Find a lot to like about the Senate climate agreement

Gazet: There are plenty of incentives aimed at consumers in the legislation, with tax credits for energy efficiency and electric vehicles. Does it take a largely bottom-up approach or is it more balanced than that?

pregnant: I think it is more balanced. It is bottom up and top down. I’ve always believed that all-encompassing programs that tackle anything important – and difficult – should be a combination of bottom-up and top-down. This seems to me like a good balance. There were important things missing that were in other actions the Biden administration was trying to get past, but there were also some not so good items that were dropped. I’m not claiming this is perfect legislation, but it’s a lot more than we thought we’d get.

Gazet: Are there details you particularly like? May it have ripple effects?

pregnant: Total energy and climate, $385 billion, is awesome. Clean manufacturing tax credits is a very productive approach. Tax breaks for consumers to buy electric cars and energy efficiency improvements too. We know this works. The real name of the game in controlling emissions is making clean choices more economically attractive than dirty choices. Simply. So any action that could contribute to creating or expanding the economic advantage of using clean and efficient technologies is a smart thing to do, and there’s a lot of that here.

There are also some details, such as very large incentives for companies to reduce methane emissions, which are a big problem. Some measures that focus on balancing economic costs are also very good. There is always an emphasis on how much it will cost to have cleaner options faster, but there is almost no discussion of how much money these measures will ultimately save the economy by reducing the damage from climate change. I wish there was more attention paid to the economic benefits of taking these steps. The late economics professor Dale Jorgensen, who recently passed away, was a big supporter of the proposition that doing what we need to do to tackle climate change will ultimately be an economic benefit, not a cost.

Gazet: Given the cost, will we eventually reach a tipping point after which renewables become cheap enough to deploy on their own, as natural gas did when it weakened coal? Could this legislation lead us to that tipping point?

pregnant: In some ways, we’re already at that point. It is now cheaper to generate electricity from solar photovoltaics and from wind energy in many places than from coal. In some places it is cheaper than generating electricity with natural gas. This is a very important driver. One of the challenges is that some of the technologies we need to adopt if we want to cut emissions as much as we need to are economically more complex. I’m thinking of carbon capture, sequestration, and use, for example.

Some environmentalists hate these options, saying they are just an extra lease of life for fossil fuels. But in a world that still depends almost 80 percent of its primary energy on coal, oil and natural gas, we have to realize that there will be a lot of fossil fuels burning in the coming years. What we need to do, given the urgency of challenging climate change, is to make it possible to burn some of this fossil fuel in ways that do not release the resulting carbon dioxide into the atmosphere. But carbon capture and sequestration in geological formations is intrinsically expensive, and we will only do so if it is made more economical with government support or regulations. This is another good feature of this new legislation: it would provide a boost to carbon capture and sequestration subsidies.

Gazet: Can supporting carbon capture and sequestration tell oil companies that they have a place in the carbon-neutral economy of the future and get them involved, or is there little chance they will do anything other than fight that tooth and nail?

pregnant: The situation has changed with the major oil and gas companies. Some of them are now very progressive in their approach to this problem. For example, BP has completely restructured its business plan and aims to make significant reductions in its operations’ emissions, and ultimately the emissions for which it is responsible. I’m pretty sure they’re serious about it. A number of other major oil and gas companies are moving in this direction. I’ve been saying for decades that we’re not going to solve the problem of climate change on the corpses of private sector companies. We will solve the problem by finding ways to engage those companies on a path toward a more sustainable energy system. These people can also do arithmetic – in fact they are very good at it. They can read the data, and the data on climate change shows it’s real, it’s a killer, it’s here. And if we are to at least minimize the worst consequences of climate change, there must be a much larger shift than oil and gas companies have been willing to admit until recently. They now admit it and are trying to figure out how to do it. We must push them forward.

Gazet: There are tax credits to encourage energy production, including for large solar and wind power plants. Does the legislation do anything to encourage the transmission lines needed to get energy from places where the wind blows and the sun shines to the big cities?

pregnant: The biggest problem with sending is allowing. It is incredibly complicated to build a transmission line anywhere due to the number of permits required and the ability of any of these permit grantors to refuse and block the project. There is language in this legislation about speeding up and simplifying permitting processes, and that will be important if it works. But it is very difficult to solve this problem because people love due process and review at different levels. This makes it very difficult to solve the transmission problem. Clearly, the key to a higher proportion of renewable energy in our national mix is ​​the ability to build expanded transmission networks to get energy from where it’s economically generated to where it’s being consumed the most. We really have to master the challenges of locating the transmission in this country, or we’re overcooked.

Gazet: What is left? How do we get the additional 10 percent of emissions reductions that Biden wants?

pregnant: The single most important thing left out – under current political conditions, there was no way to get it done – was to put a price on carbon emissions across the board. This could be done either through a carbon tax or through a cap-and-trade approach, as was initially tried in the Waxman-Markey bill that failed at the start of the Obama administration. Economists from across the political spectrum, conservative and progressive, will tell you that the single most important and effective thing we can do to reduce greenhouse gas emissions is to set a price for carbon emissions and allow the market to figure out the cheapest way to get them. Done.

In the Obama administration, we made calculations that if we could tax $30 per ton on carbon dioxide emissions in 2015, the reductions by 2025 would have been 32 to 34 percent instead of the target of 26 to 28 percent that We adopted it. Based on measures that did not include a carbon tax or equivalent. This is a big difference from a very low carbon tax. If we had a carbon tax of $75 a ton or $100 a ton, that would be transformative. You can deduct money for poor and middle families. You can spend some money to reduce other taxes. The late Dale Jorgenson showed that if you had a carbon tax and if you offset its economic impact by lowering capital gains and income taxes, the economy would be better off 20 years after a carbon tax than without it. It is a very old economic principle that taxing “bads” is more socially effective than taxing “goods”. Capital gains and income are good and emissions are bad. If we tax emissions rather than income and make it revenue-neutral in general, as Jorgensen pointed out two or more decades ago, the economy comes out better.

Gazet: The strength of this versus the targeted approach seems to be that the tax involves the economy as a whole, so it gains efficiencies in every nook and cranny.

pregnant: Ingenuity stands out in every nook and cranny. This is her beauty.

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