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Sustainability: a Market Trend, Not a Policy

With the expected economic recovery following the pandemic, experts predict an equally rapid return of greenhouse gas emissions that have eased over the past year due to lockdown restrictions across the globe. President Joe Biden’s “Build Back Better” plan, as well as the 54 climate action orders made in his first week in office, are attempts to address climate change while simultaneously stimulating economic growth.

However, tackling climate change will likely remain a partisan issue – even with the new administration. Biden’s inauguration is indeed a win for science, but he is not a silver bullet when it comes to solving the climate crisis. His environmental goals are unlikely to come to fruition, as media sources have been referring to them as aggressive. Private sector participation is the key to achieving his goals, and profit will be the deciding factor for whether these corporations self-impose sustainability initiatives. The new administration can try to pass a plethora of policies, but a more effective course of action would be to work alongside the private sector in accelerating the existing transitions to sustainable sectors. 

The advent of the new presidential administration as well as Democratic majorities in both houses of Congress have been significant strides for the U.S. in returning to environmental progress. Biden has repeatedly spoken about the urgency of climate change. But how realistic is his version of the new America? On the New York Times podcast “The Daily,” Coral Davenport described a 2035 America in which Biden’s plan had been fully realized. All electricity is generated from wind, solar, and nuclear sources. Combustion engines are a thing of the past. Her rosy description of such a seeming utopia incites skepticism from climate activists dejected by the federal government’s inexorability on climate issues in the 21st century. 

As part of its climate plan, the Biden Administration promises that the transition to sustainable industries will create an abundance of new “green” jobs. There is a correlative trend downwards in the number of jobs available in fossil fuel industries. According to the Bureau of Labor Statistics, employment in coal mining is projected to change -1.7% per year over a ten year period, putting the industry’s employment among the fastest declining. The Bureau also projected that wind turbine technicians and solar installers will be the first- and third-fastest growing jobs, respectively, in the country over the next ten years.

Others remain more skeptical of politicians’ promises. It is unclear how workers losing their jobs in the oil and gas industries will be retrained to qualify for a spot in a renewable energy company. Former Secretary of State and Special Presidential Envoy for Climate John Kerry has proposed that oil workers laid off by Biden’s policies will readily be able to switch to solar panels production, but this is a severe oversimplification. Besides vague reference to funding, it is not clear on how the federal government plans to ensure a smooth and just transition for the people whose livelihoods are at stake.

Not only do Biden’s policies affect the lives of individuals, the local economies of regions dependent on certain fossil fuels are somehow expected to fully pivot away from their main revenue source. A 2019 report by Columbia University found that coal-producing counties are “unprepared for the fiscal collapse to their budgets.” Executive director of the BlueGreen Alliance Jason Walsh believes the federal government needs to “work with local officials to prepare economies to support other industries such as tourism, agriculture, or manufacturing.”

However, the fact that it is less expensive to invest in clean energy now rather than face the financial repercussions of climate change is pushing business leaders to press for a rapid change in the status quo. The automobile industry has been trending towards phasing out of combustion engines without any government pressure. The CEO of General Motors, Mary Barra, announced that the company is preparing to produce strictly electric vehicles to become carbon neutral by 2040, and several other auto companies are also ready to move in a similar direction. This was not a decision motivated by the new administration; rather, it was an acknowledgement of the way that the auto market has evolved over the past decade. According to senior G.M. executive Dane Parker, the company’s decision was “based on a fundamental, dollars-and-cents analysis of where the auto industry is headed and the cars that it expects to become best sellers in the future.”

 This trend can be attributed in part to the financial success of green industries. Tesla, the leader of the American electric vehicle industry, has made significant revenue from selling regulatory credits to other automakers that need assistance complying with emission regulations. Analyst Dan Levy predicts that in 2021 the company’s regulatory credit revenue will rise from $1.4 billion to $2 billion. While cap-and-trade policies are beneficial for corporate revenue, Brown University Professor of Environmental Economics and Policy Alex Poterack emphasizes the effectiveness of a carbon pricing system in prioritizing environmental health. “Carbon pricing is politically unpopular… something that could be useful is making renewable sources as cheap as possible to drive down demand for carbon emitting sources,” he said when interviewed for this article. 

Michael Porter stated in his 2013 TED Talk that corporations profit from solving social issues. His message is prescient, as the market continues to reward businesses with a lower carbon footprint. A study in 2018 conducted by the data platform Euclid found that 52% of millennials and 48% of Gen Xers “feel it’s important that their values align with the brands they like.”

Renewables have always been “cheaper” when looking at environmental cost, as unlike fossil fuels they do not have the high externality of environmental degradation. Renewables are now cheaper in nominal terms as well. If investment into renewables continues internationally, prices will fall even further and coal and gas power stations will be shut down. The U.S. has already seen 13 coal plant closures in 2020. Government pressure is unnecessary, as investors will follow the avenue that they foresee will provide them the biggest return. 

It is difficult to gauge the magnitude of jobs that are created and lost as direct and collateral damage. Service stations and traditional manufacturing factories will have to adapt, while areas such as battery manufacturing, mining, and charging stations will see an uptick. The main question is how current workers will be reeducated in order to be better prepared for the future of the industry. The intended funding for the transition of industries needs to be more explicit in how exactly it will be implemented and what programs will come in place.

Ultimately, Biden’s proposals have been referred to as the most “aggressive effort to combat climate change [by an American president.]” The question is, how realistic is his new America and what is required to see it materialize? Biden remains the leader of a divided nation, and climate change remains an issue too partisan for the government to face alone. The recent market shifts show promise for a future in which both the public and private sector can work together for a shared value – just as Michael Porter described 8 years ago. Biden’s focus should be on further catalyzing the private sector’s trends rather than proposing fantastical unilateral federal action. 

Graphic: Madi Ko