The Green New Deal is Alive and Well
The climate and health care bill signed into law in August has a familiar ring. It is remarkably green-new-dealish. The Green New Deal (GND), which was unfairly and incorrectly characterized by some as “socialist” and “extreme” when introduced in 2019, is taking on a new life because it really does make good policy sense. First, the new bill’s name—“Inflation Reduction Act of 2022”—signals inextricable connections between the environment and the economy. Senator Manchin had been reluctant to support a climate bill because of perceived inflationary risks, but he was convinced by Larry Sommers and other economists that the proposed climate change actions are actually deflationary. Solar and wind energy are already cheaper than coal and on par or cheaper than gas and oil, and incentives in this bill will accelerate that trend, saving consumers money. The tax credits to lower and middle-income families for going electric will help overcome the initial investment costs of electric vehicles and electric heat pumps for heating and cooling, thus enabling consumers to reap the benefits of their lower operating costs.
As I discuss in my new book, Science for a Green New Deal: Connecting Climate, Economics, and Social Justice, another GND attribute is an explicit environmental justice focus. Over $60 billion is dedicated to low-income communities and communities of color that are disproportionately vulnerable to the environmental and public health effects of climate change. Urban poor suffer from the heat island effects of excessive asphalt and lack of shade. Rural poor often live in areas of high flooding risk and near emissions of oil refineries. Electric cars will not only reduce carbon emissions, but also nitrogen oxides that disproportionately affect the respiratory health of low-income communities located near busy roads and highways. The bill devotes $27 billion to a “green bank” to deploy clean energy projects in low-income communities that will provide relief from the heat, dirty air, and high utility bills.
The bill is an exemplar of well-planned policy—another tenet of the GND. Industrial policy, such as promoting the manufacturing of key products on American soil through tax incentives and subsidies, is nothing new, but policies that integrate industry, energy, and the environment are novel. For example, it will promote critical mineral processing in America, which is essential for both the renewables industry and for national security by making us less dependent on China and other countries for those minerals. It also promotes longer-term research and development on technologies that are not yet economical, such as low-carbon technologies for steel and cement production, aviation, and long-distance shipping.
Similarly, credits for carbon-capture-and-storage (CCS) will spur further technological development needed for some stubborn uses of fossil fuels that still cannot be avoided. CCS should not be used as a delay tactic or a substitute for decarbonizing as soon as possible, but it may be a key technology for countering the last 10% or so of mid-century fossil fuel emissions. CCS may eventually help reverse the growth of atmospheric CO2 so that future generations might enjoy climates of pre-industrial times.
Like the GND, the bill is cross-sectoral. It devotes $20 billion to climate-friendly agriculture and forestry and coastal restoration, where additional carbon mitigation can be found and where climate adaptation is needed. This, too, can be anti-inflationary in the long term by conferring greater resilience of our food production systems, thus buffering price shocks from climate-related crop failures. Reductions in emissions of methane, a potent greenhouse gas, will be achieved in both the energy sector by penalizing oil gas companies for excess methane emissions and the livestock sector by supporting R&D on feed supplements and other approaches to reducing methane in cow burbs.
The bill is funded by an increase in taxes on corporate income and on stock buy-backs. This feature is a baby step towards addressing the growing wealth disparity between the ultra-rich and the poor and middle classes and is another anti-inflationary feature. Enough will be raised to fund both the energy programs and significant federal deficit reduction. The wealthy have the means to protect themselves from many of the impacts of climate change, and the bill could have gone further to tap them to pay their fair share for climate change mitigation for everyone. A new generation of data-driven economists has shown that investing in the health and well-being of middle and lower economic classes adds more to economic prosperity than does wealth at the top.
Finally, the bill responds to the recent Supreme Court decision that Congress had not delegated authority to the Environmental Protection Agency specifically to regulate greenhouse gas emissions. That specific authority is now written into the law, giving back to EPA the climate mitigation authority that the Supreme Court had effectively stripped from it.
The bill doesn’t contain the Build Back Better proposed mechanism to reward electric utilities that ramp up low-carbon energy and penalize those that don’t. We will need additional actions in due course, but this legislation marks a turning point for climate policy that will spur on additional innovation and build momentum toward a decarbonized economy that is also prosperous and just. It is truly transformational as a green deal and a new deal for the 21st century.