When COVID-19 struck America and the first shutdowns roiled the nation in March, talk of a rescue plan soon emerged. For a few rare weeks, partisanship was suspended. Congressional leaders coalesced around a relief package for the millions of people suddenly out of work in a paycheck-to-paycheck nation. Hence the CARES Act, and the attending price tag: $2 trillion.
$2 trillion is exactly the figure economists and scientists have said is the cost of transitioning the nation’s energy infrastructure to renewable sources to fight climate change.
That figure was striking to many people who were concerned about whether such borrowing would send the nation into an economic nosedive. Rest assured, we were told, America’s borrowing capacity is so massive that $2 trillion is a drop in the bucket. And the swiftness with which this borrowing occurred did, in fact, say much about America’s financial might.
Remember that. Because $2 trillion is exactly the figure economists and scientists have said is the cost of transitioning the nation’s energy infrastructure to renewable sources to fight climate change. Except in that context, we’ve been warned that the cost will break the nation and send us back to the financial dark ages. COVID-19 proves that it will not.
Before Joe Biden proffered spending $2 trillion over four years to reshape the energy economy, and before Elizabeth Warren and Pete Buttigieg offered similar plans, scientists who modeled America’s path to a decarbonized energy system found the transition would cost about 1 percent of the nation’s gross domestic product — $1.8 trillion in 2015, now roughly $2 trillion.
Naysayers have since countered that such a plan is too expensive, full of hidden traps like inflation related to borrowing, and tax increases in the thousands of dollars for ordinary Americans. The federal government reacted similarly when 21 young plaintiffs sued it over climate change in 2015 in the lawsuit Juliana v. US. Tasked with evaluating the same proposed transition to the energy system that scientists had modeled, the government’s expert claimed that adopting such a transition would force the nation to abandon the free market.
There’s nothing so radical in Biden’s climate plan, which he would fund with stimulus spending and increased taxes on corporations and the wealthy. And COVID-19 has shown that the nation is capable of borrowing an additional $2 trillion without raising taxes on the rank and file.
If not for moral reasons — for the sake of future generations and the environment — the nation should spend to fight climate change now to secure its economic well-being. Consider, for example, the cost of disaster relief. Spoiler: It is climbing. In the 38 years between 1980 and 2018, the United States suffered 254 weather-related disasters that cost a total of $1.7 trillion in aid, according to Alice Hill, a senior fellow for climate change for the Council on Foreign Relations, who in December testified on this subject to the Senate Democrats' Special Committee on the Climate Crisis.
For most of those years, Hill noted, the nation averaged 6.3 annual weather-related disasters that cost $1 billion or more. Between 2013 and 2018, however, that number doubled to 12.6. The Government Accountability Office has identified climate change as a high-risk cost area since 2013.
There are also hidden costs of failing to deal with climate change properly. Nobel Prize-winning economist Joseph Stiglitz has forecast that delaying spending on an energy transition will have deeper and more protracted economic consequences than just the escalating price of disaster relief.
There is, for example, the cost of having to build dikes as sea levels rise and the cost of relocating people to higher ground. Then there is the unknown cost of drawing carbon out of the atmosphere. Also unknown is the cost of managing migration, as citizens flee tropical nations. These are costs of which the United States will likely bear a sizable share. Even an isolationist nation would face the resulting impacts to the global economy.
These economic impacts would be more painful, Stiglitz says, in a domestic economy growing weaker under the burden of the mounting costs of disaster relief, alongside the resulting collapse of insurance markets and property values. The price of food and health care could also rise because of environmental damage.
To spend $2 trillion to avoid this future—and to do it with standard economic tools such as taxes on carbon and the elimination of fossil fuel subsidies—simply makes sense, Stiglitz argues. It is just as pragmatic as taking out insurance before an emergency, rather than paying out of pocket to fix things later.