Technology choices will decisively impact whether climate-pivoted economic policy brings benefit or disaster
By JONATHAN TENNENBAUM
President Joe Biden’s climate plan is a grandiose vision. Combining deliberate echoes of Franklin Roosevelt’s New Deal with the crash-program approach to development of technology. Exemplified by the Apollo program of the 1960s. If it works, planet Earth and the US economy will be saved at the same time.
Biden has vowed to establish US leadership in saving the planet from an impending climate apocalypse. His appointments of establishment climate activists to high positions in his administration, along with his opening salvos of executive orders, confirm his intention to make climate the central topic in all spheres of US government activity.
He calls it the “Whole of Government Approach to the Climate Crisis.”
Among other things Biden ordered a National Intelligence Estimate (NIE) of the threat that climate change poses for US national security. He made climate officially the priority focus of US foreign policy.
One has the distinct impression that the Biden Administration intends to use the climate crisis as an occasion for reasserting the primacy of US power in international affairs. Far beyond rejoining the Paris Agreement on his first day in office, Biden has made clear that the United States will act as global enforcer of CO2 reduction measures. And, needless to say, he intends to focus especially on China.
Biden has committed himself to making climate the center of US domestic economic policy. The recent executive orders already contain elements of his campaign promise to channel $2 trillion into building a “clean” national infrastructure. And thereby creating millions of new jobs and driving innovation and economic growth.
If all goes according to plan, by 2035 the US should have 100% CO2-free electricity generation. By 2050 total net emissions should reach zero.
“Social Cost System”
Among the first concrete steps is to initiate planning for replacing the entire fleet of over 600,000 vehicles used by federal government and the US Postal Service to zero-emission vehicles.
A key move, which has so far attracted little attention in the news media, is to implement the so-called “social cost system” as a guiding criterion for daily government decision-making. The social cost system is based on attaching a numerical value to the “global damage” attributed to emission of a given amount of carbon dioxide – in the production of a given commodity, for example.
This will have a big economic impact through the choice of products and vendors for government purchases, on which Washington spends about $600 billion a year.
The $2 trillion climate plan – whose funding must, of course, be approved by Congress – would follow on the heels of a $1.9 trillion American Rescue Plan to help the US economy and population recover from the effects of Covid-19.
All in all, the degree of concentration of a US government on a single theme is practically unprecedented in peacetime. Were it not for the Covid-19 pandemic there would doubtless be much more discussion about this radical course. People who believe that global warming is the greatest crisis of our time might easily overlook problematic, even ominous implications of declared policies.
I wish to emphasize that I am not motivated by political opposition to the Biden Administration. Nor, of course, do I oppose rational measures to reduce and eventually eliminate the world’s one-sided dependence on fossil fuels.
One should also keep an open mind in respect to any new administration, which carries contradictory interests and impulses with it into office. It may adjust its course as it confronts reality.
Taking Biden’s declarations very seriously
But there are reasons to take Biden’s declarations very seriously.
Firstly, to all appearances Biden and his close advisors truly believe that the world is headed toward an unprecedented catastrophe through global warming. And that the clock is ticking and that urgent action is necessary to reduce CO2 emissions world wide. Not only the US but other nations as well must do so. Especially the largest CO2 emitters, with China in first place.
Countries that refuse to reduce their emissions by the necessary amounts voluntarily must be forced to do so. The logic is inescapable.
Secondly, as Biden has emphasized for the United States, replacing the world’s entire fossil fuel infrastructure with “clean technology” over the next 30-40 years creates a new market of colossal dimensions. Assuming that the nations and populations are able to pay for it.
Thirdly, immense amounts of financial capital have already been committed to the expectation of radical climate policies. CO2 emissions are being monetized and a vast financial machinery created, tying asset valuations to parameters such as “carbon intensity” and “sustainability indices.”
Climate projections are being built into long-term risk strategies and the premium structures of insurance companies. The volume of carbon trade is growing exponentially. With it, the market for climate-linked financial instruments such as green bonds (already at $500 billion) and other so-called green assets.
Shaping global investment patterns and financial flows
Thereby, climate policy becomes a powerful instrument for shaping global investment patterns and financial flows. In his 2020 “Open Letter to CEOs” Larry Fink, the Chairman of the world’s largest asset management company, BlackRock, declared: “I believe we are on the edge of a fundamental reshaping of finance.”
In the meantime BlackRock, several of whose executives have been named to high positions in the Biden Administration. And announced that it is making climate change central to its investment strategy for 2021.
Thus, in all probability the Biden Administration will indeed pursue the radical course announced during his campaign and signaled by initial executive orders.
What will that mean?
From the positive side, I have reason to expect that areas of science and technology that are critically important for the future – nuclear fission and fusion, new materials, hydrogen technologies, high-density energy storage, applications of high temperature superconductivity and much more – will receive greater support under the new administration, than has been the case under preceding ones.
This is a crucial point. Leaving many other factors aside, the choice of technologies employed in the promised rebuilding of US infrastructure. Assuming it actually occurs. It will have a decisive impact on whether Biden’s climate-pivoted economic policy will benefit the nation or lead to disaster.
Following this introductory article no. 1, further installments in the series will take up the following concerns:
- Green imperialism: Is the Biden Administration turning the climate issue into a vehicle for great-power geopolitics?
- Will Biden’s climate policy serve, defacto, as a vehicle for financial interests that are positioning themselves to profit from the tectonic shifts in global financial flows, arising from a forced move away from fossil fuels? Is this a “BlackRock Administration”?
- Will overheated climate measures set the stage for a financial crisis? Major bets are being placed on the future of the world energy system, and market stability faces the dual menaces of a “green bubble” of climate-linked financial assets and a “carbon bubble” of potentially worthless fossil fuel assets.
- Consider the risk of a California-like horror scenario: economically ruinous over-expansion of so-called renewable energy sources and ideologically-driven environmentalist measures, leading to exploding energy prices, blackouts, economic austerity, productivity losses and growing poverty. Will ill-conceived climate measures generate a political backlash and a resurgence of the Republicans, at latest by the 2024 Presidential elections?
- Will the United States descend into economic and social crisis when the temporary, government money injections-induced “high” begins to wear off?
- What’s the danger that ill-conceived measures by the Biden Administration, in the name of saving the planet, will undermine the capability of the United States and other nations to cope with climate changes in the future?
- At the end I shall make some remarks concerning what a rational approach to the climate issue would look like.
Jonathan Tennenbaum received his PhD in mathematics from the University of California in 1973 at age 22. Also a physicist, linguist and pianist, he is a former editor of FUSION magazine. He lives in Berlin and travels frequently to Asia and elsewhere, consulting on economics, science and technology.