On today’s episode of Free Range, Livermore is joined by Michael Greenstone, the Milton Freedman Distinguished Service Professor in Economics and the Director of the Energy Policy Institute at the University of Chicago. He served as the Chief Economist for President Obama’s Council of Economic Advisors and has worked for decades engaged in research and policy development on environmental issues.


Livermore and Greenstone begin by discussion the climate provisions of the Inflation Reduction Act and their policy implications (0:47-4:47) Greenstone offers his take on what the IRA means (if anything) concerning the role of economists in debates over climate policy (4:48-8:49) and the two discuss the relationship between energy prices and politics. (8:50-14:10) Livermore and Greenstone agree that transparency of pricing mechanisms can be both a feature and a bug. Greenstone mentions that while the US is viewed as a free market place, our instinct is to approach the situation as engineers. (14:11-20:20)

He then offers thoughts on why the engineering approach won out in the IRA. (20:21 – 25:34)

The two discuss the factors that helped lead to lower technology costs green cleaner energy sources, which helped pave the way for the IRA. (25:35-28:12) The sulfur dioxide trading mechanism in the 1990 Clean Air Act Amendments is a classic example of policy that promoted low cost emissions reductions; R&D funding is another area where government is justified. (28:13-30:24)

The two turn to the question of economic forecasting in climate debates. (30:25-34:17) Greenstone discusses the work of the Climate Impact Lab, which he directs, which is improving estimates of climate damages and the social cost of carbon. (34:18-40:55)

The two discuss the role of adaptation in climate damage estimates (40:56-47:05) and the role of distributional analysis. (47:06-51:15)

The two then discuss an alternative to the social cost of carbon that is based on “marginal abatement costs” associated with achieving a given climate goal. (51:16-57:11)

To conclude, Livermore asks about the potential path forward for global cooperation on climate change. For Greenstone, he focuses on areas of policy that he can influence, and in particular on driving down the difference (delta) between the private cost of clean energy and dirty energy and looking for opportunities to leverage our policies for reductions elsewhere in the world. (57:12-59:36)