Addressing Climate Change Amidst our Political Divides

8/12/23

The litany of climate disasters continues, with the wildfire in Maui being the latest of many. Before this one, the National Oceanic and Atmospheric Administration counted 15 other weather-related disasters just during the current year. We’re experiencing increasing numbers of events and escalating losses every year from such climatic events — not just here, but throughout the whole world.

Although some minority of observers deny that climate change is accelerated by the burning of fossil fuels and feel that we shouldn’t expend any resources to fix what ain’t broken, my sense is that the vast majority of us are aware of the peril that we are facing. Regardless, even with most of us recognizing that the world has serious problem, and that America bears a disproportionate share of the responsibility, we continue to battle about what to do to confront it or how much we, collectively, are ready to spend to transition away from burning fossil fuels.

From an economic perspective, the problem of global warming likely originated from a general failure to account for externalities appropriately — i.e., the fact that irrespective of the rationale for burning fossil fuels in the first place, doing so adds to pollution and fosters increasingly extreme weather-related events that cost lives and loss of property. Producers and consumers of energy alike have largely avoided bearing responsibility for those costs. Instead, these costs are disproportionately borne by the unfortunate people who happen to be directly situated in areas that bear the brunt of these disasters.

Since the oil crisis back in the 1970’s, our national priority has been to achieve energy independence, which we’ve largely accomplished. We did so, at least in part, by subsidizing exploration and development of domestic energy supplies. In so doing, we solved one problem at the expense of another.

I’m sensitive to the fact that fossil fuels are essential goods for virtually all of us, and higher prices are a bitter pill to swallow — particularly for the poorest among us. Unfortunately, if we have any interest in saving the planet or at least slowing its demise, the logical policy response to global warming is to make fossil fuels more expensive or their substitutes cheaper. This realization largely ignores the concerns about affordability, but those considerations can be dealt with independently from a policy that strives to adjust relative prices between fossil fuels and alternative energy sources.

The idea of a carbon tax has been around pretty much since carbon was recognized as the culprit fostering the acceleration of climate change, and I’d venture to say that most economists would view a carbon tax as a direct and effective way to discourage reliance on fossil fuels. The aversion to higher prices (or taxes!), however, has proven to be insurmountable; and for too long, nothing much happened to address an ever-warming planet — until the enactment of the Inflation Reduction Act.

Under this legislation, instead of taxing carbon, Congress authorized a handful of subsidies designed to facilitate the transition to green energy sources. Now, however, just a year after passage of that act, Republicans in the House have inserted provisions in upcoming appropriation bills that would roll back previously passed legislation that supports the transition to green energy. (See The Guardian and Common Dreams for a broader discussion.) The timing of such back-tracking reflects a heads-in-the-sand orientation to an increasingly obvious problem.

Trained as an economist, as much as I appreciate the benefits of a market economy, I realize that markets aren’t perfect and sometimes our policy makers need to correct for the consequential outcomes that derive from externalities. This policy orientation is needed in connection with our approach to energy policy. The weight of those policies continues to encourage burning fossil fuels, and those incentives need to be reined in.

It’s hard to witness the devastation from the plethora of storms, wildfires, and heat waves happening throughout the world without concluding that it’s beyond time to recalibrate and adjust our energy priorities. The Inflation Reduction Act made a start in that direction. It would be a setback to see those efforts falter. Without a dedicated policy to address the externalities that derive from burning fossil fuels, we seem doomed to continue the trajectory of worsening weather-related disasters with an escalation of lives and property lost.

Have feedback? Send me an email at igkawaller@gmail.com.