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How climate made it on the agenda in 2008

When Joseph Aldy, HKS professor of the practice of public policy, was tapped for the Obama administration, he experienced some “imposter syndrome” as he sat in the August 2008 meeting of a small group trying to think about what could be energy and environmental policy in an Obama administration. As a staffer at the Council of Economic Advisers during the Clinton administration, Aldy found himself sitting with an assistant to the president and the president’s staff secretary, people with Senate confirmations. “I thought, why am I here?” Aldy said. “It was only at the end of the meeting that I really appreciated why they invited me.” What became clear was that Obama wanted to pass the biggest clean energy spending packaged that had ever been passed by the U.S. government. There was a lot of work for an environmental economist like Aldy.

While working with Obama’s transition team, and thinking about how to implement green ideas, Aldy realized several key elements worked in their favor. “You actually had some people who worked for the Bush administration who had already had the contacts carry over into the new administration to help with the transition, even after the new president has been inaugurated,” explained Aldy. “So, I worked with someone who was effectively a counterpart who worked for President Bush, who had already had the contacts through bilateral climate and clean energy agreements with other major economies.” Also, as the economy was falling at a perilous rate, everybody was calling for economic stimulus by the time of the November 2008 election. “For the Recovery Act, then-President Obama said he wanted to have some strategic investments. And, so, we made some: in education, in healthcare, and in community. This is conflating a vision for future stimulus—which could address resilience to climate shocks—and the approach we took in the 2009 stimulus—which focused exclusively on clean energy and mitigating CO2 emissions,” said Aldy. And finally, there was the benefit of a favorable composition of the Senate, with the majority supporting the president at the time supported economic stimulus through the Recovery Act.

“I think if you read between the lines of the Biden plan, you can see where they are certainly thinking about a carbon tax.”

Joe Aldy

The importance of climate for the next presidential administration

Aldy sees this election as crucial for delivering on two major objectives: stimulating economic activity and creating jobs and making a contribution on climate change such as a mitigation-oriented climate program. “From our experience,” says Aldy, “supporting the investments in renewable power, through tax credits and a graduate grant program in lieu of tax credits, was incredibly successful, as it pushed out a lot of investment, and helped address some of the concerns.”

He also reflected on taking action in response to a current crisis. “The precipitated cause of the crisis in 2008 was housing,” he said. “There was a lot of unemployed and underemployed building trades workers.” Aldy observed that the people hit hardest by today’s major crisis—the coronavirus pandemic—are, in contrast, primarily in the service and retail sectors and that they may have difficulty transferring their skills to high-demand job areas. “The other thing that I think is different now, compared to a decade ago, is that we did almost everything focused on clean energy investment,” Aldy said. “I think we better understand climate risk now, and we better understand the lack of meaningful progress, or at least sufficient progress, globally to level off and reduce global emissions of greenhouse gases.” As Aldy noted, we are keenly bearing the impacts of years of climate change today, “whether it's the fires out West, storms hitting the Gulf coast, or the floods in the Mississippi River basin—around St Louis—last year.” To improve the resilience of communities to climate shocks, Aldy argues that the federal government should invest in infrastructure. “That would be dollars well spent to address climate change that would complement the money that you'd also want to spend to continue to decarbonize our energy system,” he explained.

Finally, Aldy believes the federal government should consider some form of a carbon tax, along the lines of the Climate Protection and Justice Act, submitted by Senator Bernie Sanders, which expanded the American Clean Energy Investment Act of 2015. In fact, most Democratic candidates in the 2020 primary had some form of carbon tax in their plan. And while policymakers should take the competitive pressures on U.S. manufacturing into consideration, Aldy argues that carbon taxes may play an important role. “Putting a border tax on the carbon content of imported goods from countries that don't have a comparable climate change program will be hard to do, and may violate the WTO, unless you have a domestic carbon tax,” Aldy said. “In a Biden administration, I think there will be some appetite in trying to establish a ‘good neighbor’ approach to international affairs.”

Banner image: Democratic U.S. presidential nominee and former Vice President Joe Biden speaks about climate change during a campaign event in Delaware, September 2020. Photo by Leah Millis

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