Democrats unveiled a sweeping climate proposal this week. While the progressive plan will not pass this year, it does provide a road map for next year. Democrats should take the time to reconsider because it is an insensible climate policy under normal economic conditions and even worse as the country faces massive constraints. Conservatives should respond constructively with critical reforms that fuel economic growth, improve the fiscal outlook, and reduce global emissions.
The plan aims for prosperity that is prepared to meet the challenges of climate change. But the tools selected, such as mandates and subsidy programs, reduce economic productivity. This would fuel an expensive subsidy war when federal coffers can least support it. Mounting costs, public debt, and private investment in political favorites have minimal effects and will also not leave future generations better off.
There is scant evidence that domestic net zero emissions by 2050 is even feasible, let alone a pathway toward increased prosperity with meaningful environmental benefit. Researchers think we are a half century away from zero emissions in the industrial sector, without considering this economic downturn. Electric utilities with zero carbon goals admit they are not sure they will meet the 2050 target, but they know it will cost a bundle. Yet the plan calls for decarbonization of the sector 10 years earlier.
There is another critical zero to consider, which is the number of cost analyses in the plan. Quality analyses take time, however, comparable references set the price tag in the trillions. American businesses and consumers will suffer by paying more money for less options. Such a burden is completely tone deaf in this economic downturn.
The hard truth is that zero emissions in the country alone accomplishes relatively modest climate benefit, a far cry from the claim of solving the climate crisis. Carbon dioxide is mixed in the air, accumulates over time, and the United States is responsible for a small fraction of all emissions. Instead of reducing emissions at high costs, lawmakers should pursue a policy that benefits domestic interests as well as the climate.
The key is making it cheap to reduce emissions at home in a way that can be done around the world. This requires a “no regrets” innovation agenda that includes a more effective national laboratory system and institutional reforms to let private capital flow to productive uses. Indeed, businesses have shown an expanding appetite for clean investment. Companies with ambitious carbon targets want more free market reforms for procurement choice and electricity industry access. This would mean liberating supply chains, fostering competition, enabling increased consumer choice, and using trade as catalysts for growth and global emissions cuts.
Regulatory reforms should remove barriers to capital stock turnover. The irony is that some environmental mandates penalize the funding for clean manufacturing. Clean investors want “speed to market” and yet regulatory obstacles like approvals under the National Environmental Policy Act take more than half a decade to finish. Permits under the Endangered Species Act and the Clean Water Act also deter these clean investors.
Regulatory reforms have to enhance competition by updating the rules over the electricity industry and stimulate competition where mandates prohibit this by replacing monopoly utilities with competitive platforms. Electric transmission investment, an integral part of renewable energy expansion, requires a regulatory overhaul to increase competition and prudent capital management decisions to flourish in the sector.
Progressives cannot be faulted for a lack of ambition. But core elements of their plan are not practical and not in the best interests of individuals, businesses, or environmental outcomes. It is easy to set lofty goals that reward stylish models now and raise costs in future election cycles. It is harder to challenge entrenched interests now with regulatory reforms to unleash lasting economic productivity and emissions reductions. Now is the time to become braver than the symbol of zero emissions.
Devin Hartman is the director of energy and environmental policy with R Street Institute in Washington. Nicolas Loris is the deputy director of the Thomas Roe Institute for Economic Policy with the Heritage Foundation.