The Green New Deal
The term “Green New Deal” was first used by Pulitzer Prize-winner Thomas Friedman in January 2007. America had just experienced its hottest year on record (there have been five hotter since), and Friedman recognized that there wasn’t going to be a palatable, easy solution to climate change as politicians hoped. It was going to take money, effort, and upsetting an industry that has always been very 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.”
Since then, the “Green New Deal” has been used to describe various sets of policies that aim to make systemic change. The United Nations 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.
But the Green New Deal is 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 and already a favorite to run for president in 2024. Her ambitious and wide-ranging proposal, which was a centerpiece of her campaign, addresses an issue 60% of Americans say is already affecting their local community and promises to tackle economic inequality through the creation of high-quality union jobs. The Green New Deal has also been helped by a grassroots outfit called the Sunrise Movement, which organized that much-talked-about protest at Sen. Dianne Feinstein's office in February 2019.
That same month, Ocasio-Cortez and Sen. Ed Markey (D-Mass.) introduced in Congress a 14-page nonbinding resolution calling for the federal government to create a Green New Deal. The resolution has more than 100 co-sponsors in Congress and attracted several Democratic presidential candidates, though not the ultimate winner—Former Vice President Joe Biden (see below).
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 were protesting Senate Majority Leader Mitch McConnell (R-Ky.) bringing up the vote without scheduling hearings and expert testimonies first.
While the idea of a Green New Deal and the threat of climate change have been known by politicians for years, this is the most detailed plan yet to transform the economy presented to the American people, even though it is itself extremely vague and more a set of principles and goals than of specific policies.
The resolution says the U.S. must take a leading role in reducing emissions because it is technologically advanced and has historically been responsible for a disproportionate amount of greenhouse gas emissions, as displayed below in a chart from the World Bank.
It 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 also 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 the calls for the protection of workers’ rights, community ownership, universal healthcare, and a job guarantee.
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
Green New Deal and the Presidential Debates
The Green New Deal was brought up in the 2020 Presidential and Vice-Presidential debates and in campaigning by both parties. In the first Presidential debate, while saying he wanted crystal clean water and air, President Trump disparaged his Democratic opponent Joe Biden's plan to deal with climate change calling it a Green New Deal and saying it would cost $100 trillion. Biden denied the charge saying, "That's not my plan."
In the Vice-Presidential debate, Vice-President Pence said that Biden and Harris wanted to bury the economy under a $2 trillion Green New Deal, noting that Harris was one of the original co-sponsors. Without referring to it by name, Harris disputed Pence's claims regarding banning fracking, taxing Americans making less than $400,000; she promoted Biden's plans regarding clean energy as a job creator.
Trump-Pence on the Green New Deal
Trump acknowledged that human activity contributes to climate change "to an extent," but also said "science doesn't know," recently. Trump and Pence wanted to keep fossil fuels in the energy conversation both to appeal to those workers and to keep the U.S. relevant as a gas and oil exporter.
Mike Pence, making similar charges to those of President Trump, said at the VP debate, "They [Biden-Harris] want 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.”
President Biden's Clean Energy Revolution
Although President Biden has declined to endorse the Green New Deal, Vice President Harris was an original sponsor. Harris, however, 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 on 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 achieves that goal by 2050. The Green New Deal is estimated to cost about $93 trillion to implement. The proposed Biden plan would involve a Federal government investment of $1.7 trillion and 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.
Over the past decade, the federal government has spent $350 billion due to extreme weather and fire events, according to a 2017 report by the U.S. Government Accounting Office. But it will only get uglier, according to experts.
Reports by the Intergovernmental Panel on Climate Change and the U.S. Global Change Research Program say the global average temperature exceeding pre-industrialized levels by 2 degrees Celsius or more will cause more than $500 billion in lost economic annual output in the U.S. by the year 2100. Forest areas affected by wildfires in the U.S. will at least double by 2050, and there is a risk of damage to $1 trillion of public infrastructure and coastal real estate in the U.S.
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.
How Much Will It Cost and How Do We Pay for It?
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 have called it too socialist, too extreme, or too impractical. Some are even worried "their hamburgers would be taken away."
The U.S. currently gets 80% of its energy from coal, petroleum, and natural gas. Hence, the kind of overhaul the deal is calling for would be very expensive and require significant government intervention. The center-right American Action Forum pegs the cost at $93 trillion.
The Green New Deal resolution doesn't mention how the U.S. government, which has $22 trillion of debt, would pay for it.
Tax Policy Center senior fellow Howard Gleckman has 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 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.
On the other hand, Ocasio-Cortez has 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.
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."
There are also savings to be expected, say Green New Deal supporters.
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). In addition, it 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.
Investing in a GND Economy
Passage of the Green New Deal is extremely unlikely in the current political climate. However, it's worth looking at investing opportunities that may arise if it influences action at the state level or gets the green light in the future.
Global bank UBS has said the Green New Deal is indicative of a longer-term trend towards more sustainable and green ways of producing and consuming. Chief Investment Officer (CIO) strategist Justin Waring, who recommends investing in environmentally oriented sustainable investments, said, "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 a safe, renewable, or 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.