The Green New Deal
The term "Green New Deal" has been used to describe various sets of policies that aim to make systemic change. For instance, the United Nations (UN) announced a Global Green New Deal in 2008. Former President Barack Obama added one to his platform when he ran for election in 2008, and Green Party candidates, such as Jill Stein and Howie Hawkins, did the same.
While it isn't a brand new concept, the Green New Deal has become a big part of policy debates in the country today, largely due to the remarkable ascent of Rep. Alexandria Ocasio-Cortez (D-NY), the youngest woman to be elected to the House of Representatives.
Her ambitious and wide-ranging proposal was a centerpiece of her campaign that addresses an issue that 60% of Americans say already affects their local community. As it stands, the deal promises to tackle economic inequality by creating high-quality union jobs. The Green New Deal has also been helped by a grassroots outfit called the Sunrise Movement, which organized a much-talked-about protest at Sen. Dianne Feinstein's office in February 2019.
- The term "Green New Deal" has been used to describe various sets of policies that aim to make systemic change.
- The term was first used by Pulitzer Prize-winner Thomas Friedman in January 2007 and was made popular by the proposal made by Rep. Alexandria Ocasio-Cortez and Sen. Ed Markey in Congress in 2019.
- The deal, which failed to pass in the Senate, emphasizes environmental and social justice while calling for the creation of new jobs.
- Supporters say everyone is responsible to pay their fair share, which will result in tremendous cost savings.
- Critics say implementing the deal will cost as much as $93 trillion.
History of the Green New Deal
The term "Green New Deal" was first used by Pulitzer Prize-winner Thomas Friedman in January 2007. At that point, America experienced its hottest year on record (although there have been five hotter since). Friedman recognized the easy solution to climate change politicians hoped for wasn't possible. It was going to take money, effort, and upsetting an industry that is always generous with campaign contributions.
Transitioning away from fossil fuels, he argued in a New York Times column, would require the government to raise prices on them, introduce higher energy standards, and undertake a massive industrial project to scale up green technology.
“The right rallying call is for a ‘Green New Deal,’” he wrote, referencing former President Franklin D. Roosevelt's domestic programs to rescue the country from the Great Depression. “If you have put a windmill in your yard or some solar panels on your roof, bless your heart. But we will only green the world when we change the very nature of the electricity grid—moving it away from dirty coal or oil to clean coal and renewables.”
Ocasio-Cortez’s Green New Deal
Ocasio-Cortez and Sen. Ed Markey (D-Mass.) introduced a 14-page nonbinding resolution in Congress in February 2019 calling for the federal government to create a Green New Deal. The resolution had more than 100 co-sponsors in Congress and attracted a number of Democratic presidential candidates during the election.
On March 26, 2019, lawmakers in the Senate voted 57-0 against advancing the resolution with 43 out of 47 Democrats voting "present" in order to not take a formal position. The Democrats protested Senate Majority Leader Mitch McConnell (R-Ky.) bringing up the vote without scheduling hearings and expert testimonies first.
While politicians have known about climate change and the idea of a Green New Deal for years, this is the most detailed plan presented to the American people to transform the economy, even though it is extremely vague and acts as a set of principles and goals rather than of specific policies.
The text of the resolution details how climate change affects the economy, the environment, and national security, and outlines goals and projects for a 10-year national mobilization.
The plan emphasizes environmental and social justice. It acknowledges how historically oppressed groups (indigenous peoples, people of color, the poor, and migrants) are more likely to be affected by climate change and asks that they be included and consulted. Its progressive spirit is reflected in calls for the protection of workers’ rights, community ownership, universal healthcare, and a job guarantee.
According to the resolution, the U.S. must lead the way to reduce emissions. That's because of its technological advancement and its historical contribution to the disproportionate amount of greenhouse gas emissions. The chart below, from the World Bank, illustrates how U.S. consumers account for an oversized share of global carbon emissions.
What’s in the Green New Deal?
The main goal of the plan is to bring U.S. greenhouse gas emissions down to net zero and meet 100% of power demand in the country through clean, renewable, and zero-emission energy sources by 2030.
The Green New Deal also calls for the creation of millions of jobs to provide a job guarantee to all Americans, along with access to nature, clean air and water, healthy food, a sustainable environment, and community resiliency. These goals are to be accomplished through the following actions on the part of the federal government:
- Providing investments and leveraging funding to help communities affected by climate change
- Repairing and upgrading existing infrastructure to withstand extreme weather and ensuring all bills related to infrastructure in Congress address climate change
- Investing in renewable power sources
- Investing in manufacturing and industry to spur growth in the use of clean energy
- Building or upgrading to energy-efficient, distributed, and smart power grids that provide affordable electricity
- Upgrading all existing buildings and building new ones so that they achieve maximum energy efficiency, water efficiency, safety, affordability, comfort, and durability.
- Supporting family farming, investing in sustainable farming, and building a more sustainable and equitable food system
- Investing in transportation systems, namely zero-emission vehicle infrastructure and manufacturing, public transit, and high-speed rail
- Restoring ecosystems through land preservation, afforestation, and science-based projects
- Cleaning up existing hazardous waste and abandoned sites
- Identifying unknown sources of pollution and emissions
- Working with the international community on solutions and helping them achieve Green New Deals
Separate legislation would be needed to turn the Green New Deal into a reality if Congress passed the resolution.
The Green New Deal and the 2020 Election
The Green New Deal was one of the topics of the 2020 Presidential debates. Then-President Donald Trump disparaged rival Joe Biden's climate change plan, calling it a Green New Deal that would cost $100 trillion. Biden denied the charge saying, "That is not my plan."
During the Vice Presidential debate, Mike Pence claimed that the Biden-Harris team wanted "to bury our economy under a $2 trillion Green New Deal. [They] want to abolish fossil fuels, and ban fracking, which would cost hundreds of thousands of American jobs all across the heartland.”
The resolution also factored into the campaign trail. Trump acknowledged that human activity contributes to climate change "to an extent." The Trump campaign wanted to keep fossil fuels in the energy conversation to appeal to those workers and to keep the U.S. relevant as a gas and oil exporter.
President Biden's Clean Energy Revolution
President Biden declined to endorse the Green New Deal but Vice President Harris was an original sponsor even though she says she fully supports the Biden climate plan. Called "A Clean Energy Revolution," the plan has many of the same goals as the Green New Deal but with a less ambitious time frame and at a lower cost.
For example, the Green New Deal aspires to net-zero greenhouse gas emissions and 100% clean, renewable energy sources by 2030. Biden's plan, on the other hand, achieves that goal by 2050. The Green New Deal could cost between $51 and $93 trillion to implement, according to conservative think tanks. The Biden plan would involve a federal government investment of $1.7 trillion with a private sector, state, and local buy-in of about $5 trillion.
What’s at Stake?
A common rebuttal to opponents from supporters of the Green New Deal is that although it will be expensive to implement, not doing so will be more expensive in the long run.
In order to stop temperatures from rising beyond 1.5 degrees Celsius—the target aimed for in the 2015 Paris Agreement—global emissions need to go to zero by 2050. This means that the window to avoid the most severe impact is rapidly closing.
The federal government spent $450 billion due to extreme weather and fire events between 2005 and 2018, according to a 2018 report by the U.S. Government Accounting Office. But experts warn that it will only get uglier.
Climate change will cause more than $500 billion in economic loss in the United States alone each year by 2090, according to a 2019 study. Independent research shows that about 10% could be wiped out in the global economy's value by 2050 if temperatures continue to rise by 3.2 degrees Celsius and the world doesn't meet the net-zero targets outlined by the Paris Agreement.
Support and Criticism of the Green New Deal
The Green New Deal resolution doesn't mention how the U.S. government, which has more than $30.4 trillion in debt, would pay for it. Ocasio-Cortez told CBS's 60 Minutes that "people are going to have to start paying their fair share in taxes" to pay for the Green New Deal and suggested tax rates of 60% to 70% for the very wealthy.
Regardless of where the money comes from, there is certainly a great deal of support for the proposal, not to mention a lot of criticism.
Advocates of the Green New Deal who promote a heterodox macroeconomic framework called Modern Monetary Theory (MMT), including Ocasio-Cortez, believe the government shouldn't be too concerned about the cost.
"The federal government can spend money on public priorities without raising revenue, and it won’t wreck the nation’s economy to do so," a group of prominent MMT supporters wrote in an op-ed for The Huffington Post. "The U.S. government can never run out of dollars, but humanity can run out of limited global resources. The climate crisis fundamentally threatens those resources and the very human livelihoods that depend on them."
The Green Party, whose plan also calls for America to move to 100% clean energy by 2030 and a job guarantee, says it will result in healthcare savings, (there will be fewer cases of disease linked to fossil fuels) and military savings (there will be no reason to safeguard fuel supplies abroad). The party's deal also advocates for a robust carbon fee program.
Healthcare and other savings were also touted in a 2015 study by a group of scientists from Stanford University and the University of California, Berkeley that said it is possible for the U.S. to replace 80% to 85% of the existing energy systems with ones powered entirely by wind, water, and sunlight by 2030 and 100% by 2050.
The very real existential threat to the planet makes the Green New Deal a unique mission statement that is hard to ignore or dismiss. But critics call it too socialist, too extreme, or too impractical. Some are even warned that environmentalists "want to take away your hamburgers."
The kind of overhaul the deal calls for would be very expensive and require significant government intervention. The center-right American Action Forum pegs the maximum cost at $93 trillion, while Tax Policy Center senior fellow Howard Gleckman said the plan may slow the economy by adding to the debt and even drive jobs overseas.
"Instead of the Green New Deal, the federal government could adopt a revenue-neutral carbon tax to decrease emissions without exacerbating the fiscal imbalance," said Jeffrey Miron, director of economic studies at the right-wing Cato Institute.
Edward B. Barbier, the American economics professor who wrote the report that formed the basis of the UN's Green New Deal, said that, instead of deficit funding, the government should use revenues that come from dismantled subsidies and environmental taxes.
Investing in a Green New Deal Economy
The passage of the Green New Deal is extremely unlikely in the current political climate. But it is worth looking at investing opportunities that may arise if it influences action at the state level or gets the green light in the future.
UBS says the Green New Deal is indicative of a longer-term trend towards more sustainable and green ways of producing and consuming. Justin Waring, the company's chief investment officer (CIO) strategist, recommends investing in environmentally oriented sustainable investments.
In addition to tapping into the themes' return potential, such an investment also represents a type of "hedge" against the possibility of more aggressive environmental legislation. It may seem counterintuitive, but if you are worried about environmental legislation, you might want to invest in environmentally-friendly investments.
Josh Price, an energy analyst at Height Capital Markets, told MarketWatch that while the resolution isn't "a near-term catalyst for us by any means," the biofuels and renewables space is an interesting place to look for "slow-money, long-time-horizon guys." He mentioned NRG Energy (NRG), AES (AES), Xcel Energy (XEL) Renewable Energy Group (REGI), and Darling Ingredients (DAR) as stocks to watch.
While a Green New Deal doesn't explicitly call for eliminating fossil fuel usage, it would hit the industry hard. Nuclear energy stocks are best avoided as well in such a scenario since many don't consider it to be safe, renewable, or a clean source, and it isn't a part of the resolution. On the other hand, the semiconductor sector and electric vehicles industry would be among the winners.
How Much Would the Green New Deal Cost?
Opponents estimate a total cost between $51 and $93 trillion, based on upper-end estimates of the Green New Deal's policy objectives. While the cost may be high, supporters argue that the deal could lead to significant savings, by averting the worst consequences of climate change. Critics, on the other hand, say that implementing it could slow down the economy and will likely require a lot of overhaul and government oversight.
Who Wrote the Green New Deal?
The idea of a Green New Deal was first introduced by Thomas Friedman, who recognized there was no easy solution to climate change. He suggested it would take money, effort, and industry changes to make it a reality.
In 2019, Rep. Alexandria Ocasio-Cortez (D-NY) and Sen. Ed Markey (D-Mass) introduced a proposal for a Green New Deal in Congress, though it failed to pass in the Senate.
There have been a number of different versions of a Green New Deal, including one written by the Green Party.
How Would the Green New Deal Create Jobs?
The Green New Deal promises to create millions of jobs by tackling economic inequality. Americans would be guaranteed high-quality jobs backed by unions by shifting money from the fossil fuel industry to green technology. The deal supports the inclusion of traditionally marginalized individuals, such as migrant, indigenous, and racially diverse communities.