Market-Oriented Solutions to Climate Change

An Essay by Rep. Elise Stefanik (R-New York)

As originally published in The Catalyst, Spring 2019

he environment is the economic lifeblood of my district in New York’s North Country. Our community understands that clean air and clean water are not just political issues — they are a core aspect of our daily lives. It’s imperative that we step up in Congress and make smart environmental choices for future generations. Sustainable options depend not just on climate outcomes, but also center on reinforcing personal liberty and responsibility; values upon which our great country was founded.

I believe we must tackle this generational challenge with bipartisan, serious policies. Proposals like the Green New Deal are non-starters because they would not only restructure our energy systems, but also the relationship between the people and a vastly expanded federal government. Free markets, strong property rights, and consumer choice aren’t protected under this kind of sweeping legislation.

We can combat our climate and environmental issues through market-based solutions. We need to act — which is why I am focused on actionable policy ideas to diminish market barriers, reduce pollution, and increase economic growth and justice through free enterprise. 

We need to act — which is why I am focused on actionable policy ideas to diminish market barriers, reduce pollution, and increase economic growth and justice through free enterprise.

Fortunately, I’m not alone in this thinking. Many of my Republican colleagues also view climate change as a growing threat to our future.

Market-friendly environmentalism: What is it?

Market-based policy approaches encourage behavioral changes through signals to the market — often focused on changes in prices — rather than through explicit governmental directives. Market-based approaches encourage businesses and individuals to undertake pollution control efforts that are in their own interests, and that collectively meet policy goals when they are well-designed and properly implemented.

Republicans have championed market-based solutions for decades. President Reagan used a market-based approach to remove toxic lead from gasoline. President George H.W. Bush used a market-based approach to eliminate acid rain. And starting in 2005, when the Energy Policy Act passed in a Republican-controlled Congress, President George W. Bush signed tax credits for solar and wind into law. I would argue this commenced the era of clean energy.

Tax credits for wind and solar have helped jumpstart an industry that is now one of the most dynamic sectors of the economy nationwide. Solar photovoltaic installers and wind turbine service technicians have been the first and second top-growing jobs over the past decade. These tax credits are scheduled to phase-out over the next few years because the subsidies were originally intended to help a nascent market get off the ground, and that goal will be largely achieved by the end of the phase-out.

Solar panel installer has been the fastest-growing job for the past decade.

Combined with the transition from coal to natural gas, this market-based approach to energy policy had made it so the U.S. leads the world in emissions reductions. As of 2018, our carbon emissions were 10 percent below 2005 levels, which is roughly two-fifths of the way to the Paris Agreement target of 26 percent below 2005 levels by 2025.

Unfortunately, not all renewable energy types are treated equally by the tax code. That’s why I introduced the Renewable Electricity Tax Credit Equalization Act. This common-sense legislation places biomass, hydropower, geothermal, and other renewable energy sources on a level playing field with wind energy facilities. 

Renewable energy sources have vast potential for both our natural environment and for economic growth. It’s important that we look beyond solar and wind solutions and give other renewables the support they need as well.

Renewable energy sources have vast potential for both our natural environment and for economic growth. It’s important that we look beyond solar and wind solutions and give other renewables the support they need as well.

But even with an all-of-the-above approach to energy policy, and a level playing field for renewables, more needs to be done. After years of decline, last year U.S. greenhouse gas emissions rose by a projected 2.5 percent.

How to tackle climate change

Like most Americans, Republicans and Democrats alike agree actionable steps are needed when it comes to reducing greenhouse gases driving climate change, but too often actionable policy solutions have been out of reach. In the absence of many bipartisan federal approaches to preserving our environment for future generations, America’s private and public sectors have been making tremendous strides in developing new technologies, deploying clean energy, and reducing emissions. 

American ingenuity and innovation will help us lead the globe in solving these complex problems. The federal government has the ability to nurture this development without economically damaging regulation.

Throughout history the world’s greatest problems have been solved in American laboratories. We have the opportunity to use federal research programs to complement the advances taking place in the private sector. Increasing funding to the Advanced Research Projects Agency – Energy (ARPA-E) will help drive research into nascent energy generation, storage, and usage projects that may be too undeveloped for private investment.

Throughout history the world’s greatest problems have been solved in American laboratories.

Innovation on display at the 2018 ARPA-E Energy Innovation Summit. (U.S. Department of Energy)

Another part of the solution should be incentivizing good action by the private sector. Currently, many of the successes being driven by business lack public awareness because there is no effective way to document the aggregate benefits of their efforts. This lack of information makes it difficult for businesses to drive private investment and respond to consumer demand for climate action.

One idea that Citizens for Responsible Energy Solutions has put forward is establishing a voluntary federal framework for public and private sector entities to highlight their efforts to reduce carbon emissions and increase renewable energy procurements. This voluntary system would aim to increase transparency and accountability in the emerging carbon economy, in hopes of further decreasing U.S. greenhouse gas emissions. Voluntary programs like the Department of Energy’s Energy Star Program and the U.S. Green Building Council’s LEED Certification offer effective models for recognizing products and projects that go above and beyond environmental standards.

Read the rest of the article here.