How to Think about the Green New Deal after Its First Piece of Legislation
December 18, 2019
In early November, Senator Bernie Sanders (I-VT) and Representative Alexandria Ocasio-Cortez (D-NY) unveiled the Green New Deal for Public Housing Act, the first official piece of Green New Deal (GND) legislation (beyond the resolution released back in February). The bill calls for an investment of $180 billion over 10 years to sustainably retrofit, repair, and decarbonize public housing across the United States. With this bill, advocates are beginning to answer some of the questions surrounding what a GND looks like in practice. The legislation makes five important points about the broader GND strategy. First, it links a recognized issue in a seemingly non-climate arena—in this case, public housing—with carbon mitigation as a means of political mobilization. Second, the bill takes a sectoral (or in this case, sub-sectoral) approach as opposed to the whole-of-economy ambitions of a carbon price. Third, the legislation promotes a vision of government as a market creator and industrial planner that sets the direction of economic transformation. Fourth, it mirrors some examples used by state and foreign governments in approaching carbon mitigation through a co-benefits political strategy. Finally, the GND legislation is exclusively focused on domestic policy, with little to say about global emissions.
Proponents of the GND bill have identified investment in public housing, which can include all types of residential buildings, from single-family homes to high-rise apartments, as a clear and present need and are using this need as an inroad for carbon mitigation. According to the bill’s proponents, investments in public housing can improve living standards for its inhabitants, create jobs, and mitigate emissions while addressing the United States’ “affordable housing crisis.” Data for Progress, a left-leaning think tank, estimates the bill would create over 240,000 jobs per year, although this figure seems inflated by their methodology. Public housing serves 2.6 million U.S. residents in 1.1 million households, half of which were built before 1970. Over 85 percent of residents earn less than half their local area’s median income. The U.S. Department of Housing and Urban Development estimate d in 2010 that the existing stock of public housing requires around $90 billion of repair work before 2030 just to deal with existing issues such as lead toxicity and water quality, a figure that has likely grown over the last 10 years.
In addition to funding these housing upgrades, the bill aims to make the public housing stock carbon neutral by issuing grants to improve energy efficiency while expanding renewable energy generation. The bill would allow also public housing units to keep a share of profits from newly installed community generation projects.
Creating this link between public housing and climate change is emblematic of the broader strategy of the GND: mobilizing collective action through a utopian vision of the progressive agenda by linking its goals explicitly to climate mitigation and adaptation. This is clear from many of the public remarks of advocates and supporting legislators. For example, Ocasio-Cortez, in her speech unveiling the GND resolution, argued that “we are not going to transition to renewable energy without also transitioning frontline communities and coal communities into economic opportunity as well.” In other words, progressive goals are inextricably linked to climate goals. In an issue of the American Prospect devoted entirely to the GND, its co-founder and co-editor wrote, “the needed technologies and strategies exist. The challenge is rallying a national commitment to pursue them.” While the public’s prioritization of climate change is changing rapidly, it still trails many issues in determining voting decisions—issues that, not by chance, are being linked to climate change within the GND framework. We can therefore expect a series of additional bills marrying everything from universal healthcare to a jobs guarantee to climate change in an attempt to mobilize collective action and voting behavior.
While the link to progressive goals is novel, a piecemeal strategy to climate policy isn’t new to the GND, and it mirrors successful climate policies implemented worldwide and at the state and local level. Most importantly, it is the key element in its commitment to complete decarbonization. While economists tend to endorse an economy-wide carbon price as the most efficient and cost-effective means of reducing carbon emissions, policies designed to reduce emissions in a specific sector have been the more commonly implemented strategy and are the only approach that can achieve emissions reduction at the speed required to hit Paris Agreement targets.
Sectoral policies include any targeted approach to reducing emissions in a specific industry, technology or market, such as renewable portfolio standards and solar panel subsidies in the clean energy sector or “cash for clunkers” and gasoline taxes in the automotive industry. More and more experts are calling for a mix of these second-best policy approaches rather than relying on a carbon price alone. In a recent report from the Energy Transitions Committee, Accelerating the Low Carbon Transition, the authors write that “reducing global emissions in fact requires not just one low carbon transition, but many”—each requiring targeted actions designed to encourage “rapid diffusion of new technologies, and the reshaping of markets and socioeconomic systems.”
The GND public housing bill aims to reduce emissions by encouraging a low carbon transition within the residential sector, starting with the sub-sector of public housing. As can be seen in the chart below, every sector of emissions contains multiple sub-sectors that, under this approach, would ultimately require their own GND legislation. The entire housing stock of the United States—all 118 million house—is responsible for 16 percent of U.S. emissions. Two-thirds of residential emissions are from electricity use and the remainder are due to direct combustion such as space and water heating, the carbon content of which comes down to the mix of oil, natural gas, and coal used to generate that energy. The GND bill therefore aims to reduce emissions in residential buildings by generating clean energy and electrifying the public housing stock, cutting emissions from both the source of residents’ electricity and their direct combustion of fossil fuels. We are still very early in this process of decarbonizing buildings, and it is unclear at this stage that we even know how it could be done, yet we do know it will be essential to achieving any deep decarbonization goals. The GND for public housing bill is therefore as much an experimental first step, or proof-of-concept, as it is a comprehensive strategy for deep decarbonization.
However, the sectoral approach is undoubtedly more expensive than a whole-of-economy carbon price, and this is especially true of this first GND bill. The standard unit of comparison between climate policies is the dollars spent per ton of carbon mitigated, sometimes referred to as the static cost of carbon abatement. Using this measure, if we assume the legislation steadily reduces annual U.S. emissions over the ten years of spending, reaching 5.6 million metric tons annually by 2030 (as estimated by Data for Progress), and that the additional $90 billion on top of regular repairs all goes toward decarbonization (which is unspecified in the text of the legislation), a back-of-the-envelope calculation suggests the bill spends approximately $1,500 per ton of carbon mitigation over a 15-year period. A similar calculation by the Niskanen Center puts the marginal abatement cost at between $833 and $1,204 per metric ton.
By way of comparison, economist William Nordhaus estimates that carbon would need to be priced at $236 per ton in a carbon tax or cap-and-trade scheme to meet the 1.5 degrees Celsius climate target, and the Environmental Protection Agency’s estimate of the social cost of carbon was $42 under the Obama administration. When compared to other sectoral policies, however, the GND bill fares better. According to one review of the literature, some solar subsidies have a static cost as high as $2,100 per ton, and low carbon fuel standards can be as high as $2,900 per ton. On the other hand, more cost-effective policies like renewable portfolio standards cost only as high as $190 per ton, methane flaring regulation costs $20 per ton, and behavioral energy efficiency policies can earn net benefits of $190 per ton.
This static cost methodology, however, does not include positive externalities, or spillovers, from a given piece of climate policy. Not only are there likely to be social and economic benefits from investing in public housing—a figure for which is not available in the legislation—but there may also be spillovers that affect emissions in the future. The canonical example of this kind of dynamic process is the price of solar panels, where relatively expensive early investments in R&D, subsidies, and feed-in tariffs dramatically drove down the cost of panels and carbon abatement over time. Such feedback loops are notoriously difficult to model and are therefore ill-suited to conventional cost-benefit analyses of a given policy, yet these dynamic effects should still be weighed against static costs in evaluating this and future legislation.
The GND is firmly based on this vision of the federal government as a market creator and instigator of a broader economic transition, dynamically reshaping private sector incentives. Through large-scale infrastructure programs and public investment, it aims to set the direction for an economy-wide transformation, crowding in green investment, stimulating innovation, and therefore lowering the cost of future emissions reduction. This industrial planning approach to carbon mitigation has been partially implemented in Germany and China, with some success, and a growing number of economists suggest the same “mission-oriented approach” is needed in the United States to achieve deep decarbonization. Public housing is the only component of the residential sector where the federal government can invest directly, which is one reason why a GND bill starts with this relatively small sub-sector. Over time, this initial investment may reduce the cost of decarbonizing the private housing stock by enlarging the market for green retrofitting, driving down the price of necessary technologies like electric heat pumps, and crowding in additional private investment into a growing market opportunity.
This legislation also reflects how the GND has learned from the political strategy of existing climate policies, particularly those conducted at the state level. No state has put a sufficient price on carbon to seriously approach deep decarbonization, but those that are successfully cutting emissions have instead adopted a sectoral approach providing co-benefits between carbon reduction and social or economic goals. In this way, states and the GND are taking on bite-sized chunks of emissions through legislation that can feasibly be passed even as they create supportive political coalitions along the way. While early criticisms of the GND described it as “an untrammeled Dear Santa letter without form, purpose, borders, or basis in reality,” this initial bill indicates how its architects have learned from real-world political experience to deliver climate policies that feasibly stand a chance of implementation.
This approach has been described as a “policy sequencing framework,” whereby climate policies increase in ambition over time as the political barriers are eroded and supportive coalitions are established. Sequencing has been an effective strategy for promoting renewable energy in Germany and California, for example. In these cases, early but small targets were steadily ratcheted up as the renewable energy sector grew in size and political clout, creating a positive feedback loop. Decarbonizing public housing could initiate such a feedback loop by generating new jobs and businesses in green retrofitting, which could then generate additional political pressure for a broader green housing bill, not to mention the support of the residents themselves. A key risk, however, is that such high-cost programs are often defeated exactly because of their hefty price tags—thus negating their potential for future political benefits. In this way, sectoral climate policies have generally taken an approach of being high cost per dollar of abatement but low cost overall to reduce the chances of fiscal hawks balking at the bill. An ongoing difficulty for GND advocates will be overcoming the initial barrier of having both high overall and marginal abatement costs.
Finally, this first piece of GND legislation is notable for its highly localized approach. Even as climate observers bemoan the “enraging failure” of COP25, the UN climate conference in Madrid, GND advocates have chosen an issue specific to just 2.6 million Americans and 0.1 percent of U.S. emissions to focus on first. One might argue that this is in fact consistent with global climate negotiations, which, since the 2015 Paris Agreement, have shifted from attempts at generating binding emissions targets to devolving responsibility to national governments that enforce voluntary commitments. The localized approach is also in keeping with the political strategy of the GND, which boils down to connecting climate change to everyday issues. Nonetheless, the United States occupies a unique position on the international stage, and it is worth noting the GND has little to say so far about how its radically ambitious proposals at the domestic level can translate into global leadership.
After months of speculation and debate over the GND resolution, we now have a substantive bill to draw from. The breadth of its scope and specifics of its strategy are a bit clearer now that we have seen one of its ideas brought to legislative light. Given what we now know about the strategy of the GND, we can both expect to see more bills approach decarbonization on this sector-by-sector basis while also hoping that future bills clarify issues such as expected externalities, social versus decarbonization spending, and the international outlook. In the meantime, it is up to think tanks, the academy, and politicians to engage in this debate and help the public determine whether those ideas are worth the price tag.
Lachlan Carey is an associate fellow with the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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