DeepSummary
The episode is a conversation between Jason Bordoff and Jason Furman, an economist and former advisor to President Obama. They discuss the Inflation Reduction Act and its impact on climate policy, particularly the shift towards green industrial policies and subsidies. Furman expresses concerns about the distributional impacts of such policies and their effectiveness compared to a carbon tax.
Furman argues that while the IRA represents the biggest climate policy action in US history, subsidies alone may not be sufficient to achieve the necessary emissions reductions at scale. He suggests keeping options like a carbon tax open and questions the emphasis on creating green jobs and domestic manufacturing through industrial policy.
The conversation also touches on issues like supply chain resilience, trade policy, and the challenges of accurately assessing the social cost of carbon and long-term impacts of climate change. Furman provides insights from his economic policy experience while acknowledging the political constraints that shape climate policymaking.
Key Episodes Takeaways
- The Inflation Reduction Act represents the biggest climate policy action in US history, but relying solely on subsidies may not achieve necessary emissions reductions at scale.
- Furman raises concerns about the distributional impacts of green industrial policies and questions their effectiveness compared to a carbon tax.
- There are doubts about the political sustainability of the IRA's approach and whether it will endure under future administrations.
- The emphasis on domestic manufacturing and job creation through industrial policy could lead to less productive economic activity.
- Accurately assessing the social cost of carbon and long-term climate impacts remains a challenge for economists.
- Potential for technological progress offers optimism in reducing mitigation and adaptation costs for climate change.
- Ideological leanings and desire to 'make the world better' may drive Democratic policymakers towards industrial policy approaches.
- Trade-offs exist between climate goals and advancing other social/economic priorities through industrial policy.
Top Episodes Quotes
- “The way to think about industrial policy, whether it's for the clean energy transition, for microchips, for anything else, is to ask yourself, would it be better for the economy if we take the hundred units of stuff we're making or the hundred people we're employing and shift two of it from what's happening now to this new activity?“ by Jason Furman
- “I think the jury is out and, yeah, this isn't obviously more politically sustainable than another route would have been.“ by Jason Furman
- “If you don't think it's going to change the unemployment rate where these things are made, and you think that if we're better at something in this country and higher productivity that you don't really need to redirect your subsidies towards it, then you're just talking about risking creating new jobs and new sectors. They're actually worse than the jobs you were creating before.“ by Jason Furman
- “I am optimistic that the costs of stopping climate change and the cost of climate change both might pleasantly surprise us in the same direction.“ by Jason Furman
- “I think there's just this sort of problem that democratic administrations like to do, industrial policy. And democratic administrations attract people whose background is less in industry and more in trying to make the world a better place in lots of different respects.“ by Jason Furman
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Episode Information
Columbia Energy Exchange
Columbia University
6/6/23
Governments around the world are increasingly turning to “industrial policy” in pursuit of stronger climate action such as the Inflation Reduction Act. These targeted economic measures can build domestic clean energy industries and increase security and resilience. But there are risks to this approach, including higher costs and trade tensions. In the years ahead, policymakers will face a difficult balancing act as they work to expand the availability of low-cost clean energy while boosting their own domestic economies.
What does the shift towards green industrial policy mean for the energy transition? How has this shift manifested in the Biden administration’s approach to climate action? And what new climate policies might be on the horizon?
This week host Jason Bordoff talks with Jason Furman about the rise of green industrial policy, the outlook for the Inflation Reduction Act, and how economists think about climate change.
Furman is the Aetna professor of the practice of economic policy at Harvard University. He is a former colleague of Jason Bordoff in two different capacities, both in the Obama White House and at the Brookings Institution’s Hamilton Project. Prior to his appointment at Harvard, Furman served as a key economic advisor to President Obama, including as the chair of the Council of Economic Advisors. He played a key role in implementing the major economic policy initiatives of the Obama Administration, including the American Recovery and Reinvestment Act and the Affordable Care Act.