We need reality-based energy policy

A common sense approach to climate demands a balance of costs and benefits

Climate issues have, to an extent, fallen out of the post-election discourse, probably because they didn’t play a large explicit role in the 2024 presidential campaign.

That’s fair enough. But they did play an extremely large role in Joe Biden’s presidency.

The Democratic Party trifecta of 2021-2022 put a lot of money into a lot of different things. But most of that was either deliberately structured as temporary pandemic relief or else written with built-in sunsets to reduce the cost (like the health insurance subsidies that are scheduled to expire next year) because it’s easier to extend a temporary program than to create one from scratch. But the easiest task of all is to avert the repeal of a permanent program, and the big thing that the trifecta made permanent was climate-related spending in the Inflation Reduction Act.

Which is just to say that climate was at the center of Democrats’ policy agenda, and it’s worth discussing both the decision to center it and also, given its centrality, whether the policy is being pursued in a reasonable way.

This receives less discussion than I think it deserves, because climate issues are less controversial among left-of-center intellectuals than things like trans rights or anti-Israel protests on campus. But way more people are directly, and tangibly impacted by energy policy than by Title IX rules governing school sports.

And I’m dwelling on the importance of this topic because while I think the adjustment Democrats need to make is relatively modest, I don’t want to suggest that the adjustment is unimportant. Small errors on a huge topic are a big deal, and even though the Biden-Harris administration mostly landed in a sensible place on this, they flirted with a lot of bad ideas along the way.

The guiding principle I included in my manifesto was, “Climate change — and pollution more broadly — is a reality to manage, not a hard limit to obey.”

A Common Sense Democrat manifesto

This is to say, we should take environmental problems seriously. A real fact of the modern economy is that individuals and companies will, if we let them, generate more pollution than is socially desirable. This is bad. We need rules and policies to prevent it from happening. But we should prioritize anti-pollution measures that do, in fact, actually make people better off, rather than an arbitrary grab-bag of measures.

Climate and reality

I found out last week that over on BlueSky (follow me!), I’m on a prominent blocklist for climate “deniers and trolls.”

I will cop to trolling on occasion. But this is not the first time I’ve been called a climate denier, so I really do want to say clearly:

• Carbon dioxide emissions are causing a warming effect on our planet.

• The consequences of this are negative — to the extent possible, we should push for less climate change rather than more.

The only reason denialism ends up entering the picture is that a significant group of people have described climate change as posing an extinction-level threat to humanity or, at a minimum, likely causing the collapse of civilization. And these aren’t just fringe actors. In 2023, Joe Biden said, “I’ve seen firsthand what the reports made clear: the devastating toll of climate change and its existential threat to all of us. And it is the ultimate threat to humanity: climate change.”

This is not true, it’s pretty clearly not consistent with the Biden administration’s actual policies, and I don’t think Democrats should run around saying it.

Of course, the fact that something won’t result in the extinction of our species does not mean that it isn’t a serious problem. But the distinction here is important. If the planet were in the path of an asteroid that stood a large chance of wiping out civilization, you'd be willing to do crazy, extreme things — even if your actions got hundreds of millions of people killed — to stop it. If the asteroid were smaller and risked wiping out a whole city, that would still be catastrophic, but the range of tradeoffs under reasonable consideration would be quite different. You're not an “asteroid denialist” if you insist on estimating the harms correctly; it's actually very important to distinguish between different degrees of badness to make policy decisions that make sense.

Reducing global warming at the margin could be an especially big win for low-income tropical countries like Nigeria and Bangladesh. But the status quo in these countries isn’t great, and I don’t think we should tackle climate change in a way that makes them much poorer. And we shouldn’t rule out opportunities for these countries to get dramatically richer.

The whole climate problem would be much easier to solve if China didn’t have so much economic growth over the past generation.

But the world would not be better off on the whole if that were the case. And it would be good if Benin could become as rich as China, even at the cost of higher carbon dioxide emissions. Climate change is bad. But it’s not the only bad thing in the world. We should mitigate it with measures that make things better, not “by any means necessary.”

Cost-effective climate reduction

The upshot of this is that it’s important to identify policy measures that have relatively low costs associated with their adoption and implementation, and relatively large benefits in the form of emissions reduction.

In a kind of idealized wonk technocrat space, we’d have a global estimate of the social cost of carbon, and then every country would simultaneously set a carbon price exactly equal to the global social cost of carbon. That new pricing framework could then become the baseline for climate policy, and the revenue raised by the carbon price could be used for things like high-value investments in research and innovation. And then you’re off to the races.

The real world is obviously a lot messier than that.

There will always be plenty of room to disagree about the exact impact of policies and the exact value of emissions reductions. But the idealized technocratic solution is still something to keep in mind. Even actions that are purely regulatory, like tailpipe emissions standards or regulations on power plants, still require cost-benefit analysis.

Where things get tricky is that because climate change is a global problem, the benefits to the world of Americans switching to electric cars are quite a bit larger than the benefits to Americans of Americans switching to electric cars. It would be great if every single American took a totally beneficent attitude toward the world and was happy to make large economic sacrifices on behalf of people in other countries. We give to GiveWell’s Top Charities Fund and do an annual fundraiser for Give Directly (more on this tomorrow!) precisely because we believe the interests of the poorest people in the world count. But one reason we do that with our personal charity is that in political terms, it’s hard to convince a democracy to prioritize the interests of foreigners.

A politically viable regulatory framework will inevitably fall far short of the idealized approach. This means there’s probably more value than Democrats generally realize in ideas like carbon tariffs that could alter the international bargaining environment.

But most of all, it means that by far the biggest levers available are those that operate through the innovation channel. If US public policy leads to breakthroughs in areas like small modular reactors, geothermal power, battery technology, carbon removal, or low-carbon manufacturing processes, that has a large impact on the long-term global picture because those technologies would be widely adopted if they existed. By contrast, trying to slightly speed up the pace at which Americans replace gas furnaces with electric heat pumps is a relatively weak lever. In fact, the purely local benefits of emissions reduction are so small compared to the global benefits that any kind of halfway rigorous thinking suggests not acting that dramatically on purely domestic deployment issues.

Except the good news is that there is a lot we can do to promote clean energy that doesn’t have economic costs. This is why things like permitting reform are so valuable and important. Reducing regulatory barriers to clean energy has economic benefits, not costs, so we can realistically push quite hard here.

The doomed war on domestic fossil fuels

A big problem here, one that Democrats need to confront and address, is that the big brand name environmental organizations predate public concern about climate change. They are fundamentally grounded in an ideology that is at best indifferent to economic growth and that fundamentally dislikes the idea of taking a global perspective.

Every six months or so, some smart climate person will do a big round of chest-pumping about all the great stuff that’s happened in clean tech and how the movement now needs to focus on unshackling deployment rather than toward trying to stop fossil fuel projects. But the environmentalist organizations are like the supervillain that wants to use its powers to turn people into dinosaurs rather than curing cancer — blocking fossil fuel projects is what they want to do, it’s what they’re built to do, and they fundamentally don’t care about anything else.

There’s a place in life for people who care more about hypothetical harms to whales than deploying offshore wind or protecting tortoises and “arid landscapes” from solar panels. But when those people also oppose geothermal drilling and also oppose nuclear power, then they are clearly fundamentally unserious about finding an economically tractable way to limit climate change. Elected officials should tune them out, and we should encourage donors who care about climate change to redirect their funds in more pragmatic directions. What these people wildly over-index on instead is the idea that if you somehow kneecap domestic fossil fuel production, you’ll crush the nefarious political power of dirty energy and solutions will flow from there.

This just doesn’t make sense. People who live in countries that don’t produce fossil fuels nonetheless use them, because people like to have heat in the winter and light at night and steel to build stuff. They like to drive cars. As cleaner alternatives are developed, people will use them. But you need to actually develop the alternatives and make them cheap to deploy and use.

So many Biden-era missteps stem from flirting with this over-indexing on domestic production. That starts with Chuck Schumer blocking the refilling of the Strategic Petroleum Reserve in the final year of Trump’s presidency when oil was super-cheap. Then, Sarah Bloom Raskin and a coalition of progressive groups argued that the Fed should use the pandemic as a pretext to force the entire fossil fuel industry into bankruptcy. Then, when Biden took office, he tried to end all new oil and gas leases on public lands (he lost in court) and to put Raskin in charge of financial regulation at the Fed (the Senate said no). Oil demand came roaring back post-pandemic, and investors were reluctant to put more into expanding production to match. This led to a big spike in gas prices that was exacerbated by Russia’s invasion of Ukraine, at which point the Biden administration pivoted in a more constructive direction.

Still, to this day, it is genuinely true that the administration is reluctant to go too hard on sanctions enforcement against Russia, Iran, or Venezuela, because they’re worried about global oil prices, even as they raise drilling costs at home. This is dumb, but the people making the policies aren’t. They’re making these policies because environmentalists care about domestic fossil fuel production, but not about sanctions enforcement. And if your policymaking is responsive to the demands of interest groups whose ideas don’t make sense, you end up making bad policies.

Climate policy is economic policy

This all comes down to the fact that Democrats need to stop thinking of climate policy as separate from economic policy.

The landscape is littered with takes about abstract ideas like populism and neoliberalism and pre-distribution versus redistribution and a million other things. And I notice that Democrats participating in these discourses rarely bring up energy policy at all. They instead treat climate like a purely post-material cultural concern, like fighting about the 1619 Project. It does play that way to a certain extent. But if you want to appeal to the material interests of working-class Americans, you also have to think about energy. Not purely as a source of jobs, where you need to reassure people that oil and gas jobs could be replaced by “green jobs,” but as an actual cornerstone of economic well-being.

Everyone knows the problem with a carbon tax is that making energy more expensive is unpopular. But if you’re trying to reduce emissions by blocking pipelines or forcing divestment from fossil fuels or debanking oil and gas companies, the causal pathway still runs through higher prices — the same downside as a carbon tax but without the upside of revenue.

I think a very underrated aspect of class dealignment in politics is the extent to which a particular (and somewhat misguided) take on climate policy has moved closer to the heart of Democratic Party politics. Energy policy, more than anything else, makes the idea of a GOP that is simultaneously working class and pro-business seem plausible, because abundant energy really is good for workers and business alike. Coming back to earth on this topic doesn’t mean giving up on climate change or any other important public health concerns. But it does mean saying a firm “no” to degrowth and embracing real cost-benefit analysis and maybe even (in the right macroeconomic environment) returning to carbon pricing. It means taking the national interest seriously. And it means actually doing the thing that climate hawks keep saying they’re going to do and prioritizing clean energy buildout over other considerations.