, calls for a gentler capitalism are mere fads – especially in the post-2008 reality, which confirmed the total control over society by mega-firms and mega-banks. Unless we are willing to ban tradable shares, first introduced in 1599, we will make no appreciable difference to the distribution of wealth and power today. To imagine what transcending capitalism might mean in practice requires rethinking the ownership of corporations.

Imagine that shares resemble electoral votes, which can be neither bought nor sold. Like students who receive a library card upon registration, new staff receive a single share granting a single vote to be cast in all-shareholder ballots deciding every matter of the corporation – from management and planning issues to the distribution of net revenues and bonuses.

Suddenly, the profit-wage distinction makes no sense and corporations are cut down to size, boosting market competition. When a baby is born, the central bank automatically grants her or him a trust fund (or personal capital account) that is periodically topped up with a universal basic dividend. When the child becomes a teenager, the central bank throws in a free checking account.

Workers move freely from company to company, carrying with them their trust-fund capital, which they may lend to the company they work in or to others. Because there are no equities to turbocharge with massive fictitious capital, finance becomes delightfully boring — and stable. States drop all personal and sales taxes, instead taxing only corporate revenues, land, and activities detrimental to the commons.

But enough reverie for now. The point is to suggest, just before the New Year, the wondrous possibilities of a truly liberal, post-capitalist, technologically advanced society. Those who refuse to imagine it are bound to fall prey to the absurdity pointed out by my friend Slavoj Žižek: a greater readiness to fathom the end of the world than to imagine life after capitalism.

Europe’s Green Deal

The Green Deal announced by the European Commission is a demonstration of European social democracy at work. A mixed economy, combining markets, government regulation, the public sector, and civil society, will pursue a mixed strategy, combining public goals, public and private investments, and public support.

Europe has done it. The European Green Deal announced by the European Commission is the first comprehensive plan to achieve sustainable development in any major world region. As such, it becomes a global benchmark – a “how-to” guide for planning the transformation to a prosperous, socially inclusive, and environmentally sustainable economy.

To be sure, the tasks confronting the European Union are daunting. Even reading the new document is daunting: a seeming welter of plans, consultations, frameworks, laws, budgets, and diplomacy, and many interconnected themes, ranging from energy to transport to food to industry.

Critics will scoff at the European bureaucracy. But this is bureaucracy in the finest Weberian sense: it is rational. The goals of sustainable development are spelled out clearly; targets are based on the time-bound goals; and processes and procedures are established in line with the targets. The overarching objectives are to reach “climate neutrality” (net-zero greenhouse-gas emissions) by 2050; a circular economy that ends the destructive pollution caused by plastics and other petrochemicals, pesticides, and other waste and toxic substances; and a “farm-to-fork” food system that neither kills people with an overly processed diet nor kills the land with unsustainable agricultural practices.

And the European Commission understands that this must be a citizen-based approach. Again, the critics will regard the talk of public consultations as naive fluff. But tell that to French President Emmanuel Macron, who has faced street riots for more than a year; or Chilean President Sebastián Piñera, whose country suddenly erupted in riots this fall after the introduction of a small increase in metro fares. Both Macron and Piñera are exemplary environmentalists. Both have committed their countries to climate neutrality by 2050. Both are urgently searching for a path of public consultations, but after the fact.

American neoliberals will scoff, too, arguing that the “market” will sort out climate change. Yet look at the United States today. If neoliberalism does for the planet what it’s done for America’s infrastructure, we’re all in big trouble. Arriving at a US airport means facing elevators, escalators, and people movers that don’t work, taxis that don’t arrive, rail links that don’t exist, and highways with broken lanes and overpasses.

The reason for this dysfunction is obvious: corruption. Each US election cycle now costs $8 billion or more, financed by billionaires, Big Oil, the military-industrial complex, the private health-care lobby, and vested interests intent on tax breaks and protecting the status quo. Market-based solutions are a sham when politics is subordinated to lobbying, as it is in the US. The European Green Deal shows government as it should be, not government subordinated to corporate interests.

Europe’s Green Deal is in fact a demonstration of successful European social democracy (in an operational rather than a narrow partisan sense). A mixed economy, combining markets, government regulation, the public sector, and civil society, will pursue a mixed strategy: public goals, public investments in infrastructure, private investments in industrial transformation, public-private research and development missions, and an informed population. In fact, it is industrial policy at its most sophisticated. (I recently outlined such a social-democratic Green New Deal strategy for the US.)

There are reasons for optimism. Most important, the advanced technologies exist, commercially or pre-commercially, to create a zero-carbon, resource-saving, environmentally sustainable advanced economy. By combining renewable energy, digital technologies, advanced materials, and a sharing economy in transport and other infrastructure, we can decarbonize the energy system, move to a circular economy, and dramatically reduce the flow of primary resources.

Yet three big challenges must be addressed. The first is to overcome status quo interests. Big Oil will have to absorb the losses, but workers and coal regions should be compensated, with income support, retraining, and other public services. Europe’s plans rightly call for a “just transition.”

The second challenge is financing. Europe, and indeed every region of the world, will have to direct an incremental 1-2% of annual output toward the green economy, including new infrastructure, public procurement, R&D, industrial retooling, and other needs. Much of this will be financed by the private sector, but much must go through government budgets. Europe will need to face down the ideologues who oppose more EU spending. Facts will need to matter.

The last big challenge is diplomatic. Europe accounts for around 9.1% of global carbon dioxide emissions, compared with 30% for China and 14% for the US. Even if Europe fully implements the Green Deal, it will be for naught if China, the US, and other regions fail to match its efforts. European leaders therefore rightly treat diplomacy as crucial to the Green Deal’s success.

Consider China. After decades of rapid growth that has eliminated mass poverty, China has become the world’s leading emitter of CO2 (though only half of America’s emissions per person). China by itself will determine the world’s climate future. On one hand, Chinese leaders know that their country is extremely vulnerable to climate change and at risk of becoming diplomatically isolated if it fails to decarbonize. On the other hand, they are confronting the dangers of America’s misguided cold war. Government hardliners and China’s coal lobby are resisting decarbonization in the midst of US pressures, especially since Trump himself is rejecting decarbonization.

European diplomacy can make the difference if it refuses to go along with America’s insidious efforts to contain China, and instead offers China a clear and positive partnership: working together on sustainable Eurasian infrastructure, development, and technology, in the context of a Chinese Green Deal alongside Europe’s. Such a partnership would hugely benefit Europe, China, and the dozens of Eurasian countries in between, and indeed the entire world.

Europe has made a historic breakthrough with its ambitious, challenging, and feasible plan. The Green Deal is a powerful beacon of hope in a world of confusion and instability.

Drug Pricing Legislation Will Save Lives

If enacted, H.R. 3, the Elijah E. Cummings Lower Drug Prices Now Act, would, for the first time, give the government the power to negotiate lower drug prices for millions of patients enrolled in Medicare, and millions more with private insurance. The stakes are huge: Not only would this save Medicare $500 billion over the next decade, these savings would be used to expand benefits to include dental, vision and hearing coverage and help low-income seniors pay out-of-pocket costs.

But seniors are not the only ones who stand to gain from this critical step in overhauling America’s broken system for prescription drugs. People of all ages with private insurance will also benefit from lower drug prices that our government can negotiate with Big Pharma.

Contrast this with the weak alternative proposed by House Republicans, which strips away nearly every one of these much-needed improvements. In thrall to Big Pharma, the other side of the aisle would continue to ban negotiations on Medicare so the drug corporations can keep charging patients any price they want. The bill doesn’t stop drug corporations from raising prices faster than inflation and rather than help seniors who can’t afford the dental, vision and hearing care they need by expanding Medicare, this bill protects the status quo that keeps Pharma profits high at our expense.

Let’s be clear: Americans on all sides of the political spectrum are eager to see checks on drug corporations’ power to price-gouge and needlessly hike costs. But in some communities, stopping these unjust practices is a matter of life and death. For those living with or at risk of contracting HIV and AIDS — especially communities of color — an end to the status quo can’t come soon enough.

Consider the drug corporation Gilead: makers of a drug called Truvada. When taken daily, Truvada, or its generic equivalent, reduces the risk of HIV transmission by more than 99%. That’s more effective than the vaccines for polio, measles, mumps and tuberculosis. If we can get enough people to take the medication, we can end the epidemic once and for all.

Gilead has a monopoly on Truvada. A monthly prescription in the United States costs $1,600, despite the fact that it’s available in places like Southeast Asia and the African continent for just $6. Is it any surprise that, according to public health experts, more than a million Americans who should be taking Truvada aren’t doing so because they can’t afford monopoly prices? And according to the Centers for Disease Control and Prevention, of the 500,000 black people who would benefit from PrEP, a daily pill for HIV prevention, just 7,000 filled prescriptions in 2015.

Cities like my hometown of Baltimore and Washington, D.C., are designated as “hotspots” for HIV transmission by the federal government. Communities like ours account for nearly half of all new cases each year — a brutal trend I’ve been fighting for two decades. Back then, I managed one of the first federal harm reduction grants as HIV ravaged our community, living onsite with 350 poor people battling HIV. How is it all this time has passed and we’ve only made marginal progress in this fight?

Perhaps it’s because of the fact that HIV may be an equal-opportunity killer if untreated, but the odds of contracting it are not distributed equally. Black men living in Baltimore face a risk 11.1 times higher than their White peers. For Black women, the risk is more than 20.3 times higher than Whites.

Let’s be clear: this is a solvable problem. Passing the Elijah E. Cummings Lower Drug Costs Now Act would be a great start — one which the late Rep. Cummings, a long-time champion against Big Pharma price-gouging, would applaud.

Struggling to get by in America is hard enough. It shouldn’t be deadly. Not when we have the technology to prevent HIV transmission and not because we defer to greedy drug corporations withholding a cure from the public. Taxpayers and the U.S. government paid for almost 100% of the research that went into the development of Truvada as PrEP, and still retain the relevant intellectual property rights. Now we must demand it’s made available and affordable to all who need it. Because this is a matter that is literally life or death.

Cornel West On Social Justice, Political Discourse And Trump

At the 2019 NJEA Convention West talks One on One with Steve Adubato about social justice in education, the importance of civil political discourse, the leadership styles of President Obama and President Trump and the election outlook for 2020.


Trump Delivered A Fatal Blow To Peace In The Holy Land

Two years ago Friday, President Donald Trump formally recognized Jerusalem as Israel’s capital. It was an irresponsible, dangerous and cruelly insensitive act that did grave damage to the rights and well-being of Palestinians and put an end to any pretense that the United States could help negotiate a resolution to the Israeli-Palestinian conflict.

From the beginning of the modern “peace process,” there have been two fatal flaws that have hampered the effort: the asymmetry of power in Israel’s favor and the clear US bias in support of Israel. The unilateral American recognition of Jerusalem emphasized both flaws. It prejudged one of the conflict’s most sensitive issues in Israel’s favor and emboldened and rewarded the most hardline elements in Israel while compromising those Palestinian and Arab leaders who had put their trust in the US role. The decision to recognize Jerusalem as the capital made clear that the US could not be an honest broker.

Jerusalem is not to be toyed with. It is not just any city. It is central to the narratives of all three Abrahamic faiths. For this reason, the architects of the 1947 UN plan that partitioned Palestine into Jewish and Arab states set it aside as an international zone. It was for this reason that when Israel occupied the Western side of the city following the 1948 Arab-Israeli War, and later declared Jerusalem as its capital, that unilateral decision was never recognized by the international community.

Israel compounded their defiance in 1967 when, after occupying the rest of Palestine, they annexed a substantial area of Palestinian land (including a number of Palestinian villages) as a result of the Six-Day War and declared the entirety of West and East Jerusalem as “Greater Jerusalem” insisting that it was their “eternal undivided capital.”

This flagrant violation of international law was unanimously condemned by the United Nations. Seen in this context, Trump’s action puts the US stamp of approval on Israel’s 70-year record of violations of law and UN Resolutions.

For Arabs and Muslims world-wide, Jerusalem has become a powerful symbol representing a century of betrayal by the West. Like the issue of Palestine itself, mention of Jerusalem evokes broken promises, brutal occupation by imperial and colonial powers, loss of control of history and denial of fundamental rights.

I often remind American audiences that Jerusalem is to Arabs and Muslims what the 1890 massacre at Wounded Knee was to Native Americans. It may not have been their tribe that was involved in the infamous brutality inflicted on those who were killed at Wounded Knee—but they can understand the tragedy that took place and collective history dispossession and continuous hurt. Jerusalem is the wound in the heart of Arabs and Muslims that never healed. With his callous decision to effectively absolve Israel of its crimes and recognize their control of the city by conquest, Trump rubbed salt into this wound.

It was, therefore, absurdly insensitive and galling for the US President to couple his provocation with an appeal to Palestinians to remain calm and peaceful. He was, in effect, saying: I don’t care what you have suffered, nor do I care how unjust and illegal Israeli actions have been, just sit back and take it.

I would add that while, with his decision, Trump was playing to his right wing evangelical Christian supporters, he ignored the feelings of the Christian community in Palestine. In a statement issued the day before the President’s announcement, the Patriarchs and Bishops of the Eastern Christian churches headquartered in Jerusalem pleaded with him not to recognize Israel’s exclusive claim to the city.

Finally, there is the reality of daily life for Palestinians in and around Jerusalem. Having largely closed East Jerusalem from the rest of the West Bank, Israel has accelerated its policy of strangling the life out of Arabs in Jerusalem. Denied employment, victimized by home demolitions and land theft, and subject to a host of discriminatory policies that violate fundamental human rights, the endurance of East Jerusalem’s Palestinian Arab population is tested daily. Trump’s silence on these matters, while offering a hollow “God Bless the Palestinians” at the end of his remarks on December 6th 2017, was more like “ashes in the mouth” than an expression of real concern. It aggravated more than it comforted.

While Americans remember December 7, the date of the Japanese attack on Pearl Harbor, as “a day of infamy,” Arabs and Palestinians may well feel the same about December 6— the date President Donald Trump delivered a fatal and fateful blow to peace and justice in the Holy Land.

Criminalizing Dissent – Palestinian Rights Panel

As a panelist at Criminalizing Dissent: The Attack on BDS and Pro-Palestinian Speech, King recounts his own path to organizing against police brutality and lessons learned for how activists can effectively organize and plan to confront the urgent problems our nation faces. 


Paying For A Zero-Emissions Economy

In October 2018, the Intergovernmental Panel on Climate Change (IPCC), the most authoritative global organization advancing climate change research, issued an alarming report titled “Global Warming of 1.5°C.” This report emphasized the imperative of limiting the increase in global mean temperatures to 1.5 degrees Celsius above pre-industrial levels as opposed to 2.0 degrees, the previous consensus goal.

The IPCC concluded that limiting the global mean temperature increase to 1.5 rather than 2.0 degrees by 2100 will dramatically lower the likely negative consequences of climate change. These include the risks of heat extremes, heavy precipitation, droughts, sea level rise, biodiversity losses, and corresponding impacts on health, livelihoods, food security, water supply, and human security.

The IPCC estimates that to achieve the 1.5 degrees maximum global mean temperature increase target as of 2100, global net CO2 emissions will have to fall by about 45 percent as of 2030 and reach net-zero emissions by 2050. I focus in this article on what it will take for the U.S. economy to reach net-zero CO2 emissions by 2050, and specifically, how we can pay for this project. In the interests of space, I do not delve into the additional specific financing challenges around also hitting the IPCC’s intermediate target of a 45 percent CO2 emissions reduction by 2030, though important additional challenges do emerge with achieving this 2030 goal.

Purely in terms of the financing issues involved, it is an entirely reasonable and not especially difficult proposition to build a zero-emissions U.S. economy by 2050. By my higher-end estimate, it will require an average level of investment spending throughout the U.S. economy of about 2 percent of GDP per year, focused in two areas: (1) dramatically improving energy efficiency standards in the stock of buildings, automobiles, and public-transportation systems, and in industrial production processes; and (2) equally dramatically expanding the supply of clean renewable-energy sources—primarily wind, solar, and geothermal power—available at competitive prices to all sectors of the U.S. economy.

This level of clean-energy investment spending would amount to about $400 billion in the first year of the program, which I will set as 2021, and rise to about $850 billion as of 2050, assuming the economy grows at an average rate of about 2.4 percent per year. As an average figure between 2021 and 2030, investment spending would then be around $600 billion per year. Total clean-energy investment spending for the 30-year period would amount to about $18 trillion.

These figures are for overall investment spending, including from both the public and private sectors. Establishing the right mix between public and private investment will be a major consideration. As an initial rough approximation, let’s assume that the breakdown should be 25 percent public and 75 percent private investment. For the first year of the project in 2021, this would break down to $100 billion in public investments along with $300 billion in private funds. A major part of the policy challenge will be to determine how to leverage the public money most effectively to create strong incentives for private investors.

Before plunging into the financing details, I need to emphasize a critical point at the outset: This clean-energy investment project will pay for itself in full over time because it will deliver lower energy costs for all U.S. energy consumers. This results because raising energy efficiency standards means that, by definition, consumers will spend less for a given amount of energy services, such as being able to travel 100 miles on a gallon of gasoline with a high-efficiency hybrid plug-in vehicle as opposed to 25 miles per gallon with the average car on U.S. roads today. Moreover, the costs of supplying energy through wind, solar, geothermal, and hydro power are now, on average, roughly equal to or lower than those for fossil fuels and nuclear energy. As such, the initial up-front investment outlays can be repaid over time through the cost savings that will be forthcoming.

In addition to building a clean-energy infrastructure, this new investment will be a major new source of job creation at all levels of the U.S. labor market—in the range of 7.5 million jobs on average between 2021 and 2050. This is true, even while recognizing that the workers and communities in the U.S. whose livelihoods depend on the fossil fuel industry will inevitably be hurt as this industry contracts, step-by-step, to zero between now and 2050. Advancing generous “just transition” policies for the affected workers and communities needs to be a central element of the overall clean-energy investment project. Harold Meyerson discusses these critical questions around job creation and just transition policies elsewhere in this issue.

For 2018, clean-energy investments in the U.S. economy amounted to about $64 billion, equal to about 0.3 percent of GDP. We therefore need to expand clean-energy investments roughly sixfold in very short order to get to the 2 percent of GDP target, and then maintain this heightened level of spending relative to GDP until 2050. At one level, this is obviously a daunting challenge. On the other hand, it does still mean that roughly 98 percent of economic activity in the U.S. can proceed largely independent of the clean-energy investment project.

Why 2 Percent of GDP?

To show that my spending estimates are not based on a lot of hocus-pocus, I should describe where the 2 percent of GDP figure comes from. This estimate is derived directly from the figures on costs in the U.S. to achieve either a given improvement in energy efficiency or a given increase in the clean renewable energy supply.

The U.S. economy presently consumes a total of about 100 quadrillion British thermal units (Q-BTUs) of energy from all fossil fuel, nuclear, and renewable-energy sources. As a high-end estimate, working from the research literature, I assume that it will cost about $30 billion to achieve 1 Q-BTU of energy savings relative to the consumption level that would result through a business-as-usual economic trajectory between now and 2050. From this, I calculate that it will cost a total of about $3.3 trillion over the 30-year investment cycle, or about $100 billion per year on average, to stabilize overall U.S. energy consumption at about 110 Q-BTUs as of 2050. For Year 1, energy efficiency investments would be about $70 billion.

To operate the U.S. economy totally through clean-energy sources as of 2050, that means that we need a total of 110 Q-BTUs of clean-energy supply. At present, total supply of wind, solar, hydro, and geothermal is about 6 Q-BTUs. We therefore need to expand supply by 104 Q-BTUs by 2050. Again, working from the research literature, a high-end figure for the average costs of expanding renewable-energy supply between 2021 and 2050 is about $150 billion per Q-BTU. Thus, over the 30-year investment cycle, we need to spend a total of roughly $14.6 trillion on clean-energy capital expenditures, or a bit less than $500 billion per year on average. For Year 1, the spending level would be about $330 billion.

The total average investment spending level will therefore need to be about $600 billion per year, with $500 billion going to renewable investments and $100 billion to efficiency projects. Average GDP between 2021 and 2050 will be about $30 trillion if the U.S. economy grows at 2.4 percent per year. This is how we reach the conclusion that clean-energy investments will need to average about 2 percent of GDP per year between 2021 and 2050—i.e., $600 billion in investments divided by $30 trillion in GDP.

As noted above, we are assuming that of the full $400 billion in spending that will be required in Year 1, $100 billion will come from the federal government, with the remaining $300 billion supplied by private investors. We also assume that the $300 billion in private investment funding will not be forthcoming without strong and large-scale public-policy interventions. We therefore need to answer two big questions with a financing proposal: where to get $100 billion a year in new federal government funds, and how to most effectively induce the additional $300 billion in private funds? The table, right, provides a guide for following the main features of my proposed plan.

Where to Get $100 Billion in Federal Government Money?

As of 2018, the U.S. federal government budget was $4.1 trillion. The $100 billion budget for federal clean-energy investments that I am proposing would therefore amount to only 2.5 percent of the overall budget. Nevertheless, these funds will need to come from someplace. I propose three funding sources: (1) a carbon tax, in which 75 percent of revenues are rebated back to the public but 25 percent are channeled into clean-energy investment projects; (2) transferring funds out of the military budget, particularly from its nuclear weapons program; and (3) a Federal Reserve–based Green Bond lending program. Strong cases can be made for each of these funding measures. But each proposal does also have vulnerabilities, including around political feasibility. The most sensible approach is therefore to combine the measures into a single package that minimizes their respective weaknesses as stand-alone initiatives.

Carbon Tax With Rebates. As noted by James Boyce elsewhere in this issue, carbon taxes have the merit of impacting climate policy through two channels—they raise fossil fuel prices and thereby discourage consumption while also generating a new source of government revenue. At least part of the carbon tax revenue can then be channeled into supporting the clean-energy investment project. But the carbon tax will hit low- and middle-income people disproportionately, since they spend a larger fraction of their income on electricity, gasoline, and home-heating fuel. An equal-shares rebate, as proposed by Boyce, is the simplest way to ensure that the full impact of the tax will be equalized across the population.

Consider, therefore, the following tax-and-rebate program. Focusing, again, on Year 1, we begin the tax at a low rate of $20 per ton of carbon. Given current U.S. CO2 emissions levels, that would generate about $100 billion in revenue. If we use only 25 percent of this revenue to finance clean-energy investments, that amounts to $25 billion for investment projects. This would then cover about 25 percent of the $100 billion in total federal funding needed for the clean-energy investment project. The 75 percent of the total revenue that is rebated to the public in equal shares would amount to about $230 for every U.S. resident, or nearly $1,000 for a family of four. The average price of gasoline would rise by about 7 percent, from about $2.70 to $2.90 per gallon.

Taking From U.S. Military Budget. The U.S. military budget in 2018 was about $700 billion. We would therefore need to devote about 14 percent of the military budget to clean-energy transformation to fully fund the $100 billion in total federal funding for the clean-energy investment project. This would be an entirely justifiable transfer of funds on both logical and ethical grounds if we take at face value the idea that U.S. defense spending should be about protecting the well-being of U.S. citizens. But, on political grounds, it would represent an implausibly large military spending cut. A more realistic approach would be to allow that the transfer out of the military budget would, like the carbon tax funds, be at $25 billion. This would require a transfer of about 4 percent out of the military budget. These funds could be raised through a 4 percent across-the-board military spending cut. A more targeted approach would be to cut by cut by 50 percent the average annual $50 billion budget now devoted to nuclear weapons development. Given that, along with climate change, the existence of nuclear weapons represents a true existential threat to life on Earth, this would be a fitting approach to funding the clean-energy investment project.

Federal Reserve Green Bond Funding. It was demonstrated during the 2007–2009 financial crisis and subsequent Great Recession that the Federal Reserve is willing and able to supply basically unlimited bailout funds to Wall Street during crises. The extensive 2017 study “The Cost of the Crisis” by Better Markets documents this carefully:

Within the first few years following the onset of the crisis, the government committed approximately $12.2 trillion to stop the crash of the financial system, stabilize the economy, and try to spur economic growth. Of that massive total, $9 trillion was allocated to bailing out Wall Street’s too-big-to-fail banks with direct investments in financial institutions, purchases of high-grade corporate debt, and purchases of mortgage-backed securities; $1.7 trillion was allocated to insuring debt issued by financial institutions and guaranteeing poorly performing assets; and $1.4 trillion went to a significant expansion of the government’s traditional overnight lending to banks.

What also became clear through these bailout operations is that there were no binding rules prohibiting the Fed from intervening in the private financial market in any ways it deemed appropriate.

I would propose $50 billion in Green Bond financing supplied by the Fed, which would then match the $25 billion each coming from both the carbon tax and military budget transfers. This would amount to a minuscule 0.4 percent of the Fed’s Wall Street bailout operations during the crisis. It is true that the Wall Street bailouts during the crisis represented a dramatic deviation from normal Fed operating practices, induced by the incipient global financial collapse. But it is also obviously true that we human beings now face a far more dire crisis resulting from climate change.

The Fed’s funding support could be injected into the economy through straightforward channels. That is, federal, state, and municipal governments could issue long-term zero-interest-rate Green Bonds. The Federal Reserve would purchase these bonds. The various levels of government would then have the funds to pursue the full range of projects that will fall under the rubric of the $100 billion in public funds needed to finance the clean-energy investment project.

In other words, we can raise the funds needed without any general tax increase. The next administration may well want to repeal the $4 trillion Trump tax cut, or selectively raise taxes on the wealthy to finance other public needs. But a general tax increase is not needed to get to zero carbon.

Raising $300 Billion in Private Funds

Moving the $300 billion into clean-energy investments can be accomplished through a combination of sticks and carrots—i.e., strong regulations that require CO2 emissions cuts and significant subsidies for investors to invest in clean-energy projects.

Joan Fitzgerald’s article in this issue describes in depth a range of effective regulatory interventions, including renewable-energy portfolio standards for electrical utilities and energy efficiency standards for both buildings and transportation vehicles. Focusing on the subsidy side, there are several tools that can be effectively deployed, all of which are already in place or have been recently operating at some levels of the state, local, or federal government.

An obvious starting point is tax incentives. It was telling that, in the 2018 federal tax legislation, the Trump administration flinched before eliminating the generous investment tax credits provided for private clean-energy investors. At present, that credit amounts to fully 30 percent of the total investment costs.

Public policy can also significantly lower the risks, and therefore the costs, to private investors of borrowing money to finance clean-energy projects. One important tool here is Property Assessed Clean Energy (PACE) financing. Under typical PACE financing arrangements, property owners borrow from a local government or bank to finance clean-energy investments. The amount borrowed is then repaid via a special assessment on property taxes, or another locally collected tax or bill. The security of the tax collection mechanism reduces the risk to private lenders or bond investors, which in turn means that financing can be obtained at lower rates. Several states, including California, Florida, and New York, which themselves comprise nearly 25 percent of the U.S. population, have PACE financing programs presently in operation. These and similar programs in other states will need to expand greatly to help bring overall private clean-energy investments to $300 billion.

Government loan guarantees are probably the most cost-effective way for the government to provide large-scale subsidies to private-sector borrowing for clean-energy investment projects. Evidence for this comes from the loan guarantee program for renewable-energy investments that was enacted in 2009 as part of the Obama economic stimulus program, the American Recovery and Reinvestment Act (ARRA). This loan guarantee program became notorious as a symbol of government ineptitude when Solyndra, a Northern California–based manufacturer of solar panels, declared bankruptcy in 2011. The federal government was therefore obligated to pay Solyndra’s creditors the full $535 million of Solyndra’s outstanding guaranteed loans. But the program also generated successes, as noted by Mariana Mazzucato in a companion article in this issue. The fair way to evaluate the relative success of the loan guarantee program is to consider the Solyndra experience alongside the complete portfolio of other renewable-energy projects that the ARRA program subsidized.

Overall, under this ARRA-based program, the federal government provided guarantees for a total of about $14 billion for 24 clean-energy projects. Of these, there was one other loan default case in addition to Solyndra. But once one accounts for the government having recovered about 50 percent of its costs through selling the assets of the two bankrupted firms, the net federal costs of the program were about $300 million. This implies that the government spent $300 million to support $14 billion in new private clean-energy investments, amounting to a leverage ratio of $50 in clean-energy investments for every $1 in government subsidies.

If this leverage ratio could be applied to the overall clean-energy investment project that I am outlining, it would mean that only $6 billion in government outlays would be sufficient to induce the full $300 billion in new private-sector clean-energy investments. Such an elevated leverage ratio will not likely be achievable for a broader loan guarantee program. One reason is that we do not know what percentage of the $14 billion total in new investments under the ARRA program would have happened anyway, without the government guaranteeing the private investors’ loans. It is also true that achieving a high leverage ratio will be more difficult when operating the program at a much larger scale, i.e., in trying to raise $300 billion as opposed to $14 billion.

Still, while recognizing these considerations, it is reasonable to allow for a leverage ratio in the range of 10 to 1, i.e., one-fifth of the ratio that emerged out of the ARRA program. That would still mean that the federal government would need to spend a total of only $30 billion in loan guarantees to fully underwrite $300 billion in private clean-energy investments. This is without taking account of the other incentives to investors accruing through the investment tax credits, PACE financing, or other risk-reducing policy interventions. In fact, these various policies will be most effective when operating in tandem. Through their combined impacts, it should not be excessively difficult to bring total private clean-energy investments to the $300 billion target.

Climate Insurance and the Costs of Doing Nothing

What will happen if we do not succeed in stabilizing the climate? MIT climate scientist Kerry Emanuel offered the following perspectives in his 2012 book What We Know About Climate Change:

  • “There will be more frequent and more intense heat waves … previously fertile areas in the subtropics may become barren, and blights may seriously affect both natural vegetation and crops.”
  • “Comparatively small shifts in precipitation and temperature can exert considerable pressure on government and social systems whose failures to respond could lead to famine, disease, mass emigrations, and political instability.”
  • “Were the entire Greenland ice cap to melt, sea level would increase by around 22 feet, flooding many coastal regions including much of southern Florida and lower Manhattan. Eleven of the fifteen largest cities in the world are located on coastal estuaries, and all would be affected.”

More recently, the November 2018 Fourth National Climate Assessment of the U.S. federal government, led by the National Oceanic and Atmospheric Administration (NOAA), was equally emphatic in describing the likely consequences of failing to control climate change. This report, focusing only on impacts within the United States, begins with the following overview:

More frequent and intense extreme weather and climate-related events, as well as changes in average climate conditions, are expected to continue to damage infrastructure, ecosystems, and social systems that provide essential benefits to communities. Future climate change is expected to further disrupt many areas of life, exacerbating existing challenges to prosperity posed by aging and deteriorating infrastructure, stressed ecosystems, and economic inequality.

At the same time, as all serious studies on the impact of climate change fully recognize, every projection as to the impacts of climate change must be understood in terms of probabilities and degrees of confidence, not certainties. In fact, we need to take decisive action now on climate change, not based on 100 percent certainty as to its consequences, but rather through estimating reasonable probabilities. Indeed, we should think of a U.S. clean-energy project as the equivalent of an insurance policy to protect ourselves and the planet against the serious prospect—though not the certainty—that the types of consequences described by Emanuel and NOAA could result.

We purchase insurance to protect ourselves against many other contingencies, such as house fires, automobile accidents, or serious illnesses. We do this even though we have no idea whether our house may ever burn down or our car will get totaled in an accident. From this perspective, the only major issue in dispute is how much we should be willing to pay to purchase an adequate amount of climate insurance. This is the equivalent of deciding not whether to purchase automobile insurance but, rather, how much to spend and how much coverage we need.

In addressing this question, it is critical to recall the point I emphasized at the outset, that the net costs of the clean-energy investment project will be zero over time. That is, the program will pay for itself over time because (1) the energy efficiency investments will enable all energy consumers to spend less money to obtain the energy services they want; and (2) the costs of clean renewable energy are already at cost parity with fossil fuels, and those costs will be falling further through additional innovations. We will need to invest something like $18 trillion over a 30-year period to build a 100 percent clean-energy infrastructure in the U.S. But these investments will come back to us through lowering the costs of consuming the energy we need for all our various purposes.

After accounting for the full range of factors at play with a U.S. clean-energy project, we can conclude that, on balance, the costs of purchasing global climate change insurance will be modest. It is an insurance policy we can unquestionably afford to pay for, even if, in the unlikely event, the prevailing scientific consensus on climate change does turn out to be wrong. The alternative to not purchasing this insurance policy is, effectively, to play Russian roulette with the fate of the Earth.

Getting To A Carbon-Free Economy

The Green New Deal refers to two distinct ideas. The narrower idea, which I discuss here, is a strategy to decarbonize the U.S. energy system in line with the Paris Agreement. The broader, urgent idea is an integrated program including renewable energy, infrastructure, health care, education, and jobs.

Contrary to some commentaries, decarbonization will not require a grand mobilization of the U.S. economy on par with World War II. The incremental costs of decarbonization above our normal energy costs will amount to 1 to 2 percent of U.S. GDP per year during the period to 2050. By contrast, during World War II, federal outlays soared to 43 percent of GDP from the prewar level of 10 percent of GDP in 1940.

The key today is to redirect outlays now spent on fossil fuel–based technologies toward zero-carbon technologies instead. That redirection will require a serious increase in federal and state public infrastructure spending, but most importantly will depend on new federal and state regulations to redirect the energy-related spending. Carbon pricing (such as a carbon tax) will be one useful tool for redirecting the spending, but will be of less importance than regulations.

Limiting Global Temperature Rise

The core goal of the Paris Agreement is to strengthen the global response to climate change by:

Holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change. (Article 2, Section 1a)

The Intergovernmental Panel on Climate Change (IPCC) followed the Paris Agreement with a crucial study (2018) highlighting the very grave risks of exceeding the 1.5 degree Celsius limit. There are three kinds of dire risks. First, the global damages from 2 degrees of warming would be significantly higher than from 1.5 degrees. Second, even 1.5 degrees may well be above the threshold for major irreversibilities such as a multi-meter rise in the sea level caused by the partial disintegration of the Antarctic and Greenland ice sheets. Third, increases in temperature above 1.5 degrees threaten to unleash powerful positive feedbacks that could lead to a spiraling of further warming, such as the massive release of CO2 and methane from the melting permafrost. A superb comprehensive scientific overview of several of these issues was written by James Hansen and co-authors. [1] (See here for an up-to-date account of possible large-scale positive feedback effects that could dramatically amplify climate change.)

Indeed, the long-term risks of even a 1.5 degree warming sustained over decades or centuries are so high that we must be more ambitious than merely stabilizing at 1.5 degrees. Hansen cogently argues that we should return CO2 concentrations to levels consistent with long-term warming of just 1 degree Celsius. That means that after reaching a peak CO2 concentration of perhaps 450 ppm (parts per million) or less at mid-century, we should enter a sustained phase of global net negative CO2 emissions so that CO2 concentrations gradually return to 350 ppm over the long term, or ideally even sooner. Besides phasing out carbon emissions, this goal can be accomplished through two kinds of carbon storage: geological storage (capturing CO2 in the air and pumping it into geologic reservoirs) and biological storage (afforestation, reforestation, and restoration of degraded lands, all capturing CO2 in vegetative cover and soils).

To stay below 1.5 degrees of warming, all regions of the world should reach net-zero emissions by 2050 at the very latest. The U.S. currently represents around 15 percent of global CO2 emissions, and that share will decline in the coming years. Therefore, decarbonization of the U.S. energy system must be complemented by decisive actions abroad, but the U.S. needs to lead. The Green New Deal should include a pillar for U.S. diplomacy and international economic policy designed to speed actions abroad, not only in the United States. At a minimum, the U.S. must remain a leader of the Paris Agreement.

Five Technological Pillars of Decarbonization

Hundreds of scholarly and policy studies have reached a broad consensus on the technology pathway to decarbonization. The consensus points to five pillars of decarbonization. [2]

The first and most important single pillar is zero-carbon electricity. This is the most important measure since zero-carbon electricity can be deployed directly (in battery electric vehicles, for example) and indirectly in green chemistry to manufacture zero-carbon fuels (hydrogen, for example). Zero-carbon electricity involves a shift toward zero-carbon primary energy sources and a very significant overall expansion of electricity production for the electrification of transport, buildings, and industry.

Zero-carbon electricity worldwide will tap multiple primary energy sources, including renewables (broadly defined to include wind, solar, hydro, geothermal, ocean, and tidal); nuclear; biofuels; and carbon capture and storage of fossil fuel–generated electricity. Recent global studies have emphasized the core role of renewables in zero-carbon electricity. This is because the costs of renewable energy have plummeted (especially solar photovoltaics), while nonrenewable energy sources—nuclear, biofuels, and carbon capture—each pose major technical and social obstacles leading to public opposition. Nuclear power of course raises massive concerns over nuclear accidents and nuclear wastes. (See the companion article by Alexander Sammon.) Biofuel raises great concerns about ecosystem degradation and competition with food supplies. Carbon capture raises massive opposition over technological doubts (e.g., leakage of CO2), land use obstacles (e.g., pipelines to carry the CO2), and high costs.

The second pillar of decarbonization is the electrification of end uses. There are many sectors currently using fossil fuel energy that can be converted to direct use of (green) electricity. These include battery electric vehicles (BEVs), heat pumps for residential and commercial buildings, electric cooking (e.g., induction and microwave stoves), and direct reduction of ores in metallurgy. These pathways of electrification seem more likely today than just a few years ago. Major automakers are now making significant commitments to electric vehicles, for example, with dates set for the phaseout of conventional internal combustion engine vehicles.

The third pillar is green synthetic fuels for economic sectors not easily electrified. In aviation transport, there is continuing debate about the feasibility of electrification. It seems increasingly likely that electrification will cover short-haul flights (e.g., under one hour) but that longer-haul flights will continue to require liquid fuels of high energy density. These synthetic fuels can be manufactured using green electricity. (See the companion article by Mara Prentiss.)

The fourth pillar is a smart power grid, built on big data, artificial intelligence, and the Internet of Things. The idea of a smart grid is a self-regulating system that can shift among multiple sources of power generation and multiple uses to provide reliable and low-cost systems operations despite the variability of renewable energy. On the supply side, a smart grid will integrate variable renewable energy from many sources in order to smooth the variability of power generation. A larger connected grid, covering more geography and more sources of variable renewable energy, will reduce variation of power. Various storage options, including batteries, pumped hydro, compressed air, and conversion of renewable energy into synthetic fuels, will help to stabilize the supply side. The demand side will also show flexibility by enabling smart meters to turn on and off electricity consumption of users depending on temporal needs, urgency, and shifts in market prices that reflect supply-demand conditions.

The fifth pillar is energy and materials efficiency to economize on the use of primary energy, and on the plastics, metals, cement, and other industrial materials that emit CO2 in their production and use. Improved materials and material flows, popularly known as “reduce, reuse, and recycle” or “circular economy,” can significantly improve energy and materials efficiency, reduce the process emissions of CO2 (such as in the manufacture of clinker for cement), and slash energy inputs needed for industrial processes.

Easier and Harder Sectors

Decarbonization of electric power will be relatively straightforward, though there remain important challenges to managing power grids that are fully dependent on renewable energy. Low-carbon power sources such as photovoltaics and wind have already come down dramatically in cost so that their levelized costs (that is, their long-term costs including the costs of capital investments) are already competitive with fossil fuels.

The biggest operational challenges arise from the intermittency of the renewables and their limited dispatchability (the relative inability of renewable-energy sources to ramp up and down quickly in response to market needs). There are two complementary solutions to intermittency. One is power storage, for example in grid-scale batteries, synthetic fuels (e.g., hydrogen), and systems such as pumped hydro, in which excess renewable energy is used to pump water into an uphill reservoir for later use in hydroelectric power generation. The other solution is geographical diversification of renewable-energy sources through a large interconnected grid. A more extended grid reduces the variability of power generation relative to the average load and therefore reduces the need for energy storage as a percentage of the average load. As for dispatchability, storage solutions such as pumped hydro and synthetic fuels (e.g., hydrogen) offer the necessary dispatchability.

We need to enter a sustained phase of global net negative CO2 emissions so that these concentrations gradually return to 350 ppm over the long term.

Some downstream users of fossil fuels will be easily electrified, while others will be difficult or impossible to electrify. Light-duty vehicles and urban delivery vans, for example, will almost certainly shift soon from internal combustion engines to zero-emission battery electric vehicles or hydrogen fuel cell vehicles. The hydrogen will have to be produced in a zero-emission manner, such as by hydrolysis using renewable energy or by fossil fuels combined with carbon capture and storage. Other transport modes—long-distance trucking, ocean shipping, and aviation—are “hard sectors” in that electrification is much less straightforward or out of reach. Onboard batteries are heavy and take up considerable volume needed for freight. Other solutions, such as synthetic green fuels or biofuels for aviation, hydrogen fuel cells for ocean shipping, and catenary lines for electric trucks along major highway routes, will be necessary.

The recent report by the Energy Transitions Commission, “Mission Possible: Reaching Net-Zero Carbon Emissions From Harder-to-Abate Sectors by Mid-Century,” and the FEEM-SDSN report, “Roadmap to 2050: Power, Industry, Transport and Buildings,” discuss the technology possibilities for the harder sectors.

Most new buildings will be relatively easy to electrify using electric heat pumps and overall improvements in insulation and ventilation. Older buildings that currently rely on fossil fuel heating will have to be retrofitted for electric heat pumps. Retrofitting will require a long national effort and will be moderately expensive. Major challenges remain in decarbonizing certain industrial sectors, including metallurgy, petrochemicals, cement, and some other heavy industries that intensively use fossil fuels for process heating and feedstocks. There will be no one-size-fits-all strategy. Certain kinds of process heating can be electrified; others not, at least currently. Certain feedstocks can be replaced by non-carbon-emitting materials; others not, at least currently.

A Timeline for Decarbonization

The essence of decarbonization is the replacement of today’s fossil fuel–using capital stock with a new zero-carbon capital stock. Coal-fired power plants need to be phased out and replaced by renewable-energy power generation. Internal combustion engine vehicles need to be phased out and replaced by electric vehicles. Boilers and furnaces in buildings need to be phased out and replaced by electric heat pumps. And so forth.

The least-cost solution in each case is to retire the existing capital at the end of its normal life and replace it with zero-carbon capital. Cars and trucks last 15 to 20 years; power plants 30 to 50 years; buildings 50 to 100 years; and so forth. This means that with the natural life span of vehicles, we would require 15 to 20 years from the first date at which all new vehicles brought to the market are zero-emission vehicles. The alternative strategy, which is more costly, is to scrap the existing capital stock early, for example by removing even new internal combustion engine vehicles from the road. Of course, if we factor in the costs of the worsening climate, the cost-benefit calculus changes.

Consider, for example, the challenge of decarbonizing the U.S. fleet of some 200 million light-duty vehicles. Suppose, as an illustration, that cars last for 20 years, and that ten million vehicles are currently retired each year and replaced with ten million newly produced vehicles. The industry’s production capacity is geared to ten million sales per year. In order to shift the U.S. automobile fleet to electric vehicles, the industry must be retooled.

Let us stipulate for purposes of illustration that converting the U.S. automotive industry to the production of ten million BEVs per year will require a decade, providing the time not only to retool existing production lines and to design the new vehicles, but also the time to build new supply chains for batteries and other components. As of 2030, all new U.S. vehicle production and sales will be electric. Between 2030 and 2050, the entire fleet of 200 million internal combustion vehicles will be phased out and replaced by electric ones.

Could this happen, instead, by 2040? That would require replacing 200 million vehicles during a ten-year period, 2030 to 2040. Annual production and sales of electric vehicles in the 2030s would have to average 20 million vehicles, twice the current industrial capacity. Yet after 2040, production and sales would fall for many years because of the young age of the BEV fleet. The production boom would be replaced by a bust. In the long run, production would revert to ten million per year on average. Moreover, the early conversion of the fleet would only reduce emissions to the extent that the U.S. power system also had been decarbonized and expanded by 2040 to accommodate the 200 million electric vehicles.

Perhaps the early replacement of internal combustion engine vehicles by 2040 could be accomplished, but the extraordinary costs of the early scrappage of existing vehicles, the massive rise in overall vehicle production to 20 million per year during the 2030s, and the subsequent closure of industrial capacity after 2040 would effectively require the nationalization of the automobile industry. And the emissions from the temporary boom of automobile production could easily overwhelm any emissions reductions achieved by the early scrappage of the internal combustion engine fleet.

This simple parable is meant to illustrate a point. We will need until 2050 to achieve full decarbonization. Even then, we will be incurring many extraordinary costs to meet the mid-century target, including the early closure of hundreds or even thousands of fossil fuel–based power plants. Yes, we should have started decarbonization in earnest in the 1990s, by adopting the Kyoto Protocol. Instead, it was spurned by the U.S. Senate. So here we are in 2020 with far too little time left for climate safety. Yet we must proceed.

Zero-carbon power generation can probably be achieved nationwide by 2040 to 2045. New York state has set 2040 and California has set 2045 as respective target dates. Given the older ages of most existing coal-fired power and many gas-fired plants, such a timeline would permit the natural retirement of most carbon-based power generation, with only a modest need for early closures. Market forces will also lead to some early closures, as the capital-inclusive costs of new renewable-power generation decline below the marginal operating costs of some existing thermal plants. The conversion of the automobile and trucking fleet will require most of the period to 2050. We should anticipate—and regulate—that as of 2030, all new sales of light-duty vehicles will be zero-emission vehicles, mostly battery electric vehicles. New buildings could become all-electric within the next few years, since the technologies to build all-electric heating and cooking systems are already at hand. The retrofitting of existing buildings, however, will take far more time, almost surely to 2050.

The Incremental Costs of Decarbonization

The best current estimates put the incremental cost of decarbonization at around 1 percent of GDP each year or perhaps even less. Decarbonization will neither break the budget nor massively spur the economy by itself. But yes, it can save the planet from environmental ruin.

The extra costs incurred to shift from fossil fuels to zero-carbon energy include the incremental costs of providing electricity with renewables rather than fossil fuels; of shifting to zero-emission vehicles; of buildings using green electricity for heating, ventilation, and cooking, rather than fossil fuels; and the incremental costs of decarbonizing several “hard” sectors, including aviation, ocean shipping, steelmaking, cement, and petrochemicals.

Smart meters turn electricity consumption on and off depending on the needs of users, and shifts in market prices that reflect supply and demand conditions.

The incremental costs also include all the complementary infrastructure needed to operate a zero-carbon energy system. For example, the U.S. will need additional grid transmission to connect high-quality renewable energy (Southwest solar energy, Midwest wind energy, Canadian hydropower, and offshore wind energy) with final users. New charging stations across the nation will be needed for electric vehicles. New catenary lines (overhead electric lines) may be added to interstate highway lanes for electric trucks. Extensive new investments in 5G capacity will be needed to manage smart grids. And so forth.

Several recent studies have nonetheless concluded that the overhaul of the energy system will not be large relative to the economy. My Columbia colleague Geoffrey Heal provided an especially insightful estimate of transition costs, showing that renewable energy plus storage can cut U.S. emissions by 80 percent by 2050 for less than 1 percent of GDP per year.[3] Another colleague, Jim Williams of the University of San Francisco, has similarly calculated that an 80 percent reduction of U.S. emissions by 2050 could be accomplished for around 0.8 percent of GDP per year.[4]  A recent study on global decarbonization by 2050 led by Christian Breyer at Lappeenranta University of Technology in Finland concludes that the levelized costs of a 100 percent renewable-energy system in 2050 will be less than the costs today (52 euro/MWh compared with 70 euro/MWh today). And a 2015 study by Alexander MacDonald and co-authors found that CO2 emissions from the U.S. electricity sector can be reduced by 80 percent relative to 1990 levels without any increase in the levelized cost of electricity. Moreover, the transition to renewable energy will create many more jobs than will be lost in the closure of the fossil fuel sector. (See the companion article by Harold Meyerson.)

A major ongoing study by the National Renewable Energy Laboratory (NREL) reportedly finds that a U.S. “super-grid” connecting high-quality renewable-energy resources with major population centers would cost around $80 billion in total, a mere 0.4 percent of GDP as a one-time investment, and would deliver economic benefits of at least twice that sum. There are fears that the NREL findings are being suppressed or delayed by the Trump administration.

I should underscore that most of the studies to date examine the incremental costs of 80 percent decarbonization rather than 100 percent decarbonization. It is likely true that the marginal costs of decarbonization will rise as we approach 100 percent. As one example, Jessika Trancik’s team at MIT has determined that the storage costs to back up 95 percent of an all-renewable power system would be roughly half of the costs to back up 100 percent of the system, since 100 percent backup requires vastly more storage to protect against an extremely rare shortfall of intermittent energy.

In summary, the gist of recent studies is that decarbonization is not hugely expensive as a proportion of the total economy. The estimates suggest that 80 percent decarbonization can be reached at a cost of 1 percent of GDP or less per year.  Complete decarbonization by 2050 could perhaps cost up to 2 percent of GDP per year, taking into account the higher marginal costs of decarbonizing the harder sectors, but could in fact end up being much less costly than 2 percent of GDP, and even below 1 percent of GDP.

Would it be worth the extra costs to accelerate U.S. decarbonization to 2040 rather than 2050, assuming that it would be technically feasible? The answer is no. U.S. CO2 emissions from energy in 2020 will be around 5.3 billion tons. If we compare a linear ramp-down to zero by 2050 and a faster linear ramp-down by 2040, the faster ramp-down would reduce U.S. cumulative emissions of CO2 by around 27 billion tons. That in turn would reduce the atmospheric concentration of CO2 by around 1.8 ppm, with reduced global warming on the order of 0.01 degrees as of 2100—in other words, negligible. The short-term effect on temperature would be even less. And we must remember that an accelerated decarbonization might not actually cut cumulative emissions as assumed by a steeper linear ramp-down because of the larger buildup of new industrial capacity (e.g., electric vehicle production) needed in the accelerated transition.

Even if the entire world were somehow to decarbonize on a linear ramp-down by 2040 rather than 2050, the reduction of global warming as of 2100 would be on the order of 0.1 degrees, with a smaller short-term effect. Yes, such a reduction in warming would definitely be beneficial; each 0.1 degree warming hurts. Yet the practical time needed to phase out the world’s existing fossil fuel capital stock, build massive new infrastructure, retool major global industries such as automotive production, and solve countless technological challenges, all while attending to the urgent sustainable-development needs of the more than six billion people in developing countries, argues overwhelmingly for a timeline to 2050 rather than 2040. Decarbonizing globally by 2050 will itself be a near-miracle, one that requires a global breakthrough in politics and policies starting imminently and carried forward for decades.

A National Policy Framework for Decarbonization

The national policy framework for decarbonization should aim at three overriding objectives: (1) the end of U.S. energy-based emissions of CO2 by 2050; (2) a low-cost pathway for the transition; and (3) a fair transition to address vulnerable groups and regions, including workers in fossil fuel–related sectors who will lose their jobs in the transition; regions currently dependent on fossil fuel production; and low-income households.

The Green New Deal should involve all levels of government, including state and local, rather than put all responsibility at the federal level.

An effective plan should involve distinct strategies for each of the four major energy sectors: power generation, transport, buildings, and industry, with special attention paid to key subsectors, such as light-duty vehicles, intercity trucking, aviation, and ocean shipping. The plan should distinguish between the easy and hard sectors, including R&D for the hard sectors. The plan should address several dimensions of public policy, including:

  • Timelines for phasing out fossil fuel–related capital stocks
  • Allocations of responsibilities among federal, state, and local governments
  • Carbon pricing, including carbon taxes, feed-in tariffs, and renewable-energy auctions
  • R&D outlays for the hard technologies
  • Public investments in interstate transmission, charging stations, catenary lines, government fleets and buildings, and other public infrastructure
  • Financing for a fair transition (job retraining, income supplements, regional development)
  • Public financing for building retrofits
  • U.S. international leadership within the Paris Agreement
  • There are two heatedly debated questions that dominate the policy debate. The first is over the use of carbon pricing, especially carbon taxation. The second involves the allocation of responsibilities across levels of government.

Carbon regulation and pricing. There are two basic policy approaches to pollution control that also apply to decarbonization: (1) quantity regulation and (2) corrective pricing. Under quantity regulation, the government sets quantitative limits on pollution (either in absolute amounts or per unit of output) and timelines to abide by the limits. Under corrective pricing, the government taxes the pollutant and/or subsidizes the green alternatives. In the case of decarbonization, both quantity regulation and corrective pricing will be needed, but the relative balance between the two should vary according to the sector of the economy.

Quantity regulation is the preferred option when the technological alternatives are well known, easy to monitor, and already cost-effective. Corrective pricing makes sense when the alternatives are uncertain, difficult to monitor, and with highly varying cost-effectiveness depending on the context. In those cases, a corrective price (e.g., a tax on the pollutant) allows markets to search for low-cost solutions and promote innovations.

The most important international pollution abatement to date has been the highly successful global phaseout of ozone-depleting chlorofluorocarbons (CFCs). This phaseout was governed by the 1987 Montreal Protocol and subsequent amendments. In this case, the pollutant (CFCs) had a known and cost-effective alternative, the hydrofluorocarbons (HFCs). The Montreal Protocol thereby relied on quantity regulation. All signatory governments to the Montreal Protocol agreed to timelines for the phaseout of CFCs. The U.S. also deployed a bit of corrective pricing mainly in the form of import levies to block the importation of CFCs while U.S. production of CFCs was being curtailed. Another notable success story of quantity regulation is the removal of lead from gasoline, a process mandated by federal law rather than carried out by corrective pricing.

In the case of decarbonization, quantity regulation has been used for power plants both at the federal level (such as President Barack Obama’s Clean Power Plan to phase out coal-fired power plants) and at the state level (for example, in state renewable portfolio standards that require utilities within the state to phase out fossil fuel–based power generation on a timeline). Quantity regulations have also been used to raise the fuel efficiency of the U.S. vehicle fleet under Corporate Average Fuel Economy (CAFE) standards. Corrective pricing, by contrast, has also been used in a variety of ways to induce profit-oriented utilities to choose zero-carbon power solutions. These include tradable emissions permits, where the market price of the permit creates the incentive to shift technologies; feed-in tariffs, whereby utilities are given a bonus per unit of low-cost energy; and reverse auctions for the supply of zero-carbon power (the low bidder wins the supply contract). No state has yet adopted a carbon tax, but it is under consideration in several states.

I would suggest that quantity regulations for decarbonization will be most effective for four sectors: power generation, light-duty vehicles, heavy-duty vehicles, and buildings. For these sectors, the federal government should implement a timeline for phasing out the fossil fuel–based capital stock. For example, the federal government might mandate that all new power generation capacity in the U.S. should be zero-carbon after a certain date, say 2022, and that remaining fossil fuel–based power generation should be phased out by a certain date, say 2040. Similarly, the federal government should mandate that all new light-duty vehicles sold from 2030 onward must be zero-emission vehicles, and that internal combustion light-duty vehicles must be phased out no later than 2050. A somewhat extended timeline might be given for trucks, e.g., all new trucks must be zero-emitting as of 2035. For buildings, a federal building code for new construction might mandate zero-emission buildings (electric heating, ventilation, cooking) from 2030 onward, and retrofits on existing buildings by 2050. Such quantity regulations can be supplemented by a gradually rising carbon tax that will accelerate the transition process and ensure the retirement of old carbon-emitting capital.

Corrective pricing makes more sense as a primary instrument for sectors in which the best alternative technologies and incremental costs are still highly uncertain. Thus, we should consider a gradually rising carbon tax on aviation, ocean shipping, steelmaking, cement, and petrochemicals. Since the capital stock in these sectors rolls over gradually, the carbon pricing should be introduced with enough lead time to enable companies to make changes in planned future investments. Thus, the carbon tax on aviation, ocean shipping, and other sectors might be introduced into law but begin only as of 2025 or 2030. This will avoid an arbitrary rise in taxes on current capital, but will incentivize firms and industrial sectors to replace that capital in the future.

The Green New Deal should avoid the social eruptions that have recently hit France, Chile, and elsewhere where governments introduced a new levy on transport that essentially taxed the existing capital (e.g., automobile use), often in a regressive manner, without any real opportunity for those hit by the levies to change their behavior in the short term. Carbon taxes should be phased in gradually, and focus on future decisions, rather than tax existing carbon-using capital that only serves to redistribute income regressively without affecting short-term emissions to any significant extent. (See the companion article by James Boyce.)

Federal, state, and local responsibilities. The regulation of the U.S. energy system is shared among the federal, state, and local governments. The Green New Deal should tap into this intergovernmental structure rather than put all responsibility at the federal level. Bypassing the states would create huge inefficiencies, political backlashes, and serious obstacles for ongoing state-level regulation of the utilities.

The federal government should lead on nine dimensions of the Green New Deal:

  • Federal timeline and standards for electric-utility decarbonization
  • Federal timeline and standards for zero-emission vehicles
  • Federal standards for electrification of buildings
  • Federal financing for building retrofits (e.g., as grants to states)
  • Federal infrastructure, including an expanded interstate energy grid, interstate highway charging stations, interstate highway catenary lines for trucking, federal zero-emission fleets and buildings
  • Federal R&D program, including energy storage technologies, smart grid, aviation, ocean shipping, smart transport systems, etc.
  • Federal green bank for utility sector financing
  • Fair-transition programs for vulnerable individuals and regions
  • U.S. leadership under the Paris Agreement

State renewable portfolio standards. Even with a federal mandate on all utilities to decarbonize by 2050, the states will still have responsibilities for regulating the power utilities within each state, including the licensing of sites, the regulation of transmission and distribution lines, system safety and reliability, environmental protections, and of course electricity pricing. Each state should be directed to adopt and implement a renewable portfolio standard (RPS) program that is consistent with the federal mandate to decarbonize by 2050.

To defeat Big Oil, advocates need a specific plan that demonstrates how renewable-energy alternatives will benefit every part of the country.

The Lawrence Berkeley National Laboratory (LBNL) reports that 29 states have RPS requirements to raise the share of renewable energy in overall retail sales. Some non-RPS states, such as Indiana, North Dakota, and Wyoming, have also increased their renewable-energy capacity to serve RPS demands in nearby states. The 29 RPS programs cover 56 percent of total U.S. retail electricity sales. Three states have recently set dates for 100 percent zero-carbon power in their RPS: California (2045), New Mexico (2045), and New York (2040). In total, ten states plus the District of Columbia and Puerto Rico have set zero-by-2050 targets into law or executive order: California (2045), Hawaii (2045), Maine (2050), Minnesota (2050), Nevada (2050), New Jersey (2050), New Mexico (2045), New York (2040), Washington (2045), and Wisconsin (2050).

The RPS requirements provide a very important institutional mechanism for implementing federal zero-emission power standards. RPS programs to date have mandated 45 percent of the increased delivery of renewable-power generation since 2000. In 2018, 37 percent of solar-capacity additions and 19 percent of wind additions were to meet RPS requirements.

Some of these renewable-energy investments would have happened without RPS, but RPS surely played a significant role, not only in directing the utilities toward zero-carbon energy, but supporting them to do so in an efficient manner consistent with overall objectives of power plant siting, low costs to consumers, system reliability, and other objectives. At the same time, the current power crisis of California’s PG&E points to the reality of significant underinvestments in systems infrastructure when private-sector utilities pursue short-term profits at the expense of long-term standards.

Financing Decarbonization

There are two basic ways to finance the energy transition. The first is through market transactions. The government mandates zero-carbon technology, and private-sector producers invest and sell goods and services to the public. For example, utilities are required to invest in renewables, and they recoup their costs by their sales to households and businesses. Automobile producers are mandated to sell zero-emission vehicles, and they recoup their costs through vehicle sales. In this case, the direct role of government financing is very limited. The second is through direct government provision of zero-carbon energy. In this case, the federal or state governments would directly own and operate power generation facilities and transmission and distribution grids. They would recoup some or all of their costs through market sales by public enterprises, or alternatively finance their operations through general government revenues.

There will be a mix of the two. Outlays for certain public infrastructure will require government financing, for example the expansion of the interstate transmission grid for renewable energy. As a natural monopoly, the expanded transmission grid would be unsuitable for private ownership. Another case will be the federal outlays for a fair energy transition, which by design will not recoup a flow of earnings. Federal support for building retrofits will also likely be grants rather than loans.

Most of the transition costs, therefore, will be borne not by the federal and state governments but by energy users: household and commercial buyers of electricity, car owners, and others. Since the zero-emission technologies are already close to the costs of fossil fuel–based technologies, there is no reason to anticipate any major hardships on energy users. As noted earlier, the total national costs might come to around 1 to 2 percent of national income per year, roughly $200 to 400 billion, with most of that borne by the private sector. There are of course many technological uncertainties, and the total costs could end up higher or lower. Indeed, as the costs of clean energy continue to fall and as conservation measures improve (improved building insulation, more efficient appliances), many users could experience net savings on energy bills.

Total federal outlays could reach up to $400 billion per year, or roughly 2 percent of GDP, if we factor in the total costs of new infrastructure spending on roads, fast rail, protected coasts and waterways, restored bridges, expanded transmission grids, and other infrastructure that is needed in any event given the decrepit state of U.S. infrastructure. This added spending is not the incremental cost of decarbonization per se, but the cost of restoring and modernizing America’s overall infrastructure, a worthy and much-needed objective. Research and development outlays should also rise significantly. We may estimate that research outlays for renewable energy should be of roughly the same scale as the biomedical research budget of the National Institutes of Health, roughly $30 billion per year.

It is notable that Senator Bernie Sanders has presented a multiyear Green New Deal plan with a headline price tag of $16 trillion. The main reason for this enormous sum is Sanders’s call for the federal government to build and operate the new renewable-energy system, essentially displacing the existing utility industry in the process. In the plan that I have sketched, I assume that the utility sector, not the federal government, will bear the investment costs. Sanders also includes generous outlays for retrofitting buildings and for a highly accelerated replacement of the existing vehicle fleet. My cost estimates, and those of the studies I have quoted, are based on decarbonization by 2050 in line with the IPCC 1.5 degree scenario.

Getting Started in 2020 for the Next Presidency

Proponents of the Green New Deal will need to do their homework if they are to triumph in Congress over the Big Oil lobby. Public opinion is in favor of climate action, but that doesn’t matter in Congress. What counts is who pays the campaign bills. Unfortunately, the answer is Big Oil. In the 2016 federal election cycle, the oil and gas industry gave $56 million in campaign financing to Republican candidates compared with just $8 million to Democratic candidates. In the 2018 election cycle, the Republicans received $43 million compared with just $6 million for the Democrats.

To beat Big Oil, the Green New Deal advocates need a specific plan: one that demonstrates how decarbonization will work, and how it will benefit every part of the country. With such a plan, Green New Deal advocates will be able to turn public opinion into votes in Congress. Every congressman, indeed every voter, should have a specific idea of what the Green New Deal would mean for their district and region. Without such a plan, climate activists will continue to win the battle over climate science but still lose the war over climate action.

To date, advocates of decarbonization have tended to focus their advocacy on pricing policies (cap-and-trade, carbon tax, feed-in tariff, etc.). Yet such pricing proposals only serve to raise suspicions and opposition to new taxes. Such policy proposals fail to win the hearts and minds of the general public, and the public fails to press the Congress for action.

A historical analogy may be useful. When President Dwight Eisenhower first proposed the Interstate Highway program in 1953, conservatives in Congress were reluctant to support the program. The congressmen could not see what was in it for them and the proposal was stalemated. Then, in September 1955, the Bureau of Public Roads of the Department of Commerce put out a book of maps showing the “general location” of the proposed highway system in dozens of major metropolitan areas. Suddenly, congressmen could see the benefits of a new highway system passing through their district. The vividness of the proposed plan helped to carry the day in Congress. (See the article by Robert Paaswell.)

The good news is that the specifics of a Green New Deal to decarbonize the energy system are finally coming into focus. We now understand clearly the key pillars of decarbonization. We now understand that today’s technologies can get most of the transition accomplished, and that even the “hard” sectors can be decarbonized after a bit more R&D. And the truly great news is that all of this can be achieved at very low cost. Decarbonization to save the planet is actually the greatest bargain of our time.


[1] James Hansen et al. “Young People’s Burden: Requirement of Negative CO2 Emissions,” Earth System Dynamics 8, 577–616, 2017.

[2] There is, in fact, a sixth pillar that will be needed in a comprehensive national climate policy: sustainable land use, mainly involving the agriculture sector. Agriculture contributes CO2 from deforestation and land degradation, and also non-CO2 greenhouse gas emissions, including methane released by ruminant animals (especially cattle) and flooded rice paddy, and nitrous oxide emissions from nitrogen-based fertilizers. Agriculture must be part of an integrated strategy, but is beyond the scope of this article.

[3] Geoffrey Heal, “Reflections—What Would It Take to Reduce U.S. Greenhouse Gas Emissions 80 Percent by 2050?” Review of Environmental Economics and Policy, Volume 11, Issue 2, Summer 2017, 319–335.

[4]Jim Williams, “Decarbonizing the United States: Challenges of Scale, Scope, and Rate” (lecture, National Academy of Sciences) July 22, 2019.