Energy, Climate Change, and U.S. Regulatory Policy

Long before there was serious consideration given in the United States (or other countries) to enacting public policies to address the risk of climate change, regulatory policies existed in the electric power and other energy sectors, as well as in areas as diverse as banking, commercial airlines, trucking, railroads, and telecommunications.  There is no one who is better equipped to place recent developments in climate change policy into this historical context of U.S. regulation than my podcast guest, Paul Joskow, the Elizabeth and James Killian Professor of Economics emeritus at MIT and former President and CEO of the Alfred P. Sloan Foundation in New York City.  You can listen to our conversation in the latest episode of my podcast, “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program.”  Our full conversation is here.

In these podcasts, I converse with leading experts from academia, government, industry, and NGOs.  Obviously, Paul Joskow fits very well within this group, as a respected international expert and renowned scholar on myriad topics, including industrial organization, energy and environmental economics, and regulatory policy. During his years at the Sloan Foundation, he launched several new programs in economics, and a program in energy and the environment.

Paul is the former chair of the MIT Department of Economics and director of the MIT Center for Energy and Environmental Policy Research.  He is also a Distinguished Fellow of the American Economic Association, a Fellow of the Econometric Society and the American Academy of Arts and Sciences, a Member of the Council on Foreign Relations, and – I’m pleased to say – an Associate Scholar of the Harvard Environmental Economics Program.  

James Poterba, Nobel Laureate Peter Diamond, Paul Joskow, and Olivier Blanchard at the Nobel Banquet, Stockholm, Sweden, December 2010.

In discussing recent changes in regulatory policy affecting electric power and other energy sectors, Joskow reflects on the fact that “the big change that has taken place in the last 20 or 25 years has been restructuring these industries so that we could rely more on competition and less on regulation. It started with the natural gas industry and the oil industry, and then during the 1980s and 1990s, and ultimately around 2000, it resulted in restructuring and the creation of competitive wholesale electricity markets and retail competition in many U.S. states, in Europe, and in other countries.”

When I ask Paul how current political polarization is affecting climate change policy in the United States, he responds that it is having a “significant effect on the ways in which the electric power sector in the U.S. is adapting to climate change and implementing policies to mitigate climate change. And because of partisanship, there’s a lot of difference between [what’s happening in] the blue states and the red states.”

Joskow gives the Biden Administration mixed reviews on climate policy in its first year in office.

“I think the administration has its heart in the right place in the sense that we need to adopt policies that will mitigate, reduce, and eventually eliminate greenhouse gas emissions. They’ve adopted policies which I would consider to be largely non-market-based policies. They’ve resisted pricing carbon emissions. And I think that significantly complicates moving forward in an efficient way,” he says. “The absence of a national policy makes it even worse because rather than having a coherent U.S. policy, we have states that have adopted their own policies and states that have resisted any policies, and that’s become kind of a mess in my view.”

Paul also says that while he is pessimistic about the possibility that the U.S. will succeed in adopting a coherent greenhouse gas mitigation policy over the next few years, he is more confident that the Europeans and Chinese will make progress on that front, and that in the U.S. and elsewhere there are market forces at work that will help in the long run, particularly the declining costs of wind and solar power.

“Work we’ve done at MIT suggests you get quite a bit, in the long run, of diffusion of wind and solar into the system just on straight economic grounds. There’s a lot of R&D going on [in] other technologies and electricity that do not produce CO₂ emissions,” he notes. “There’s interest in small nuclear plants, and there’s interest in alternative fuel cycles, the Allam [power] cycle, which basically uses CO₂ to drive a turbine and then sequesters it. There’s work going on in carbon capture and sequestration.”

But political reality intrudes, as Paul Joskow observes, “So, there’s a lot of stuff going on, but I think we’re suffering, especially in the U.S., from the lack of a really coherent set of policies to which the entire country is committed.”

For this and much more, I hope you will listen to my complete conversation with Paul Joskow, the 32^nd episode in the Environmental Insights series, with future episodes scheduled to drop each month.  You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program.  Previous episodes have featured conversations with:

• Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
• Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
• Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
• Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
• Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
• David Keith, professor at Harvard and a leading authority on geoengineering
• Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
• Scott Barrett,  professor of natural resource economics at Columbia University, and an authority on infectious disease policy
• Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
• Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
• Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
• Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
• David Hone, Chief Climate Change Adviser, Shell International.
• Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector. 
• David Victor, professor of international relations at the University of California, San Diego.
• Lisa Friedman, reporter on the climate desk at the The New York Times.
• Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
• Spencer Dale, BP Group Chief Economist.
• Richard Revesz, professor at the NYU School of Law.
• Daniel Esty, Hillhouse Professor of Environment and Law at Yale University. 
• William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
• Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
• John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
• Gernot Wagner, Clinical Associate Professor at New York University.
• John Holdren, Research Professor, Harvard Kennedy School.
• Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
• Suzi Kerr, Chief Economist, Environmental Defense Fund.
• Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
• Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
• Gilbert Metcalf, Professor of Economics, Tufts University.
• Navroz Dubash, Professor, Centre for Policy Research, New Delhi.

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

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