The Green New Deal is Expensive but Important


The Green New Deal’s promise of a 10-year transition is expensive and unrealistic. But it has changed the political discourse on climate change for the better.

Analysis by Mario Viola and Jeppe Damberg


Introduced on February 7th, 2019, House Resolution 109, titled “Recognizing the duty of the Federal Government to create a Green New Deal”, sparked lively debate due to the unprecedented nature of its proposal. In a clear allusion to Franklin D. Roosevelt’s New Deal in response to the Great Depression, the Green New Deal was an economic stimulus package to address climate change and economic inequality proposed by congresswoman Alexandria Ocasio-Cortez and 89 cosponsors. Yet, the Green New Deal’s aim of killing two birds with one stone received both criticism and praise for its sweeping ambition. American Economist Paul Krugman has called it “reasonable” while others have criticized it for being too expensive and for its neglect of a carbon tax. Where lies the truth? As our beloved Political Science professor Emiliano Grossmann would have said: “as always, somewhere in between”.

What’s in the Green New Deal? The nonbinding resolution called for a “10-year national mobilization” which primary goals would be [1];

  • “Guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States.”
  • “Providing all people of the United States with – (i) high-quality health care; (ii) affordable, safe, and adequate housing; (iii) economic security; and (iv) access to clean water, clean air, healthy and affordable food, and nature.”
  • “Providing resources, training, and high-quality education, including higher education, to all people of the United States.”
  • “Meeting 100 percent of the power demand in the United States through clean, renewable, and zero-emission energy sources.”
  • “Repairing and upgrading the infrastructure in the United States, including . . . by eliminating pollution and greenhouse gas emissions as much as technologically feasible.”
  • “Building or upgrading to energy-efficient, distributed, and ‘smart’ power grids, and working to ensure affordable access to electricity.”
  • “Upgrading all existing buildings in the United States and building new buildings to achieve maximal energy efficiency, water efficiency, safety, affordability, comfort, and durability, including through electrification.”
  • “Overhauling transportation systems in the United States to eliminate pollution and greenhouse gas emissions from the transportation sector as much as is technologically feasible, including through investment in – (i) zero-emission vehicle infrastructure and manufacturing; (ii) clean, affordable, and accessible public transportation; and (iii) high-speed rail.”
  • “Spurring massive growth in clean manufacturing in the United States and removing pollution and greenhouse gas emissions from manufacturing and industry as much as is technologically feasible.”
  • “Working collaboratively with farmers and ranchers in the United States to eliminate pollution and greenhouse gas emissions from the agricultural sector as much as is technologically feasible.”

With these goals, the G.N.D aims to transition the United States to a 100% renewable economy through investment into electric cars and other infrastructure as well as address poverty by increasing state-sponsored jobs, especially in “vulnerable communities” which included “the poor and disadvantaged people.” Additionally, the resolution called for universal health care, increased minimum wages and monopoly-busting. Bold, ambitious and a conservative’s worst nightmare. In March, Republicans called for an early vote on the resolution without allowing for discussion or expert testimony, angering democrats who in response voted only “present” on the Senate floor resulting in a 57-0 defeat. As of May, Democrats continue to push for the Green New Deal and its models for implementation are widely debated by economists and politicians alike.

The Cost of Climate Change and the Promise of Job Security

The Green New Deal highlights that “climate change constitutes a direct threat to the national security of the United States by 1) impacting the economic, environmental, and social stability of countries and communities around the world; and by 2) acting as a threat multiplier.” The evidence for this AOC & Co. find in the October 2018 report entitled ‘‘Special Report on Global Warming of 1.5C’’ by the intergovernmental Panel on Climate Change and the November 2018 Fourth National Climate Assessment report. These reports show that;

  • human activity is the dominant cause of observed climate change over the past century;
  • a changing climate is causing sea levels to rise and an increase in wildfires, severe storms, droughts, and other extreme weather events that threaten human life, healthy communities, and critical infrastructure
  • global warming at or above 2 degrees Celsius beyond preindustrialized levels will cause
    • mass migration from the regions most affected by climate change;
    • more than $500,000,000,000 in lost annual economic output in the United States by the year 2100;
    • wildfires that, by 2050, will annually burn at least twice as much forest area in the western United States than was typically burned by wildfires in the years preceding 2019;
    • a loss of more than 99 percent of all coral reefs on Earth;
    • more than 350,000,000 more people to be exposed globally to deadly heat stress by 2050;
    • a risk of damage to $1,000,000,000,000 of public infrastructure and coastal real estate in the United States;
    • global temperatures must be kept below 1.5 degrees Celsius above preindustrialized levels to avoid the most severe impacts of a changing climate, which will require—
      • global reductions in greenhouse gas emissions from human sources of 40 to 60 percent from 2010 levels by 2030;
      • and net-zero emissions by 2050

Unless governments can come up with policies to slow global warming, climate change will make life difficult for mankind. To prevent a 1.5°C increase temperature relative to pre-industrial times, greenhouse-gas emissions would need to be halved by 2030 and brought to zero by 2050. If these mileposts aren’t met, many economic catastrophes may follow. The Fourth National Climate Assessment predicted that the U.S. economy will shrink by as much as 10 percent by the end of the century if global warming continues apace. In the words of Glenn Rudebusch, Executive VP and Senior Policy Advisor at the Federal Reserve Bank of San Francisco, “climate-based risk could threaten the stability of the financial system as a whole and be of macroprudential concern”. [2]

Yet, the Green New Deal does not only concern itself with fighting global warming. Its very first sub-paragraph reads “guaranteeing a job with a family-sustaining wage, adequate family and medical leave, paid vacations, and retirement security to all people of the United States.” Pavlina Tcherneva, a Economics director at Bard College, who provided much of the research in support of the Green New Deal, stated in an interview that part of the Deal was meant to emulate some aspects of FDR’s New Deal. More specifically, it plans to extend protections to vulnerable communities that the National Labor Relations Act overlooked through the introduction of a job guarantee. [3] The job guarantee would match workers with occupations befitting their skill level, while guaranteeing living wages through unions. Furthermore, the Green New Deal aims to protect vulnerable communities by providing transitional employment to individuals affected by natural disasters and by employing their efforts where it is most needed – in an effort to move towards a greener economy. Additionally to that, there’s the promise of higher quality education to every citizen, infrastructure upgrades, retrofitting all buildings in the country and more.

It is the attempt to deal with climate change and job security simultaneously that has garnered a lot of criticism. The efforts to ensure a wholesale transition to a green economy may likely not have a positive effect on job security. The cumulative effects of decarbonisation of the energy sector over 10 years or upgrading of all buildings in the United States would not necessarily generate millions of jobs. Rather, as renewable capacity is limited today,[4] insisting on decarbonisation within a decade could push up electricity costs up quickly. And costs is at the center of the debate about the GND. There are many numbers flowing around, but due to the many different projects – health care for all, investment in infrastructure etc. – that the Deal calls for and the little elaboration it provides on how to achieve them, it is difficult to estimate the overall cost of the resolution. In Vermont alone a move towards 90 percent renewable energy by 2050 has  been estimated at a cost of estimated at $33 billion.  Modernizing the electrical grid across the United States alone could cost as much as $476 billion, yet reap $2 trillion in benefits, according to a 2011 study issued by the Electric Power Research Institute. [5] Yet, the economic reality is more complex than the case for dismissing the G.N.D because of its high costs allows for. In Vermont we see job growth in clean energy sectors and the state expects the transition will spur cost savings for consumers. The 2011 Electric Power Research Institute report on modernizing electrical grid also estimated that an overhaul of the grid could reap 2 trillion dollars in benefits.

No Budget, No Problem

Perhaps it was because of the difficulty of calculating the cost of a 10-year transition to a green economy that the resolution did not propose a budgetary plan. AOC stated that a budget plan was not included as the G.N.D’s primary goal was not dictated by the implementation of a program but in officializing the House’s commitment to include climate change in its agenda. Yet if the sponsors of the resolution wish to see the actual implementation GND, a green budget would be required. The government need to look for more than mere capital, but capital that is derived in a green way. Fortunately, a variety of literature exists on fund the GND with, if not green, then greener capital.

To mention a few methods: climate bonds, also known as green bonds, are financial instruments pledged specifically towards sustainable development projects and other such endeavors of an ecologically-friendly nature. Among its most prominent issuers are the World Bank and China, and as we see their popularity grow worldwide, we may find that the US will turn to them to fund large-scale environmental restoration projects in the future. A tax on luxury goods with high carbon emission rates is yet another way to raise capital for such projects, at the very least counterweighting the impact that that very luxury good has on the environment, if not outgunning it. Hummer owners worldwide, beware. Finally and most ambitiously, a comprehensive re-regulation of the corporate tax system, with increased austerity measures for “big corp” (we admit, a traditionally anti-American proposal) would mandate that corporate taxes are paid fairly and in their proper due amounts, then funneling this money towards the GND. The most crucial method implemented, though, perhaps achieved by an amalgam of the all these methods, is an inculcation of “green behaviors” into our social and institutional orders. What is most important in this effort is cohesion – if all parties are equally committed to improvement on the ecological front, then improvement there shall be. A plan as ambitious as the GND demands an equally ambitious budget. Perhaps that is why the sponsors chose not to include one.

Beto O’Rourke

It would not be unfair to deem the implementation of the GND unrealistic based on what we have discussed here, but the Deal has nonetheless propelled a political platform likely to be picked up, if not fully then by its bits, towards the next election cycle. In the context of the 2020 presidential race, hope to have a greener economy is not lost. Democratic candidate Beto O’Rourke presented a $5 trillion dollar plan to tackle climate change that seems more economically viable than the aspirational Green New Deal, while many others, on either side of the aisle, are putting forth environmental policies of their own, many more advocating for swift and profound action than not. [6] O’Rourke’s plan calls for similar things that Ocasio-Cortez have advocated when talking about the GND: a re-entry into the Paris Agreement, ecologically-friendly infrastructural investment, inter-city and state partnerships, and investment into a climate readiness and federal cropping program..

The US Chamber of Commerce recently conducted a poll to assess American sentiment regarding the Green New Deal, with results showing that, even if only a minority supports the Green New Deal, around 80% of the people in the poll support the causes the Green New Deal advocates for. [7] More than anything, this should be a sign of hope to all those that feel as if they are fighting this fight for the environment unilaterally. People in the US care; it is merely a problem of methodology, rather than ideology. Once that barrier is cleared, we may see mass institutional reform in the years to come, with a “green thumb” pushing the buttons on Capitol Hill.  


References

[1] Rizzo, Salvador (February 11, 2019). “Fact Checker: What’s actually in the ‘Green New Deal’ from Democrats?”. Washington Post. Retrieved March 2, 2019. As a reader service, we’re going to summarize what’s actually in the Green New Deal from Democrats, and how we ended up with all this confusion.

[2] D. Rudebusch, G. (2019). Climate Change and the Federal Reserve. [online] Frbsf.org. Available at: https://www.frbsf.org/economic-research/publications/economic-letter/2019/march/climate-change-and-federal-reserve/?utm_source=frbsf-home-economic-letter-title&utm_medium=frbsf&utm_campaign=economic-letter [Accessed 9 Jun. 2019].

[3] The Real News Network. (2019). Why the Green New Deal Includes a Jobs Guarantee. [online] Available at: https://therealnews.com/stories/why-the-green-new-deal-includes-a-jobs-guarantee [Accessed 9 Jun. 2019].

[4] Eia.gov. (2019). Electric Power Monthly – U.S. Energy Information Administration. [online] Available at: https://www.eia.gov/electricity/monthly/ [Accessed 9 Jun. 2019].

[5] Smartgrid.gov. (2019). Estimating the Costs and Benefits of the Smart Grid. [online] Available at: https://www.smartgrid.gov/files/Estimating_Costs_Benefits_Smart_Grid_Preliminary_Estimate_In_201103.pdf [Accessed 9 Jun. 2019].

[6] MSNBC.com. (2019). How Beto’s climate plan compares to the Green New Deal. [online] Available at: https://www.msnbc.com/velshi-ruhle/watch/how-beto-s-climate-plan-compares-to-the-green-new-deal-1514458691852 [Accessed 9 Jun. 2019].

[7] https://www.resilience.org/stories/2019-04-24/the-us-chamber-of-commerces-new-take-on-climate-change/


Leave a Reply

Your email address will not be published. Required fields are marked *

Close

Categories

Recent Posts

[wpgmza id="1"]
[contact-form-7 id="4" title="Contact form 1"]