It's the Economy, Stupid

Achieving Major Climate Benefits through COVID Stimulus Will Require a Shift in Mindset

The economic rescue and recovery package that Congress passed and President Trump signed over the weekend included something for almost everyone. Two trillion dollars to massively expand unemployment and sick leave benefits, provide aid to states and hospitals on the frontlines of the epidemic, make loans for small businesses, bailout Boeing and the airlines, and provide up to a half trillion dollar loan guarantee program for major corporations.

One thing it didn’t include, though, was renewable energy tax credits. Or fuel economy and carbon offset requirements for the airlines and cruise lines that the federal government is bailing out. Or restrictions on loans and other support for the oil and gas industry.

Green groups demanded all of these things and several of them were even briefly included in the House of Representatives version of the legislation. But they were quickly abandoned as it became clear to Democrats that holding up a desperately needed economic rescue package in the name of climate action was an untenable proposition.

Climate hawks and environmental advocates will surely try again. founder Bill McKibben has proposed conditioning corporate bailouts on promises to meet the Paris accords. Hundreds of environmental organizations have signed onto a statement titled “5 Principles for Just COVID-19 Relief and Stimulus,” demanding that stimulus packages must assure reductions in climate emissions. “The response to one existential crisis,” the groups argued, “must not fuel another.”

But environmental advocates might want to take a hard look at what just happened and consider whether this sort of interest group politicking is really what the present moment demands. It’s not that there won’t be new opportunities to include various clean energy investments in future stimulus legislation. Those measures will likely be more focused on recovery than arresting an economy in freefall and there are many clean energy and climate investments that are clearly both worthy investments in their own right and that can help put the American economy on a stronger footing as it comes back to life.

But efforts to frame the stimulus as a zero-sum choice between funding clean energy or the fossil economy will backfire. Like it or not, the US economy is still heavily dependent upon fossil fuels. Any effort to keep the US economy afloat during the coming months of enforced economic inactivity will, unavoidably, entail rescuing the fossil energy economy. Demands to hold up the recent rescue package over bailouts of the oil, gas, and airline industries were, correctly, perceived as obstructionist. In the midst of a public health and economic apocalypse, promises of a just transition ring empty for Americans who understandably just want their jobs back. In an emergency, a bird in hand is still worth two in the bush.

That will require climate hawks to recognize that even under much better circumstances, climate change was never the top tier issue that many imagined it to be.

If, by contrast, climate advocates are able to rethink their priorities and objectives in the context of the current crisis, far reaching and unprecedented action to remake entire sectors of the US economy and deploy low-carbon technology and infrastructure may be possible. But that will require climate hawks to recognize that even under much better circumstances, climate change was never the top tier issue that many imagined it to be.

While a booming economy and thermostatic response to the Trump presidency inflated polling numbers among some constituencies, even most Democrats knew the deal, as Joe Biden would say. Leading Democratic presidential candidates offered ambitious sounding climate plans to satisfy environmentalists. But that was just a sidelight. Everybody knew that the primary would be contested along traditional themes of health care, wages, jobs, and inequality.

This proved to be the case. Rank and file primary voters cared little about the candidates climate positions so long as they proposed to do something. Washington State Governor Jay Inslee, who predicated his entire campaign on climate change flamed out early. But for his personal fortune, billionaire Tom Steyer, who positioned himself similarly, would have too. In the end, Vermont Senator Bernie Sanders, who offered up a $16 trillion climate plan and proposed to nationalize much of the electricity sector, was swept away by Biden, who launched his campaign promising a moderate climate policy, one he modestly upgraded in the wake of scorching criticism from climate advocates.

All of this transpired, notably, in the Democratic primary and before the Covid-19 pandemic brought normal social, political, and economic life to a halt. If it wasn’t already clear before the crisis, it should be clear now that climate remains a second-tier concern for most Americans.

For the foreseeable future, the pandemic response, the economy, and jobs will be the paramount concern.

Under these conditions, the best opportunities to advance climate objectives will be as co-benefits of investments and policies that credibly offer relatively short-term economic or jobs benefits, and build a foundation for longer-term economic opportunity. Realizing these opportunities will require more than simply different messaging and rather a fuller reformulation of climate and energy related policy and advocacy efforts.

A major push to invest in critical infrastructure necessary for both climate mitigation and adaptation is entirely plausible as new stimulus efforts move forward in the coming months. But that will require the environmental community to abandon the posture it adopted after the passage of the Obama Administration’s green stimulus and the failure of federal cap and trade legislation a decade ago. As the administration shifted its focus to regulating greenhouse gas emissions via executive action, green groups shifted their focus to obstructing fossil energy infrastructure project by project and promoting renewable energy mandates at the state level.

With major federal investment back on the table, green groups will need to refocus their efforts on convincing policy-makers of the economic case for building more low-carbon infrastructure as part of the economic recovery. Environmentalists will also need to ask some hard questions about whether they are serious enough about rapidly deploying low-carbon infrastructure to allow for planning, permitting, and siting of that infrastructure to be expedited so it can meaningfully contribute to the recovery.

A stimulus and recovery program that includes major investments to upgrade the grid, build long distance transmission, rail and transit infrastructure, seawalls, flood channels, water systems, and much else will surely bring a fair amount of road, highway, and pipeline investment along for the ride. But what makes this moment of crisis, emergency, and recovery unique, as the record stimulus passed in a matter of days virtually unanimously just demonstrated, is that previously unthinkable levels of public investment will be possible in the coming months. There will be time in the coming years to get back to fighting fossil fuels. The imperative right now, in this extraordinary moment, is to increase the total spend and get clean energy and other climate friendly infrastructure and technology into forthcoming stimulus legislation.

There are also extraordinary opportunities to leverage bailouts of energy and carbon intensive sectors of the economy for a long-term energy transition. Green groups attempted to hold up bailouts of the aviation, cruise ship, and oil and gas industries until those industries made various commitments to green up their operations. But the main event is not environmental conditions around bailouts but public equity in the industries that taxpayers are bailing out. As was the case with the auto industry after the financial crisis, public ownership of major industries will take years to unwind, offering the next administration and Congress critical opportunities to retool those industries while they are in public hands.

What makes this moment of crisis, emergency, and recovery unique is that previously unthinkable levels of public investment will be possible in the coming months.

Imagine a major economic recovery package early next year to recapitalize and retool the auto, aviation, shipping, steel, manufacturing, and electric utilities industries for a globally competitive and low-carbon future. With substantial public ownership of those industries and public borrowing costs near zero or even negative, taxpayers can invest in that future at low cost and recover much or all of it as public equity positions are unwound over the longer term. Taxpayers came out ahead in the auto industry bailout and this should serve as precedent for how we approach bailouts in the current crisis.

These investments should not centrally be made on climate grounds. There is ample economic justification to retool key American industries to compete in a changing global economy without attempting to shift the focus back to climate change at a moment when there is little demand for climate policy. Deep economic downturns such as the one we are presently beginning almost always bring substantial shifts to national economies. The sectoral composition of the American economy, the markets it is able to compete in, the sorts of supply chains it supports and depends upon are likely to look different at the end of this crisis than they did at the beginning. Repositioning key American industries to compete in that future economy will bring substantial long term opportunities for the US economy (and the climate) if we can get clear now about what those opportunities actually are.

Doing so will demand that environmentalists lift their sights beyond the usual laundry lists of tax credits, mandates, and regulations that continue to characterize business as usual climate advocacy. The economic crisis and suspension of normal order creates opportunities for major investments in infrastructure and key US industries that are simply not available under the guise of traditional climate policy.

Retooling America for a prosperous and low-carbon future, in this way, will require green groups and climate advocates to retool their own agenda and politics first. Environmentalists will need to spend more effort making the economic case for the infrastructure they want to build and less time making the climate case against infrastructure they want to stop. This moment demands imagination, creativity, and flexibility, not dogmatism and literalism. Climate progress will be achieved over the coming months by working with efforts to rescue and stimulate the American economy, not by extracting concessions from those efforts.