The Green New Deal: Cutting off Our Nose to Spite the Market

The vast majority of green initiatives in the past decades seem to work within the traditional U.S. market economy - encouraging consumers to pursue sustainable living, improving the corporations’ practice on sustainability, and creating external regulation and stimulus from the federal and state governments. The adherence to a free market ideology may be set to weaken with the recently introduced Green New Deal.

Proposed by Senator Ed Markey of Massachusetts and Representative Alexandria Ocasio-Cortez of New York, the massive initiative would essentially mobilize the U.S. economy to a degree unseen since World War II, just like the bill’s referential namesake, the New Deal. Its goal is to stem the increase in carbon emissions by 2030, primarily through investment in renewable energy, public transit, and other efforts over a ten-year period.

Although this may appear all well and good, (or, for the more conservatively minded, horrific) according to talking points unintentionally released by Ocasio-Cortez’s office, the plan would not include three potentially important initiatives: nuclear power, the use of fossil fuel plants that capture and store their emissions, and market-based solutions, such as cap-and-trade and a carbon tax.

Perhaps it is the time for the federal government to take a more aggressive stance on climate change, moving beyond the neoconservative market fundamentalism and instead taking the reigns directly on future efforts. After all, the last time a New Deal was proposed, mobilization by the federal government was essential to fighting threats from abroad. It would be rare to find an economist or politician who would propose market incentives in order to fight threats as obvious as terrorist organizations or a hostile nation. Why, then, would we not do the same for a threat as massive as climate change?

And yet the exclusion of any market-based solutions will not only breed political animus, but also undermine the effort itself. The carbon pricing model by William D. Nordhaus, a Yale economist and co-recipient of the 2018 Nobel Memorial Prize in Economic Sciences, is now used by municipalities in Canada and South Korea. He admits that in the European Union, the cap-and-trade model failed largely because of the system’s reliance on future emission predictions. In an interview with the New York Times, Nordhaus said that “With the E.U., their projected carbon emissions were high, but the actual carbon emissions were low, and the carbon price fell drastically, from $30 to $40 per ton down to single digits. So the price was so low it did not have an effect in lowering emissions. It was flawed design. If the models had predicted too few emissions, and the price had gone to $1,000 per ton, we would have had a different problem.” A carbon tax on the other hand would simply raise the price of specific fossil fuels, thus reducing the quantity consumed and hopefully lowering emissions, a model not often used in the U.S. The one exception is the different state-level gasoline taxes, which has historically been vilified by consumers and politicians alike.

In British Columbia, a new distributional model has taken form. If the tax raises electricity prices by $100, then consumers are compensated with a $100 credit in other areas, even if it is a directly correlated good like internet usage rates. Under this plan, the tax revenue could even be used to fund a universal basic income, a favorite of Representative Ocasio-Cortez.

The problem, then, seems to not be one of economic feasibility but political rancor. Politicians including President Obama have avoided endorsing mobilization and carbon pricing for fear of being branded as socialists and statists. And now, it is likely that some of the Blue Wave Democrats have fled to the opposite side of the political spectrum, vilifying potential market solutions for fear of accusations of complicity, as well as technologies that could complement renewables due only to bad press.

Tackling climate change and other environmental hurdles will require spanning both command-and-control efforts not seen since Roosevelt with market solutions still in the experimental phase. Moving forward in a primarily political bend will only cripple these efforts. Ocasio-Cortez, along with all her Democrat Republican colleagues, would do well to listen to the words of John Kenneth Galbraith:

"I react pragmatically. Where the market works, I'm for that. Where the government is necessary, I'm for that. I'm deeply suspicious of somebody who says, 'I'm in favor of privatization,' or, 'I'm deeply in favor of public ownership.' I'm in favor of whatever works in the particular case." — C-SPAN, November 13, 1994

Edited by Jenna Yun

References:

https://www.nytimes.com/2019/02/23/opinion/green-new-deal-climate-democrats.html

https://www.nytimes.com/2018/10/13/climate/nordhaus-carbon-tax-interview.html