Energy economist Gilbert Metcalf, Professor of Economics at Tufts University, makes the argument for pragmatic climate change policies that will withstand political divisions in Washington in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. Listen to the interview here.
Hosted by Robert N. Stavins, A.J. Meyer Professor of Energy and Economic Development at Harvard Kennedy School and director of the Harvard Environmental Economics Program and the Harvard Project on Climate Agreements, Environmental Insights is intended to promote public discourse on important issues at the intersection of economics and environmental policy.
Metcalf, who is also a Research Associate at the National Bureau of Economic Research and a University Fellow at Resources For The Future and served as Deputy Assistant Secretary for Environment and Energy at the U.S. Department of Treasury during 2011 and 2012, has spent much of his career working on policy evaluation and design in the area of energy and climate change, both in academia and government.
Author of the 2019 book ““Paying for Pollution: Why a Carbon Tax is Good for America,” Metcalf is a longtime proponent of a carbon tax to affix a social price on CO2 emissions, but he acknowledged in the interview that a carbon tax might not be a practical option in today’s hyper partisan political climate.
“I am a firm believer that we should do the most efficient policies possible, and I think carbon pricing is precisely the way to do that. I prefer a carbon tax to cap-and-trade, I think for a number of reasons…but the political environment is such that, that's just not going to happen,” he said. “And meanwhile, the concentration of greenhouse gases in the atmosphere continues to rise. So given, that I think we are obligated, those of us who care about the climate, to promote policies that will reduce emissions now, even if they're not necessarily our most desirable policies.”
Metcalf argued that the Biden Administration should consider regulatory actions and executive orders in addition to subsidies to give polluters incentives to seek cleaner energy alternatives.
“I see less of a problem with fuel economy standards [by] ratcheting those up. So, we can do something in transportation,” he remarked. “I think we'll [also] use tax credits in the electricity sector instead of regulation and perhaps we'll do the same in buildings, but that gets to the third leg of what I would call a policy tripod in a third best world, which is R&D spending. And here, I think the R&D spending really needs to be focused on the technologies that have the greatest potential to lower the cost of clean energy.”
Metcalf argued that production tax credits can be used to encourage further development of clean energy options, including wind power, but they should be designed in a way that will account for the increasingly negative impacts of carbon emissions.
“My recommendation is that we ought to tie that tax credit to the social cost of carbon,” he said. “Given the official social cost of carbon numbers that the Biden Administration is using, that would be about a two and a half cents per kilowatt hour production tax credit. So, it doesn't change the [tax] credit now, but as the social cost of carbon rises over time, then the production tax credit should rise over time.”
When asked about the current youth movements around climate change, Metcalf stated he was initially skeptical about their impact calling them a “side show,” adjacent to the more substantive international climate talks.
“I've actually changed my mind entirely,” he said. “I'm more pessimistic [now] about where the negotiations will get us given the urgency of action. But the youth movements, Greta Thunberg and others, are really, to me, incredibly important in that they are driving public opinion and bringing media attention to the problem, in a way that I think is extremely valuable. So, I see them as just absolutely essential.”
Metcalf also claimed that the young people involved in these climate movements are likely to remain engaged over time.
“I think the current youth movements see a very clear stake for themselves in terms of the damages that we're seeing in the world today because of climate change. So, I think that gives them a more enduring stake that may outlast their youth,” he said.
Metcalf’s interview is the 12th and final episode during 2021 in the Environmental Insights series, with future episodes scheduled to drop each month.
“Environmental Insights is intended to inform and educate listeners about important issues relating to an economic perspective on developments in environmental policy, including the design and implementation of market-based approaches to environmental protection,” said Stavins. “We speak with accomplished Harvard colleagues, other academics, and practitioners who are working on solving some of the most challenging public problems we face.”