Getting the Recovery Right

For most of the past generation, the aims of environmental sustainability and social justice were seen as equally worthy, yet painfully and unavoidably in conflict. Tree huggers and spotted owls were pitted against loggers and hard hats. Fighting global warming was held to inevitably worsen global poverty and vice versa. Indeed, the competing demands of the environmental and social justice agendas were frequently cited as a classic example of how public policy choices were fraught with trade-offs and unintended consequences -- how you could end up doing harm while seeking only to do good.

Now, under President Obama, the idea of a green recovery -- an investment program to promote energy efficiency and the development of renewable energy -- is a central feature of his $825 billion program to defeat the most severe financial crash and recession since the 1930s.

Of course, arguments about trade-offs and unintended consequences have not disappeared. Robert Stavins, chair of the Environment and Natural Resources Faculty Group at Harvard, recently offered this analogy: "Let's say I want to have a dinner party. It's important that I cook dinner, and I'd also like to take a shower before the guests arrive. You might think, Well, it would be really efficient for me to cook dinner in the shower. But it turns out that if I try that I'm not going to get very clean and it's not going to be a very good dinner."

A weighty intellectual pedigree does undergird the Stavins story. This is a proposition developed by Jan Tinbergen, co-recipient of the first Nobel Prize in Economics and a lifelong leftist. Tinbergen held that you need separate policy tools to address distinct policy aims -- that, in other words, trying to kill two birds with one stone is not likely to succeed. As the Obama administration begins spending in the range of $150 billion to create jobs and fight global warming through a single tool of green investments, it is clearly an appropriate time to examine how much Tinbergen's law might actually apply to our current situation.

What Is the Green Investment Agenda?

The transformation of our fossil fuel driven economy into a clean energy economy will be the work of a generation, engaging a huge range of people and activities. But focusing on essentials, there are only three interrelated projects that will drive the entire enterprise: dramatically increasing energy efficiency; equally dramatically lowering the cost of supplying energy from such renewable sources as solar, wind and geothermal power; and mandating limits and raising prices on the burning of oil, coal and natural gas.

In the preliminary version of the stimulus program drafted by House Democrats in mid-January, the green recovery components of the overall $825 billion measure include about $45 billion for retrofitting buildings to increase their energy efficiency significantly; $20 billion to upgrade the public transportation system; $32 billion for building "smart grid" electrical transmissions systems that can, among other things, efficiently use power from renewable sources; and $8 billion for renewable energy research and commercialization (allowing that the exact allocations for various purposes are not yet entirely clear).

The piece that's missing is some mechanism for limiting the burning of fossil fuels. One option is to raise taxes on purchasing oil, coal and natural gas. Congress has also considered "cap and trade" proposals for the past few years, which would set increasing limits on total carbon emissions and require corporations to pay the government for rights to produce fossil fuels. A significant bloc in Congress, including some liberal Democrats like Senator Sherrod Brown of Ohio, has opposed such measures because they would impose higher energy prices on businesses and individuals. But some version of this proposal will have to be implemented -- if not amid the recession itself, soon thereafter -- to advance a successful environmental agenda.