I can think of four major approaches to fighting climate change, and the new Inflation Reduction Act uses only one of them: Subsidizing green energy. The bill does this by offering consumers incentives for electric vehicles and heat pumps and also by directly subsidizing research and development for solar power, nuclear power, wind power, energy storage, and even new research into geothermal alternatives. These are all sexy initiatives, but they’re the “feel-good” part of fighting climate change. That’s not enough.
Here’s the issue: More green energy does not solve climate change problems at the relevant global level. We need more green energy and fewer carbon emissions. Currently we are on a track where total energy consumption is due to rise, and the world will have both more green energy and more carbon emissions, moving along a never-ending upward spiral.
The case for the bill is that it does something rather than nothing. The case against the bill is that it doesn’t, alone, do much to get the world off this track.
This brings me to the second way of fighting climate change: raising the price of fossil fuels. Economists (myself included) typically are enamored of a Pigouvian carbon tax, which would make carbon emissions more expensive, but raising the price of energy has proven deeply politically unpopular. This is especially evident in 2022, when leaders worldwide are seeking to insulate their voters from the effects of high fuel prices. Australia ended up repealing its carbon tax; more generally, the idea simply has not caught on. You might say, “We still need to tell voters that spinach is good for them.” But the bill doesn’t do much in this direction.
A third approach to dealing with climate change is combatting environmental NIMBYism. Plenty of homeowners do not want wind farms or nuclear power plants nearby and environmental restrictions can limit hydroelectric power, to name but a few examples of many. In each case, these restrictions limit the chances to expand green energy and thus prop up sources of carbon emissions.
The bill in its early stages didn’t do much to remedy these problems, although there is now a report that building and environmental review provisions will be eased by separate legislation. Often the relevant regulations are state and local rather than federal, but clearing away the relevant federal regulations is at least a start. It would be better yet if President Biden and other prominent politicians could use their bully pulpits to draw attention to these issues at the state and local level, and to emphasize the positive sides of deregulation, including job creation. The drawback is that this path would involve spending political capital, with slow and uncertain final results.
Finally, a fourth approach to climate change is to make its consequences easier to deal with. That could involve support for sea walls, agricultural improvements and more robust crops, denial of public sector storm aid to residents in danger zones, measures to enhance interstate mobility, and also geoengineering, among other options.
The case for such measures is that, realistically speaking, a fair amount of climate change is on its way in any case. Many climate change reformers, however, are hostile toward such talk, which they regard as equivalent to accepting the problem and “giving up.” The bill also does not seem to be strong in this area.
In sum, the new climate bill addresses one of these four areas, namely subsidizing green energy. But a fundamental choice stands before us: Do we wish to feel good about green energy, or recognize climate change as a global problem that actually requires fossil fuel consumption to decrease? The feeling good about green energy is the easy part, and it is what we have chosen. At some point, the latter will be necessary to actually solve the problem.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tyler Cowen is a Bloomberg Opinion columnist. He is a professor of economics at George Mason University and writes for the blog Marginal Revolution. He is coauthor of “Talent: How to Identify Energizers, Creatives, and Winners Around the World.”
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