No longer a problem for the distant future, the costs of climate change—wildfire, storm and flood damages, disruptions to agriculture, changes to insurance markets, and more—are already adding up and taking a toll on the lives and livelihoods of ordinary Americans. These costs disproportionately fall on communities of color and America’s economically vulnerable, who are already contending with higher exposure to local pollutants. At the same time, as the country works to restart its economy following the COVID-19 pandemic, energy must remain inexpensive and reliable, capable of fueling a robust recovery.

Together, these threats make up the Global Energy Challenge. To help confront it, the Energy Policy Institute at the University of Chicago (EPIC) has produced a compilation of evidence-based proposals to inform public policy. The U.S. Energy & Climate Roadmap is grounded in research conducted by University of Chicago faculty that has been galvanized by rigorous academic debate and channeled into practical policy applications through collaboration with EPIC’s policy experts.

A bipartisan collection of more than twenty current and former executive, congressional, state and industry leaders and other experts in the field have praised the book’s approach and policy proposals. These include former cabinet and congressional members such as EPA Administrator Carol Browner, Republican Congressman Carlos Curbelo, CIA Director and Undersecretary of Energy John Deutch, White House Council of Economic Advisors Chair Glenn Hubbard, Energy Secretary Ernest Moniz, Treasury Secretary Hank Paulson, White House Chief of Staff John Podesta, White House National Economic Council Director Laura Tyson, as well as senior White House and agency officials who played important roles in shaping climate and energy policy under the last five presidents. Additionally, a diverse range of industry and advocacy leaders are included: Exelon CEO Chris Crane, bp Chief Economist Spencer Dale, EDF President Fred Krupp, The Breakthrough Institute Founder Ted Nordhaus, Senior Michael Bloomberg Advisor Carl Pope, and Niskanen Center President Jerry Taylor. (Full List and What They’re Saying)

The book contains a comprehensive suite of energy and climate policies, including: concrete changes to the way the government estimates the social cost of carbon, essential for any robust climate policies; principles for pricing carbon and for ensuring that doing so does not harm U.S. businesses and workers; proposals that could further the goal of achieving a carbon-free power sector by 2035, including ways to better integrate clean energy into the grid and create a clean electricity standard; specific actions to make fuel efficiency standards more effective and to guide investments in energy efficiency programs; modifications to oil and gas leasing on public lands to ensure Americans receive fair value; and detailed recommendations to remediate the effects of coal mining and provide support for coal communities.

“The Global Energy Challenge demands that we find effective policies. The most effective policy ideas are often cultivated in academia, where they are strengthened and enriched by the scrutiny of peers. Unfortunately, they are all too often hidden in academic journals and dusty libraries,” says Michael Greenstone, the Milton Friedman Distinguished Service Professor in Economics and director of EPIC. “Our mission at EPIC is to develop these ideas and to deliver them to those who can make policy. With this book, we have gone one step further by developing the ideas and turning them into concrete and actionable policy proposals that aim to cost-effectively confront climate change, while ensuring energy costs are low and the pollution burden is reduced, especially for the economically vulnerable and people who have been treated inequitably historically.”

Evidence-based Policies for Effective Action

The book’s opening section helps readers understand the likely effects of climate change in the United States and how best to think about their total costs. Drawing on research published in Science from the EPIC-affiliated Climate Impact Lab, the first chapter illustrates the scale of the threat climate change poses to the United States and shows that the worst potential consequences will fall on the country’s poorest communities.

For policymakers, knowing the projected effects of climate change is only half the battle. Resources are finite and policymakers must choose how best to spend them, not only on fighting climate change but also on health, education, infrastructure, and other priorities. Policymakers therefore need to understand the costs of climate damages to understand how best to address them.

The second chapter in this section, therefore, explores the social cost of carbon (SCC), which is an estimate of the monetary damages from the release of an additional ton of CO2. The SCC is a central component to cost-benefit analyses required for any climate regulation, so it is critical that it reflects the profound changes in understanding about climate change. Michael Greenstone and Tamma Carleton, an assistant professor at the University of California, Santa Barbara, provide several recommendations that would ensure the Biden administration’s comprehensive effort to update the social cost of carbon is based on frontier climate economics. These include using the latest climate modeling, applying a new valuation of climate damages, employing lower discount rates, and incorporating global, rather than only domestic, damage estimates of additional carbon emissions. Greenstone and Carleton previewed these recommendations in a working paper. On February 26, 2021, the Biden administration announced an interim SCC, echoing one recommendation. (Chapter Brief)

From there, the book is organized under two broad themes. The first, Economy-Wide Approaches, starts from the understanding that it is appropriate for polluters to pay for the damages they cause. Greenstone and postdoctoral scholar Ishan Nath outline the policy widely held by economists as the most cost-effective method of reducing emissions: enacting a national, market-based framework to put a price on carbon wherever it is emitted. They suggest best practices in forming and carrying out a price mechanism. The revenue collected from such a policy, they say, could be used for a variety of purposes, including refunding low-income households. (Chapter Brief) Price mechanisms are often paired with border tax adjustments to prevent the exporting of emissions overseas. Building on research published in the National Tax Journal, UChicago Law’s David Weisbach and his colleague Samuel Kortum from Yale University lay out an alternative that would be simpler to construct and enforce and more effective at reducing emissions: a tax on domestic energy extraction and production, implemented by taxing domestic extraction and imposing border adjustments on energy imports and exports at a lower rate than the extraction tax. (Chapter Brief)

Chapters in Sector-by-Sector Approaches dive into climate and energy sectors, offering policy ideas for tackling specific energy and environmental challenges.

Achieving the Biden administration’s goal of a carbon-free power sector by 2035 will require enormous growth in U.S. renewable power generation. Building a nationwide grid would be one of the cheapest ways for the government to encourage this growth and avoid grid failures such as that in Texas that could otherwise become more frequent with climate change, writes EPIC Non-Resident Scholar and Tufts University Assistant Professor Steve Cicala. A nationwide grid could be built using both existing regulatory authority and upgrading and re-using existing rights of way.  (Chapter Brief) To complement that approach, as well as provide an improved policy to the myriad Renewable Portfolio Standards that their research shows to be inefficient, Michael Greenstone and Ishan Nath propose a flexible and technology-neutral national Clean Electricity Standard that would level the playing field among all carbon-free energy sources and encourage clean energy innovation. (Chapter Brief) At the same time, the intermittent nature of wind and solar energy requires back-up power that can quickly ramp production up and down. With some changes to design, manufacturing and construction processes to lower costs, modern nuclear power could play this role, write William E. Wrather Distinguished Service Professor Robert Rosner and postdoctoral scholar Rebecca Lordan-Perret. (Chapter Brief)

Generating more clean energy is one way to reduce emissions. Another approach is simply to use energy more efficiently. In the power sector, Harris Public Policy Assistant Professor Fiona Burlig provides ideas to improve energy efficiency policies. Most notably, she proposes rigorous ex post analysis, which mounting empirical evidence—including Burlig’s own—suggests is needed to identify and improve policies that are not delivering promised savings to American families. (Chapter Brief) In the transportation sector, Harris Public Policy Associate Professor Koichiro Ito offers proposals to improve fuel economy standards as the government revisits this policy in the coming months. These include eliminating regulatory distinctions between vehicles of different sizes and types (as explored in his paper published in The Review of Economics and Statistics) as well as establishing a formal, transparent trading market and increasing government oversight of emissions testing. (Chapter Brief)

Despite even the most aggressive efforts to reduce emissions, fossil fuels will continue to make up a portion of the U.S. energy mix in the coming decades. Where that energy comes from, how it is produced, and what happens to the people and places that produce it are all important variables. The dirtiest and least cost competitive of these resources is coal. Historically, coal has enjoyed substantial implicit subsidies because its price does not account for its full social costs. In an effort to level the playing field, UChicago Law School’s Mark Templeton, suggests factoring the social cost of carbon into the approval process for new mines on federal lands, addressing legacy environmental issues at these sites, and giving coal workers the opportunity to help clean up closed mines and plants in their communities. (Chapter Brief)

At the same time, Americans should receive fair value for the oil and gas resources that will continue to be used. Grounded in several of their research projects (here and here), Booth School of Business Assistant Professor Thomas Covert and Harris Public Policy Professor Ryan Kellogg suggest changes that would make the federal leasing process for oil and gas like those already used in state and private markets – changes that are particularly relevant as the Biden administration considers these practices amidst a pause on new leases. (Chapter Brief)

Greenstone says, “Born out of cutting-edge academic research and practical insights, these chapters provide evidence-based ideas to bolster efforts by the Biden administration and Congress to navigate the Global Energy Challenge for all Americans.”

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Media Contact: Vicki Ekstrom High, vekstrom@uchicago.edu