Presumptive Democratic presidential candidate Joe Biden has recently unveiled his approach to climate change: his “plan for a Clean Energy Revolution and Environmental Justice.” The plan calls for $2 trillion in government spending over four years and aims to set the United States on the path towards achieving net-zero carbon emissions by 2050, rebuild infrastructure, create new jobs, invest in R&D and attain “environmental justice,” among other goals.
The proposal has already been dubbed by some observers the Green New Deal without the name—which Biden’s campaign has recognized as “a crucial framework for meeting the climate challenges we face.”
There are many good things about Biden’s proposal: for example, it does not intend to ban nuclear energy or fracking (a technology used to extract natural gas), which experts see as essential to slowing down global warming.
For instance, according to Carbon Brief, by driving out coal power, the wider availability of natural gas has been the largest driver of America’s reduction in CO2, “accounting for 33% of the emissions reduction in 2016. Wind generation was responsible for 19% of the emissions reduction. Solar power was responsible for 3%.” Meanwhile, nuclear power remains the safest and one of the cleanest and most efficient energy sources. Nuclear plants produce 3 grams of CO2 per kWh of energy produced, while wind produces 4 grams, solar 5 grams, oil 715 grams and coal 820 grams, according to Our World in Data.
Biden’s plan also pushes for the integration of climate change into US foreign policy. Global warming is a challenge that can be overcome only if all countries unite their efforts, and Biden’s promise that he will not allow countries like China “to game the system by becoming destination economies for polluters” is a welcome step. In the interim, the implementation of measures like carbon tariffs will both bolster the global competitiveness of American companies and encourage the rest of the world to transition to cleaner energy sources.
However, in certain aspects, Biden’s plan remains much like the Green New Deal—for it relies overwhelmingly on government intervention, even though America’s experience with climate change has validated the importance of empowering both state and local authorities and private companies and creating the right incentives, instead of making top-down changes to the system.
A Decentralized Response to Climate Change
Following Donald Trump’s withdrawal of the United States from the 2015 Paris Climate Accords, it was widely thought that the absence of climate change action on the part of the second largest emitter of greenhouse gases meant that any hope of effective action was lost. However, the effect has been the opposite of that expected.
It is true that the Trump administration has not taken any serious steps to curb carbon emissions, but local and state authorities have ramped up their efforts. In the US, states and cities have legal and policy power to control emissions, and, even before Trump took over, most progress has been due to the steps undertaken at local and state levels, rather than by central government.
As the Brookings Institution puts it: “every sign to date suggests that globally consequential states like California and New York are going to double down on their respective climate policies.” The efforts of these two states alone have been consequential. If these states were sovereign countries, California would be the fourth largest economy in the world and New York would be the eleventh largest.
Interestingly, it is not only progressive New York and California that are taking action, but the traditionally more conservative states of the Midwest, who are responding to climate change without actually calling it climate change, in order to garner bipartisan support.
Progress on US climate policy has continued at subnational levels thanks to America’s decentralized system. That is why, even without America’s participation in the Paris agreement, the United States may end up meeting its obligations to decrease carbon dioxide emissions by 26–28% below 2005 levels by 2025. Indeed, right now, the US is leading the world in the fight against climate change—it had the largest absolute reduction in greenhouse gases in 2019. Between 2005 and 2017, US greenhouse gas emissions dropped by 12% (and by more than 2% in 2019)—in spite of the 50% increase in GDP over this period.
In a free market economy, the decentralization of the process of economic decision-making implies that prices and allocation of economic resources are determined not by the central planning board but by the confluence of market players’ opinions regarding the value of each good or service. People perceive the value of a commodity differently, and few can discern its true worth. Therefore, the best approach consists in combining multiple perspectives, which the invisible hand of the market does by allowing everyone to indirectly influence prices simply by purchasing and selling products.
Price changes in a free market economy, therefore, reflect changes in society’s perception of reality, thereby materializing particular objectives if the majority believes that investing in the projects that advance them is worthy in the long run—even if government regulation and intervention are absent. The reduction in emissions in the US has been primarily driven by the substitution of coal power by natural gas and nuclear energy—and this has been possible thanks to free market dynamics. Currently, natural gas, wind and solar are pushing out coal as a source of power simply because they are cheaper.
Consider the influence of changes in individual preferences. For example, since the meat industry is one of the primary sources of greenhouse gases, as we switch to lab-grown meat, emissions are going to fall and global warming will slow down. Thanks to rising demand and technological innovation, the price of artificial meat has been falling rapidly and it will probably become cheaper than conventional meat in the near future—because of changes in our consumption habits.
People’s views on climate change have been changing in recent years, too. More and more businesses are undertaking their own green initiatives, putting their responsibility to the environment before their responsibility to their stockholders, while individual investors, realizing the importance of tackling climate change, have been investing in more renewable companies. Most recently, Morgan Stanley announced that all its investments would be rated for climate impact.
The Trump administration’s rollback of government regulations and general lack of action cannot change these underlying market forces because they are driven by the economic, social and political views of citizens and, in a free and open society like America, the government cannot make people change their minds. As the Brookings Institution’s report concludes, “progress on decarbonizing the nation’s economy will likely continue regardless of Donald Trump, driven by technology advances, market dynamics and state policy.”
The Problems with Biden’s Plan
This brings us to the main problem with Joe Biden’s clean energy plan: instead of mobilizing market participants as well as state and local authorities, it overwhelmingly relies on government intervention to curb carbon dioxide emissions. While calling for two trillion dollars of government spending and subsidies as well as regulations, the plan contains no mention of the carbon tax, which economists have recommended for decades as the most efficient and fastest way of cutting emissions.
Carbon pricing would incentivize market players to invest in renewable energy sources by permeating every economic decision made by consumers and private enterprises, thereby allowing us to tackle climate change without having to rely on inherently inefficient government spending and regulations. Free market forces and individual efforts may not be enough: a carbon tax would accelerate the forces that, even under the Trump administration, have led to the reduction in carbon dioxide emissions.
As this article argues, “As much as possible, the government should be agnostic about how emissions are cut, leaving these decisions to private actors incentivized to avoid polluting, because they will find the most efficient ways. Mr. Biden’s plan all but gives up on that logic.”
This highlights another potential threat to Biden’s ambitious plans. It is far from certain that Biden will be able to get all his plans through Congress, even if the Democrats take over the Senate this year, and he will have to rely on executive orders. Executive orders, however, have limited influence and can easily be overturned by the president’s successor (this can also happen with legislation passed by Congress, since the majorites in both chambers are not everlasting).
If Biden decentralizes the response to climate change, then, even if his successor repeals his measures, the impulse will have already empowered other actors, from states to private companies, who will take the necessary action themselves. Also, carbon pricing is more likely to attract bipartisan support than trillions in government spending.
The United States is a very diverse, complex and interconnected society, and the government alone cannot solve big problems like climate change. For, as F. A. Hayek writes in The Use of Knowledge in Society, “the knowledge of the circumstances of which we must make use never exists in concentrated or integrated form, but solely as the dispersed bits of incomplete and frequently contradictory knowledge which all the separate individuals possess.” It is impossible to communicate this distributed knowledge to the government, let alone for the state to make the right decisions based on it. Those players who are closer to the facts of the situation—that is, state and local authorities—should make the decisions about how to allocate the resources necessary for tackling climate change.
Furthermore, the complexity and scope of major reforms makes it difficult to estimate their consequences, for there are many interconnected and interdependent variables.
The application of the scientific method to politics involves trial and error: we must learn from our mistakes as we go along. But it is difficult to learn from big mistakes because we can’t properly discern causes and effects, as Karl Popper has pointed out. Every “small” mistake provides information about what is wrong, a kind of negative knowledge that gives us certainty regarding what not to do. Biden’s proposal is so far-reaching and sweeping that it will be difficult to analyze its effects scientifically: instead of focusing on one single issue, it bundles it with other problems.
For instance, as the New York Times reports, Biden’s plan “connects tackling climate change with the economic recovery from the coronavirus crisis, while also addressing racism.” Racism and climate change are serious problems that need to be addressed: however, we should not lump them together but advocate limited government involvement aimed specifically at removing these evils, rather than endeavor to get rid of all problems simultaneously by throwing trillions of dollars at them. As Holman W. Jenkins comments, “If your surgeon told you he was going to address racism and the economy along with your coronary blockage, you would get off the table and run away.”
America’s decentralized system of governance—powered by free markets and the dispersal of power among local, state and federal actors—has allowed it to make huge strides in fighting climate change. Biden’s plan has many positive sides—especially in light of the fact that the Trump administration does not seem to care about the challenge at all. But, in order to slow down global warming, we need to rally all players, rather than rely entirely on federal government.