Twelve years ago, Aldy was a member of then President-elect Barack Obama’s transition team as it took over from the George W. Bush administration. He says the objective then was much the same as it is now—figuring out how to push aggressive measures to stave off the worst effects of climate change while bringing back lost jobs and jump-starting a stalled economy. But comparisons only go so far. Aldy says in many ways Biden’s challenges are more formidable: A much shorter window to transform our energy infrastructure, a struggling economy made even worse by a raging pandemic, and a country even more polarized and in ideological conflict with itself. Professor Aldy and host Thoko Moyo explore those those challenges and discuss how the new administration can respond — and maybe even succeed.
Joseph Aldy, an economist and professor of the practice of public policy at Harvard Kennedy School, has seen this all before. A climate in crisis. A big economic downturn. A transition from a Republican administration to a new Democratic president looking to drastically change the country’s direction.
Twelve years ago, Aldy was a member of then-President-elect Barack Obama’s transition team as it took over from the George W. Bush administration. He says the challenges today are much the same—figuring out how to push aggressive measures to stave off the worst effects of climate change while bringing back lost jobs and jump-starting a stalled economy. Some of those Obama policies worked, he says, particularly investments in wind and solar subsidies that have now made clean energy sources competitive on price with dirty ones like coal.
But comparisons only go so far. Aldy says in many ways President-elect Joe Biden faces problems that are even more formidable and acute: a much shorter window to transform the energy foundation of our economy, a struggling economy made even worse by a raging pandemic, and a country even more polarized and in ideological conflict with itself — including a US Senate that’s still up for grabs and an outgoing president who is refusing to acknowledge that he’s even lost.
Professor Aldy and host Thoko Moyo explore those challenges and discuss how the new administration can respond—and maybe even succeed.
Joseph Aldy is a Harvard Kennedy School professor of the practice of public policy, a university fellow at Resources for the Future, a faculty research fellow at the National Bureau of Economic Research, and a senior adviser at the Center for Strategic and International Studies. He is also the faculty fhair for the Regulatory Policy Program at the Mossavar-Rahmani Center for Business and Government. His research focuses on climate change policy, energy policy, and regulatory policy.
PolicyCast is a production of Harvard Kennedy School and is hosted by Associate Dean for Communications and Public Affairs Thoko Moyo.
PolicyCast is produced and engineered by Ralph Ranalli and co-produced by Susan Hughes.
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Intro: Joe Aldy: I think the fundamental challenge of climate change is that we have to completely transform the energy foundation of our economy. For more than 100 years, we've relied on fossil fuels to turn on the lights, to power our factories, to move from our homes to our offices, to our kids' schools. And we know that if we're up to the challenge of climate change, we have to get fossil fuels pretty much out of the system.
Intro: Thoko Moyo: Harvard Kennedy School economist and professor Joe Aldy has seen this all before: a climate and crisis, a big economic downturn, a transition from a Republican administration to a new Democratic president, looking to drastically change the country's direction and put addressing climate change front and center. Twelve years ago, Aldy was a member of then president-elect Barack Obama's transition team as it took over from George W. Bush's administration. He says the challenges today are much the same, figuring out how to push aggressive measures to stave off the worst effects of climate change while bringing back lost jobs and jump-starting a stalled economy. Some of those Obama policies worked, he says, particularly investments in wind and solar subsidies that have now made clean energy sources competitive on price with dirty one like coal, but there were also some stumbling blocks, particularly when it came to pushing measures through Congress.
Aldi says in many ways, president-elect Joe Biden faces problems that are even more formidable and acute. A struggling economy made worse by a raging pandemic and a country even more polarized and in ideological conflict with itself, including a US Senate that's still up for grabs and an outgoing president who's refusing to acknowledge that he's even lost. Professor Aldy is here to explain those challenges and discuss how the incoming administration can respond and maybe even succeed.
Welcome to PolicyCast.
Thoko Moyo: So I think let's just get into it. You've got a new administration that's coming in, in January. What are the top things that they need to reverse or advance coming out of the Trump administration?
Joe Aldy: Well, Thoko, I think that the first thing they certainly need to do is to recognize that how you use existing regulatory authorities, you can actually be much more progressive, much more ambitious with those authorities. I think the first thing they'll do is stop some of the Trump administration regulations, stop some of the regulatory processes that are still moving and then think through how they can be creative in using those existing authorities to move forward to better reduce our emissions of greenhouse gases, whether it's in the power sector or transportation or industry.
Thoko Moyo: And so do you want to give some specifics? So the type of regulations and processes that they'll probably be looking at?
Joe Aldy: So I think a key thing is how one uses the Clean Air Act at the Environmental Protection Agency to reduce emissions of carbon dioxide and other greenhouse gases. Right? We've seen that there's been incredible progress actually in recent years in the power sector in reducing CO2 emissions, both because of the build-out in wind and solar power, the use of natural gas that's displaced coal, but there's a lot more one can achieve through regulation. So I think one's likely to see the establishment of standards that would lower the amount of emissions of CO2 that could come from power plants as one of the key areas that a Biden administration would target.
I think they would also look at methane emissions in the oil and gas sector, and try to find ways to reduce the emissions of methane, which is a shorter lived greenhouse gas, but much more potent than other greenhouse gases. And it's something that actually plays, I think, a really interesting role, not just in how we improve the environment, but potentially in trade. We've recently seen where some French firms have paused their interest in importing LNG from the United States because of their concern about high methane emissions in our gas sector.
Thoko Moyo: Joe, I want to take the advantage of the fact that you were actually in the Obama administration and you were involved in sort of their sort of approach to climate and hear from you some of what you had hoped that the time would happen in the next four years and so paint a picture in terms of what hasn't happened. And just go very specifics around what's gone sort of backwoods and what's halted. And then a second question related to that, I'm very curious about transitions as well. I mean, there's so many things about this transition that just feels different. Could you talk about what the transition was like, for example, from Bush to the Obama administration and then this transition. What's different?
Joe Aldy: Right. So first when we look back at what the Obama administration tried to do on climate, the intent was to have a sort of two-step process. The first step was how in the Recovery Act, the February 2009 stimulus bill, how to do a lot of spending on clean energy then that would lay the foundation for an aggressive economy-wide long-term cap-and-trade program. The idea that we would have a cap on our economies emissions that would ramp down over time, but it will provide flexibility to those firms covered by that program and how they reduce their emissions so they can find the lowest cost ways of doing that. Now that required working with Congress and in the end Congress didn't pass that legislation. And that's why we saw a shift in the latter years of Obama towards regulatory approaches, all of which were stopped and in some cases reversed by the Trump administration. So I think that's why there's some of this sort of unfinished business in trying to use the regulatory authorities.
I think when we look at how one lays the foundation going forward for that kind of work, it does begin in the transition. I look back on '08/'09, one of the big things that we announced in the spring of 2009 was the so-called car deal. President Obama had the CEOs of all the major automakers, governors of major states, the auto union automakers as well. And you had key environmental stakeholders championing this aggressive new goal for how we are going to improve fuel economy. That began during the transition process, laying the work, figuring out how to make this happen, where EPA, the Department of Transportation and the state of California would all work together to double the fuel economy, the vehicles that we drive around the country. So part of that, that they're doing now is trying to think through what do we need to do to sort of lay the foundation going forward.
Now there's two really big challenges though that we didn't have in '08/'09 that the transition team has now. The first is that an '08/'09, we actually had a Bush administration that was actually quite constructive working with us. This began at the very top. President Bush, I think set the signal to all the people working in the executive branch to do what they could to work with us, especially as we were thinking about an economic recovery plan. We had access on the transition team to the experts at the Office of Management of Budget at the Department of Treasury, as we were crafting that policy. And that was an incredibly important resource to have, as we were trying to move very quickly, working with Congress on stimulating the US economy. We haven't had that kind of cooperation this time around. The second big thing is that we actually got to see each other in person and that can't be overstated. That the value of having the teams all there together at the headquarters, thinking about the different policy areas that President-elect Obama wanted us to get moving on as quickly as possible. It allowed us to get to know each other well to build those relationships. And it allowed those of us on the energy and environment working group to start working with the people in the economic working group and understand where there is a really important nexus between what we can do to promote economic activity and to deliver on the president's climate change goals.
Right now, the transition team for the Biden-Harris team, they're just doing it all on Zoom. Maybe they're doing in Google Meets. I'm not sure where the platform is, but I know they're not actually in person. And I think that is actually a challenge in getting everybody sort of working together and starting to build those relationships that are going to be critical for you to move effectively once the president has been inaugurated.
Thoko Moyo: So what is it that makes climate change so contentious? Is it a political issue? I mean, what are the arguments that the Trump administration might make for reducing or changing some of the things that they found in place when they came into when the administration came into power?
Joe Aldy: I think the fundamental challenge of climate change is that we have to completely transform the energy foundation of our economy. For more than 100 years, we've relied on fossil fuels to turn on the lights, to power our factories, to move from our homes to our offices, to our kids' schools. And we know that if we're up to the challenge of climate change, we have to get fossil fuels pretty much out of the system. There's a significant vested interest in that both among various corporations, but certainly among people in government who realized that they may be say the governor of a state or the senator representing a state that is a major producer of fossil fuels. And so they think about the jobs there. And that is typically what one would hear over the past four years is that President Trump would claim that anything we do on climate change would cost important jobs. And I think the thing is that really failed to understand A: the value of job creation in these new technologies that people who manufacture and then solar panels, those are jobs that the people who actually installed the solar panels, those are jobs the people who are improving the efficiency of our homes, installing more efficient air conditioning or installation. These are all a lot of important jobs as well. But I think more importantly, it's failing to understand just how much the energy economy has changed and how cheap a lot of these technologies are.
Trump came in saying he was going to bring back coal and coal has declined more precipitously in the last four years than it did during the Obama administration. And that's basically because wind power is so cheap, solar power now is so cheap that a utility that's trying to make money isn't going to want to invest in a new coal-fired power plant. It'll be cheaper for them to produce power for their customers by building new wind farms and installing solar capacity. So I think there's this sort of old-school, I think, view that climate change policy ends up costing a lot of jobs, it hurts some of those vested interests, but I think we're really starting to see that the economic opportunities are quite, quite significant when we look at the potential for investing in clean energy technology.
Thoko Moyo: The economics of it—so how does it work? You have, I suppose, in other parts of the world, concerns about upfront costs to invest in the technologies, which are actually quite expensive as you start out. What does it look like in the U.S. and how does that all play out and how does that influence the type of actions that administrations, be they Democratic or Republican, are taking?
Joe Aldy: Well, I think this is actually one of the really positive legacies from the support that President Obama made through the 2009 Recovery Act for wind and solar technologies. That when we subsidize those technologies, that creates a larger market for the manufacturers. They start to make more and more investments in their technology to try to drive down the costs and out-compete the other firms in their industry. And as a result, we've seen the cost for solar come down more than 90% over the past decade. We've seen wind come down quite significantly and the prospect for fairly low cost, but high production wind offshore, especially along the Atlantic coast. So I think that the economics are a lot better in part, because we've seen in the past public policies that have helped subsidize these technologies. And now it's cheaper to install overnight. So that upfront investment costs, it's actually cheaper to do that for say a megawatt of capacity of wind than it is for coal. The one contrast here though, is nuclear. Nuclear power does have the potential to produce zero carbon technology. So it's zero carbon power. So it's better for the climate, but what we've seen with some initial efforts over the past decade and building new nuclear power in the United States has turned out to be very expensive. And so absent, I think, quite generous subsidies through a public policy, we're unlikely to see much new nuclear come online, especially in a world in which we have cheap wind, cheap solar, and also cheap natural gas.
Thoko Moyo: I'm going to come back to the point that you made that, sort of what we're looking at here, if we do it right, is upending the entire energy base of what the US has basically been built on. How do you do that? And I know you've talked about the impact on that, but I want to look at those states that are really dependent on fossil fuels. When you were in the Obama administration, when you were in the Obama administration, what were some of the things that you were thinking to mitigate the impact that it would have directly in the short term on those states and the people that were working in these industries?
Joe Aldy: Well, I think this gets to a critical issue that I think President-elect Biden has focused on during the campaign, which is how as we undertake this transition, as we decarbonize the economy that we make sure the benefits of doing so are really shared throughout the economy. Now that's a question though, and certainly for those say in Appalachia who have relied on coal mining for generations as a leading source of income and employment, one of the ways that we thought about it back during the Obama administration and one that I think is still on the table is how to continue to use fossil fuels without the CO2 emissions. And this requires quite extensive improvement in the technology so that you can actually capture CO2 before it goes out of the smokestack and bury it and put it in the ground or use some of that captured CO2 and produce new materials.
So this was something we actually had funding for that in the Recovery Act of 2009. The challenge is that in industry, many of the utilities pulled out of the consortium that we were trying to work with to build a commercial scale coal-fired power plant with this kind of technology that would pull CO2 out of the air. The Southern Company has tried to do this on their own, and they've had significant cost overruns and just fundamental challenges making the technology work. But that's one thing. And it's something, whether it's in coal and I know some in the oil and gas industry are thinking about this with the prospect of combining carbon capture technology with natural gas power plants. It is one way to extend the lifetimes of fossil fuels, extend that economic value to those communities that produced coal and natural gas without having the climate damage.
So part of it is to think through adding an innovation strategy that can deliver on this. But the other is to think about, I think, an economic diversification and how we think about more of place-based policies that can attract new industries that can think about more effective ways of educating and training workers so that they have the skills to go into new occupations that are going to be in higher demand as we continue the de-carbonization path. That's going to be a challenge. We've tried some doing job training programs in the past with mixed success. It's been a challenge when we think that for other reasons, say some parts of the Midwest with manufacturing, have declined over the past 10 to 15 years. We haven't been very effective at rebuilding many of those economies, those local economies that have been hard hit in the manufacturing sector. So I think this is something where we could benefit from really good research by many of our colleagues here at Harvard to think through how to design more effective policy, to ensure that this transition doesn't leave these communities that have historically produced significant fossil fuels that have helped power the growth and development of America that we don't leave those communities behind.
Thoko Moyo: And is it true to say that the benefits of sort of climate-friendly technologies and products, I think are fairly well understood, but the market uptake is still quite low. And I'm wondering if the things that you're explaining speak to the barriers that have prevented more of that uptake and that I'm just curious to hear your thoughts about that.
Joe Aldy: Well, I think there's two things that are important to think about when we look at sort of, what's been the rate of uptake of some of these novel clean energy technologies. First it's actually, when we think historically about energy transitions, it's actually been moving pretty fast. The energy system moves very slowly. And part of that is that a lot of the ways we use energy is based on capital and equipment that's very long-lived. So we just moved into a house that's more than 100 years old. We have a natural gas boiler. So it's using the sort of old technology in an old house. It's part of living in the Boston area. There are ways we can try to reduce our use of fossil fuels. And in fact, we're doing that with some of the work we're going to do with our house. But part of it is that we have really old buildings. We have power plants, they may run 40 or 50 years. We may have equipment using factories that will be maintained and used for decades. So part of it is this challenge of when we can sort of take advantage of the natural turnover of our capital stock, of our equipment, that makes it a lot cheaper to bring in these new technologies. And when we see what's happened with a significant increase in wind and solar generation in the US over the past decade, we've never seen any power generating technology ramp up as quickly as they have in those past 10 years.
I'll say the other challenge though, is with new technologies, sometimes people are sort of waiting to sort of learn. They're trying to see if someone who's sort of that pioneer and using a technology, let them figure out if it really works well. Sometimes we're seeing companies waiting to get a sense of what the policy landscape is going to be. That they kind of severe yo-yo and climate policy going from Clinton to Bush, to Obama, to Trump and now to Biden. There's a lot of uncertainty about what will be the policy landscape and what does that mean about the returns companies will face when they start to make investments in lower carbon and zero carbon technology. So I think there'll be incredible value to providing more certainty and predictability about policies that will then make it all the more likely we'll see greater take-up of these technologies by businesses and families alike.
Thoko Moyo: Okay. So I want to bring it back to the Biden administration. So what are some of the things that they need to take to engage with other countries? Because that's a huge part of the climate agenda, isn't it?
Joe Aldy: Well, we're not going to solve the climate change problem unless everybody around the world makes progress together. I think that was one of the key success stories of the 2015 Paris Agreement, the big UN climate change agreement that the United States was a part of that then President Trump withdrew the United States from. So I think it's important to be a part of that to help chart the course going forward. It has set ambitious goals to try to protect us from the worst effects of climate change, but even in 2015 world leaders recognize that we weren't doing enough right now, and that we're going to have to ramp up our ambition over time to deliver on those goals.
So I think a key thing for a Biden-Harris administration is first to say, we're going to be a partner in the Paris Agreement, but more importantly, what is it we're going to do domestically to demonstrate that we are credibly reducing our emissions and that we're going to be an effective partner with other major economies and virtually every country around the world, but also how we're going to work with some of these countries so that they have the capacity to do more that for some developing countries so they have the resources to do more. This is something that actually going back to the Bush administration, they started to put more money into helping facilitate the transfer of clean energy technology to developing countries. It was something that was ramped up in the Obama administration, but then declined precipitously in the Trump administration. So I think you’ll also see efforts to use, say the Department of the Treasury and the Department of State to help mobilize more resources, to help those least developed countries who are likely to be the ones to bear the first, most significant risk and damages of climate change. They also have fewer resources to deal with it. So I think there's a lot that one can do there to help rebuild our relationships with our partners around the world. But some of that also involves demonstrating progress at home and credibility at home in order to all work together.
Thoko Moyo: And Joe, do you think though, that with criticisms of the Paris Agreement, that nations haven't been ambitious in their targets, and they're not even meeting those unambitious targets? Do you think it might be an argument that maybe the US doesn't need to be part of a global coalition? Maybe it can do more on its own bilaterally with other countries. I mean, what would your response be if someone were to make the argument that you don't need a Paris Agreement for the US to do the right thing and do all the things that you're explaining?
Joe Aldy: Well, I think the first thing that's important to stress and something that I think was not well understood if I'll be generous in the Trump administration, was that this is a voluntary agreement. So what we're doing doesn't actually cost us anything at home that we're not willing to do through our own domestic policies. No one, China's not telling us what to do. The Europeans aren't telling us what to do. What we do in Paris is what we pledged to do. And that's true for these other countries. The theory of the case of the Paris Agreement is that we take voluntary actions. We implement those actions. We have to make them transparent. We subject them to review by other countries around the world. And if they're doing the same thing, we're able to look at each other. We're able to sort of assess are we all making progress together? And if so, it allows us to more credibly ramp up our ambition. We're able to tell our domestic stakeholders, we've made progress. Our trade partners have made progress. Our regional neighbors have made progress. We can all move forward more aggressively in the next stage, and that's going to be critical because of course, one of the key criticisms of climate policy dating back at least to the 1990s has been, if the US takes serious actions to mitigate our emissions, it's going to put our industry at a competitive disadvantage versus say their competitors in China or Brazil or India, or what have you.
So I think the key thing is, is to be able to make progress and to be able to see that other countries have made progress as well. And I think that goes back all the way to 2014, President Obama made it a key part of building momentum towards Paris and delivering on a bilateral agreement with China where the two biggest sources of emissions were the two biggest economies. We have the means to deal with this problem, but we also need to demonstrate to the rest of the world we're willing to work together to make progress on this. And I think going forward, it's going to be important for a Biden-Harris administration to effectively engage China so that we make more ambitious progress and they do as well.
Thoko Moyo: And what's the opportunity in the coming months as we see lots of world leaders coming to page visits and sort of as the US starts to reengage as a Biden-Harris administration? What do you see the opportunity there is for the US' goal of re-engaging with the world on climate?
Joe Aldy: So, one thing that's important about this is that this is an area where the White House can make progress immediately. Some things require working with Congress. Some things require working through a regulatory process that takes some time, but they can work with say the heads of state of Canada and Mexico are likely to be the first two heads of state the President Biden meets with. And that you say climate change is important to both of our countries and to have some kind of bilateral agreement that may advance clean energy technology, or promote the investment in climate resilient infrastructure. You make that as one of the deliverables, you're highlighting that this is an important issue, and it's a way to help build I think momentum globally, as we're trying to do more on climate change. It's a way to sort of signal I think to our domestic stakeholders, we're getting more and more serious about climate change.
And it's also a way to motivate all the different parts of the federal government. Because I think the key thing is, as President Biden goes forward, he's going to have to use every potential lever in the federal government to advance climate change. And you really need a whole of government approach because climate change touches every part of our society. And so I think there's ways whether it could be with one country, say we're going to do climate-oriented procurement, with another country maybe we're going to coordinate on developing new advanced energy technologies that we know are going to be necessary to deal with this problem long-term. Maybe it's a bilateral agreement with a developing country, more on climate resilience. If it's an agreement, say with Indonesia or Brazil, maybe on how we better manage our lands and reduce deforestation as a way to combat climate change.
So you can find all these different ways in which you can take advantage of common interests, highlight those through head of state meetings and demonstrate that you're making these sort of small steps that across everything else I think helps sort of makes more significant progress on climate change, but also it helps build that momentum for the bigger steps we needed to take down the line.
Thoko Moyo: And you mentioned sort of the whole-of-government approach, and that sort of makes me think of the regulatory agenda. Do you want to talk a little bit about that, what's that going to look like for this incoming administration?
Joe Aldy: Well, I think the first thing is to look through existing regulatory authorities, whether it's EPA under the Clean Air Act, it's the Department of Energy that can set efficiency standards for appliances. It's the Department of Transportation with fuel economy standards. So you could see Biden and White House direct each of these agencies, EPA, DOE, and transportation, to do more and to propose ambitious regulations that they would then be available for public comment, incorporate that public comment and then finalize more aggressive rules down the line. There is a risk of judicial review with these. So it's important to do it well. There's still some risks because the courts have become more conservative over the past four years with Trump appointments, but certainly there's going to be an interest in using those kinds of authorities right now.
You could also see perhaps starting at the Department of the Treasury, how do we engage financial regulators to try to increase consideration of climate change and how they manage and oversee the financial sector. So whether it's financial disclosure at the Securities and Exchange Commission, it could be a so-called climate stress test for large financial institutions. There's different ways you could see how the financial regulatory community, many of which are independent, but they are influenced some by the Secretary of the Treasury. And in fact, it's institutionalized through the Financial Stability Oversight Council, where the Secretary of the Treasury can work with other financial regulators to make sure that we think about climate change as a potential systemic risk to the economy and how that can motivate actions that these regulators can take to help address those risks.
Thoko Moyo: But this is a long-term thing, I mean this isn't going to happen all at once and sort of in the short term.
Joe Aldy: No, to do it right, to do it well, you need to do your homework. You need to have the basis for a rule-making process. You need to go through that process and take public comment. This is the reason why many things across the spectrum, not just on climate in the Trump administration, they lost on process grounds many times in the courts, not on the merit. So the government shouldn't lose on process grounds. We're the ones who designed the rules for process. We should be able to satisfy those conditions for process and do that right. And then there's a discussion then in the courts about the merits, but that does take some time to go through that process. Even an accelerated process to regulate carbon dioxide emissions at power plants is probably going to take several years to write the proposal, take public comment on it and revise and finalize that rule down the line.
Thoko Moyo: Early on you mentioned that there were some proposals or some directions you wanted to take during the Obama administration that didn't get past Congress. How is this new administration, well, how do they need to be thinking about Congress? I mean, is that going to be a big part of their work coming in when it comes to the climate agenda?
Joe Aldy: Well, it's going to be big on probably three fronts. First is going to be in the near term on an economic recovery program. Unfortunately, as Vice President Biden, he came in during the worst recession since the Great Depression. And now as President Biden, he gets to basically go through this again. There are some notable differences in this recession versus the '08 recession, but still there's going to be a need for stimulating the economy. And the question is how one can craft an economic recovery package that can both create jobs, increase economic output, but also start to make necessary investments in de-carbonization and climate resilience. The challenge though is back then we had a lot more Democrats in the house and the Senate to work than President Biden will have. It is going to be a closely divided Congress. And so that is going to make it a challenge on how to negotiate with Republicans and with moderates in his own party, in order to pass a recovery package that can make a meaningful contribution to climate change.
The other two components I think, would be an infrastructure package where I think there may be bipartisan support and interest in an infrastructure package. And so you can do some things on infrastructure whether it's say investing in electric vehicle charging stations or investing in more high voltage transmission lines or investing to make sure that our physical infrastructure, our roads and our buildings are more resilient to climate shocks. You can do a number of things like that as a part of that package. But I think the key thing is, is how to craft a long-term comprehensive climate change policy that sends the kind of signals we need to the private sector to start to deploy clean energy technologies today, to create the incentives to innovators and entrepreneurs, to bring to the market a better lower costs, more effective technologies down the line.
That was the big failing in 2009, 2010, in the Obama administration. We tried to work with Congress on the cap-and-trade bill passed the House, but it didn't have the votes in the Senate. And I think that's something that is going to be important if we're going to be able to make progress on the kinds of goals that President Biden has set such as decarbonizing the power sector by 2035 or decarbonizing the entire economy by 2050.
Thoko Moyo: And so when you mentioned the sort of economic recovery packages and sort of negotiating those through Congress, I wonder what impact the pandemic, the COVID pandemic is going to have. And I know it's related, very closely interlinked with the economic recession that we're in, but do you want to talk specifically about that because that's the one thing that really is a huge contextual issue or for everything?
Joe Aldy: Well, one thing is we've already spent trillions of dollars trying to deal with the economic fallout from COVID. And a lot of that while the term gets used in the media as stimulus, I think of it as disaster relief. Stimulus is trying to get the unemployed out of their homes and into the workforce, into the workplace. And a lot of what we're doing dating back to March was to actually provide monies to help people and businesses with immediate cashflow. So we didn't actually go into the workplace because of the significant public health risks that COVID presented there. So I think there's going to be a near-term need to get COVID under control and manage. Some of that will be through vaccination. Some that will be, I think, with enhanced testing and tracing, but it's something that I think economists have all generally agreed on that the most important thing we can do for the economy is to get COVID under control. But then we're going to have, we're still more than 10 million jobs down from where we were February of 2020. So there's a lot we're going to need to do to create new jobs. And so that's the challenge is as we move forward, for those who are really permanently separated from their jobs. So it's not the temporary layoff and once COVID is over, you go back to your job. The people who really lost their jobs and maybe their employer no longer exist as a business because they went bankrupt during COVID. How do we use an economic recovery program to create new jobs, create the incentives for new businesses to really move investment? And are there ways we can do that that's better aligned in our efforts to address climate change?
And so I think there's a number of things that can be done there. There's a number of lessons from the '08/'09 effort to try to address the Great Recession that can help inform how we move forward here. So COVID is clearly going to be important. And I think it's past clearly the shadow on the economy until we have it under control, but it's also going to necessitate, I think, a major public spending effort if we're going to rebuild our economy and get us growing again, like we were pre-COVID. The other thing I'll quickly say on COVID is that it was an example of, I think our failure to really effectively cooperate with countries around the world and to have sufficient transparency and trust with each other. And that gives me pause about how well we might work together on climate change if things start to get worse and worse with climate change becoming more and more severe. But I think it does provide a case study for us to learn from about how to be more effective cooperating with countries around the world and how to promote transparency, especially among some of the other major economies in the world.
Thoko Moyo: So you've laid out quite a lot of things that the new administration has to think about as they come in. So maybe let's end with if you were advising them right now, what are the top three things that you would say they need to prioritize as they come in, as they start their work?
Joe Aldy: I think the first and most important thing is to make it clear throughout the federal government that climate change is not some niche issue that the sustainability advisor and the secretary's office handles, but as part of the everyday business of the government. That everything, whether it's at the Pentagon, whether it's at the Department of Education, HHS, what have you everywhere we need to be thinking about how government's decisions influence the climate. One way you can do this is, is I think you send a very clear signal that you want all your departments to start planning for how they can set their goals for reducing their emissions, but also thinking through everything they do. Being the country's largest consumer, we can try to green the way we consume. We can make our supply chains greener. We can learn from say a Walmart on how to do this more effectively. We can look at, I think the lessons from some of the other major corporations in our economy that now use so-called internal carbon pricing. So they actually say, here's a carbon price. How does it affect our investments? How does that affect our strategy? If the Biden White House said, here's the carbon price I want you to use. I want you to use this carbon benchmark, and I want everything you do to sort of reflect and account for this, both your near-term investment in procurement, your longer-term strategy development that helps make everyone think about climate as a part of the everyday job of doing the government's business.
I think the second thing is going to be how we communicate to people, how we communicate to key stakeholders around our economy about climate change. This has become a frustratingly partisan issue. It has been subject to a lot of deliberate misinformation. I think it's going to be for the president to speak about climate change and make it clear on why it's important we, as a country are addressing it, what he is doing as president to make sure that the government does more, but also making it clear that from CEOs of major corporations to a homemaker in the Midwest, there are things you can do so that we get all moved together as a society in dealing with this problem. So I think that the president needs to use the bully pulpit and the president needs to think about how to engage his team, even those who you might not typically think of as being speakers on climate change, maybe the Secretary of Defense, the Secretary of Treasury, have them talk about why this is important, how is informing their work and how they can then engage the key stakeholders they normally do in the course of their business, in our society to make sure that they're making progress in addressing climate change.
And the third is I think to draw off of that and hopefully build some momentum is it, how do we work with Congress to then craft a comprehensive approach to dealing with climate change. We're not going to be able to deliver on President Biden's goals that he's laid out. We're not going to be consistent with what the international community has called for in the Paris Agreement, without more ambitious authorities in our laws. We're going to have to craft new public policies. We're going to need that working with Congress. That's hard. That's going to be a heavy lift, but I think that's going to be critical if we're really going to make progress on this problem.
Thoko Moyo: Thank you so much, Joe.
Joe Aldy: It's been my pleasure. Thank you, Thoko.
Thoko Moyo: Thanks for listening. I hope you'll join us for our next episode. And if you'd like more information about other recent episodes or to learn more about our podcast, please visit us at hks.harvard.edu/policycast.