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Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery

Robert Stavins's picture
Professor & Director John F. Kennedy School of Government, Harvard University

Robert N. Stavins is the A.J. Meyer Professor of Energy & Economic Development, Director of Graduate Studies for the Doctoral Programs in Public Policy and in Political Economy and...

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  • Sep 13, 2020
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In our most recent (September 8th) webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA), I had the pleasure of chatting with Joseph Stiglitz, University Professor at Columbia University.  This webinar series features leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government.  A video recording and transcript of the webinar are available here.

In this case, my guest has had his feet planted firmly in more than one of those realms.  In addition to being a long-time faculty member at Columbia, Joe Stiglitz is Co-Chair of the High-Level Expert Group on the Measurement of Economic Performance and Social Progress at the OECD, and Chief Economist of the Roosevelt Institute.  Among the many positions he has held, he was a Member and then Chairman of the Council of Economic Advisers in the Clinton administration, and subsequently Senior Vice President and Chief Economist of the World Bank.

He received the John Bates Clark Medal from the American Economic Association in 1979, and the Nobel Prize in Economics in 2001.  In addition, he is Fellow of the National Academy of Sciences, the American Academy of Arts and Sciences, the American Philosophical Society, and the Econometric Society.

I first met Joe in 1993 when he was a Member of President Clinton’s CEA, and then again on a long flight to Seoul, Korea, when we were both attending the initial meeting of the Second Assessment Report of the Intergovernmental Panel on Climate Change.

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In our wide-ranging conversation, Joe Stiglitz shares his thoughts on carbon pricing, post-pandemic economic recovery, green economy transition, and much more.

Stiglitz explains that he favors a multi-faceted strategy to address climate change and to spur the transition to a green economy – including public investments, research and development, regulations, and carbon pricing. Such a “carbon package,” he says, can serve as a long-term economic stimulus because it will encourage companies to retrofit their operations, thereby spurring private investment and innovation. “And that’s the sense in which it will be a growth story. It will actually make for a more dynamic economy.” 

The economic impacts of COVID-19 may have temporarily diverted resources away from climate change efforts, Stiglitz remarks, but the post-pandemic period will bring tremendous opportunities to integrate green policies into economic recovery plans in the United States and elsewhere. “The pandemic has brought to light some of the real weaknesses in our economy. It has certainly made us more aware that we need to be better prepared for the risks that we face. One of those risks was the pandemic that we hadn’t thought about, and the other one is something we know about, which is climate risk,” he says.

Discussing public investments moving forward, Stiglitz remarks, “From my perspective, we as citizens have the right to make sure that that money serves a dual purpose – not only the purpose of bringing the economy back, [but] back in a way that is more consistent with the vision that we want of the post-pandemic economy and society. And that means a more equal society, I hope, a more knowledge-based society, and a much greener economy.”

He highlights two examples of national recovery plans that include green elements – in France, where the Air France rescue package includes provisions that the airline reduce its carbon footprint; and in New Zealand, where unemployed and underemployed citizens were hired to improve public parks, which serve as popular tourist destinations. And he cites the European Union’s “Green Deal” as an example of a multilateral effort to hasten the transition to a green economy, and he likens it to a wartime effort to address a visceral threat.

“What we are talking about here is heavy mobilization of resources,” he says. “Sometimes I use the metaphor of a Green New Deal wartime mobilization. The difference is that you see your enemy right in front of you in war. The effects of climate change we are seeing right in front of us – in the fires, the hurricanes, the floods, but some people are not seeing it as clearly as we would see a military attack.”

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When we are half of the way through the one-hour conversation, I pose some questions submitted by members of the virtual audience, on issues ranging from the challenges facing developing countries to the economic capacity necessary to move the needle on climate change. 

When asked what approach he would advocate to achieve widespread policy support for achieving net CO2 emissions reductions by the year 2040, Stiglitz remarks that, “I think that as a recognition that we all share the planet and carbon molecules don’t carry passports, that we’re in this together. There is a shared concern. Hopefully that will be enough to enable people to come to agreement on what a fair sharing of the burden is.”

Beyond this, Stiglitz explains that there is plenty that individuals can do to help in the fight against climate change.  “We all have multiple roles in our society. We are consumers. We are workers. We are citizens. As citizens, we have an important role in advocacy, in helping change the political process to help deal with carbon and the green transition. The only way these problems will be solved is when we have proper public policy.”

“As consumers, I think we also have roles, moving more towards greener housing, greener eating, greener transportation. We make lots of decisions, as individuals, we do savings, and we could put our money into portfolios that are greener. We can express our values through how we allocate our portfolios.”

“As workers, I think it’s important to articulate to the extent that we can, and in some firms there’s a greater openness than others, that we ought to be thinking of moving towards greener. I would argue it’s better for the companies…if they’re ready for the green transition,” he states. “I think there are lots of individual actions, and if we’re going to move our society, it will take lots of these adding up together to succeed.”

All of this and more can be heard and seen at this website.  I hope you will check it out.

Previous webinar in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition.”

The next HPCA Conversation on Climate Change and Energy Policy is scheduled for October 19th with guest Joseph Aldy, Professor of the Practice of Public Policy, Harvard Kennedy School.  Please register in advance for this event on the HPCA website.

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