Ed. note: Excerpted from The Green New Deal and Beyond: Ending the Climate Emergency While We Still Can by Stan Cox with permission of the publisher. Published by City Lights.
A leakproof, declining cap on fossil fuels is a necessary step to constrain global warming and stabilize the ecosphere, but doing so will have huge economic repercussions, and it’s hard to imagine Big Petroleum, Big Coal, or private utility companies going along with anything like it. As they have throughout their history, they will use their great wealth and pervasive influence in Washington to fight or sabotage this or any serious attempt to further regulate fossil fuels. Therefore, I expect that a Congress determined to impose a cap and prevent climate catastrophe would have no choice but to nationalize the fossil-fuel industries, and the states would need to convert private gas, water, and electric (including renewable electric) utilities into locally controlled public utilities.
Imagine, if you will, that we do replace the fossil fuel giants with two brand-new public cooperatives—People’s Carbon for coal and People’s Hydrocarbon for oil and gas—whose mission is to put themselves out of business within the next decade or two. Their allocation of fuels would be conducted under democratic oversight nationally and administered locally. As the War Production Board did in the 1940s, the cooperatives will steer their diminishing allotments of fuels into society’s various sectors, giving priority to renewable energy manufac-turing and installation, providing sufficient supplies to critical direct uses such as home heating, steering fuels toward essential agriculture and manufacturing, and barring their use in wasteful or superfluous production. The production and allocation of concrete and steel will be similarly regulated. Dwindling supplies of fossil fuels will be allocated among local utilities to maintain adequate power generation, filling gaps not yet being filled by expanding non-fossil generation.
Meanwhile, contracts for the buildup of green infrastructure and wind and solar capacity will give preference to community and neighborhood power generation, prohibit profiteering, and contain provisions for limiting environmental harm. They will be steered away from large corporations as much as possible, and will strictly regulate inputs of materials and parts, barring suppliers who cause ecological or humanitarian damage anywhere in the country or world. The conversion to a new electric supply will occur more quickly in some regions than in others, but that doesn’t matter as long as the national supply of fossil fuels is being both reduced on schedule and allocated where most needed.
At the same time, the Green New Deal’s energy conservation provisions will kick off a national home-insulation and efficiency effort starting in lower-income neighborhoods, as well as an expansion of affordable housing and public transportation. There’s a plan for this. In November 2019, Congresswoman Ilhan omar (D-Minn.) introduced an ambitious bill called the Homes for All Act, which would provide for 12 million affordable, environmentally sustainable housing units. The bill, she wrote, would be “a key part of the Green New Deal.”
With aviation fuel supplies dwindling, rail travel will replace air travel. High-speed, high-cost, high-concrete rail will be dropped from the transportation plan; instead, existing rail lines across the country will be refurbished and extended to carry modest-speed electric passenger and freight traffic, following a plan like the one urged today by the Solutionary Rail campaign. Green public transportation within urban areas will be expanded, not by digging under the streets but by taking over existing streets and expressway lanes, gradually displacing private cars completely.
Both the IPCC and Green New Deal targets for driving down emissions would require a cap that reduces oil, gas, and coal use on a schedule so tight that new energy capacity can’t be built and deployed fast enough to substitute fully for their retirement. Nationwide energy shortages will inevitably occur during the transition and beyond. No one wants to see a return of the panic and chaos that was triggered by the oil crisis and inflation of the 1970s. Well before any shortages arise, safety nets must be put in place. As use of oil, gas, and coal is phased out, the prices that both producers and consumers pay for fuel and electricity will rise, raising the risk of inflation throughout the economy. The government will likely have to impose price controls on all energy, as the office of Price Administration did in the 1940s and the Nixon Administration did in the 1970s.
Price controls will keep the energy affordable, but they won’t increase its supply. If there is not sufficient fuel or electricity to fully satisfy unchecked demand, a fair-shares rationing system will be needed in order to ensure that households have equitable access to electricity, gas, heating oil, and vehicle fuel. The simplest and fairest approach would be to allot to each household a monthly number of credits, free of charge, to be handed over when buying electricity and fuels. Those credits would be used like points in World War II–era meat rationing, when a household could buy only as much as its point coupons allowed. The numbers of credits issued to each person or household, to be handed over when paying utility bills or buying vehicle fuel or other energy products, would be determined each year according to the total quantities of electricity and fuels available under the national cap and allocated to the household sector.
Output from solar parks and wind farms will be increasing, but not as quickly as output from coal- and gas-fired power plants is decreasing under the cap. Therefore, it will be necessary to ration all electricity, whatever its source, to ensure fair shares of a limited supply. I suggest equal numbers of credits per adult for each energy source, with an additional half-credit each for up to two children per household.
In the industrial sector, national allocation of energy will help ward off shortages of essential goods, but as the fossil-fuel cap lowers, shortages of consumer goods could develop throughout the economy. At that point, a more comprehensive strategy to ensure fair shares and sufficiency for all will be needed. For several years, The Climate Mobilization has been working on just such a strategy as part of a “Victory Plan” through which the United States could effectively address the climate emergency and much more. The group has published drafts, most recently in 2019, but its plan continues to evolve. Extraordinary in scope, it covers a phase-out of fossil fuels and a phase-in of alternative energy; a shift to public transportation; transformation of the food system; retrofitting of the built environment; redirection of the military toward an ecological mission; reforestation; research on reduction of atmospheric carbon; prevention of mass extinction; restoration of the oceans; and a socially just transition process.
The Victory Plan includes the general outlines of a cap-and-ration system for greenhouse emissions. (The plan’s authors cite my book any way You Slice It: The Past, Present and Future of rationing as a reference, but I was not involved in the plan’s drafting.) Under the proposed mobilization, there would be a “rapidly declining national greenhouse gas emissions budget,” that is, a declining cap. A point-based system would be used to rate all goods and services based on the emissions of greenhouse gases caused during their production and use. The rating system and cap would be applied in a stepwise fashion, first to the energy sector and somewhat later to transportation, manufacturing, and food. For each category of goods, an equal number of ration points would be issued to each household via a smart-card system. Households could sell unused rations back to the government for cash, and those rations would be retired.
Modeled in part on the civilian mobilization for World War II, the Victory Plan would be carried out by a broad array of agencies, including a Climate Mobilization Board, which would administer caps on fossil fuels and materials and oversee production goals. The Mobilization Board would be an analog of the War Production Board of the 1940s. Another agency from that era, the office of Price Administration, would be revived under its original name to oversee price controls and rationing. Crucially, local residents would administer the rationing system in each community. A Mobilization Labor Board would ensure “true full employment,” good wages, “paid family and medical leave, child care, healthcare benefits, and retirement benefits,” and good-faith collective bargaining for the transition workforce.
A proposal focused more narrowly on fair-shares energy rationing is called Tradable Energy Quotas (TEQs). The system, which was developed over the past couple of decades by the U.K.-based Fleming Policy Center, was introduced, studied, and debated in Parliament in the 2000s, but it was judged to be ahead of its time. Now, with an emergency widely acknowledged, it warrants another look. I’m not saying that a Victory Plan or Tradable Energy Quotas should simply be copied and pasted into future policy; rather, I am using them as detailed examples of how fair-shares energy rationing can work at the household level.
Briefly, a Tradable Energy Quotas system would set up its version of a cap: a national carbon-emissions budget that declines year by year. Each fossil fuel would be assigned an emissions point value, and every household would have carbon accounts into which shares of carbon credits would be deposited weekly, with one share per household member. Each adult in the household would have an electronic, debit-type carbon card. Whenever drivers, for example, fill their cars’ fuel tanks, they would pay the price of the fuel with cash or a credit card and also debit from the carbon card a number of TEQ credits corresponding to the number of carbon points carried by the fuel they just bought. Points for home electricity and natural gas could be automatically deducted from carbon accounts by the utilities just as they now deduct monthly bill payments from customers’ bank accounts. As an emissions or fossil-energy cap ratchets downward and the substitution of renewable energy lags, people in specific situations—living far from work and unable to afford to live closer, perhaps, or living in a drafty house without having the money to insulate—may suffer a serious shortfall of ration credits. To address those situations, the proposal for tradable energy quotas would create a national market into which energy-efficient households can sell credits they don’t need (for real money), and from which households can buy additional carbon credits if they run out before the next deposit arrives. The market is meant to help cover shortfalls, but by bringing cash back into the rationing system, a TEQ program might leave an opening for economic injustice to creep back into the system, increasing the cost of energy for low-income families while allowing affluent families to buy their way out of conservation. Larry Edwards has proposed an alternative process for filling the gaps. I won’t get into the details here, but in his system, unused ration credits would automatically flow into a surplus pool from which people needing credits could draw for free, but in a way that responds to all requests uniformly up to an amount at which either the requests are all fulfilled or the credit pool is emptied.
Whatever basic procedures and formulas end up being used for fair-shares energy rationing, they would need to be applied equitably throughout the nation. However, they could and should be administered locally, democratically, and inclusively, as is envisioned for Green New Deal policies. Local decision-making was a feature of both U.S. and U.K. rationing systems during World War II. More than five thousand local rationing boards, staffed by tens of thousands of paid employees and hundreds of thousands of volunteers, had, according to Amy Bentley in her book on wartime food rationing, “a significant amount of autonomy, enabling them to base decisions on local considerations.” While a cap on fossil fuels during the transition to renewable energy would affect everyone, how we use that energy should still be up to us, our neighbors, and our local communities. The national policy need not involve the government micromanaging our lives. We would know how much energy is available, and individuals and communities should be the ones who decide how to use their share. Police shouldn’t be issuing tickets for “pleasure driving” as they did during World War II. Utilities shouldn’t be remotely controlling our thermostat settings. No one should be telling us what we can or cannot eat. But we all will be living under the same energy limits.
When Green New Deal funds flow into communities for energy conservation and reduced dependence on fossil fuels, their use also should be determined by local, democratic, participatory processes. We should remember that when the New Deal faltered, the Southern Tenant Farmers Union, the West Coast dockworkers, and others stepped in to shake up the system and demand a course correction. Local and regional activism will almost certainly become important in seeing to it that national climate policy is applied fairly and effectively.
The Risk in “Climate Keynesianism”
House and Senate resolutions call for the Green New Deal to be developed through “transparent and inclusive consultation, collaboration, and partnership with frontline and vulnerable communities, labor unions, worker cooperatives, civil society groups, academia, and businesses.” Funding would come largely from the federal government, but where would the government get the money? Such resolutions are not the place for specifics, so the documents have simply stated that Congress will provide capital for the Green New Deal in a way that “ensures that the public receives appropriate ownership stakes and returns on investment” through community grants, public banks, and other public financing. Congresswoman Alexandria ocasio-Cortez, a sponsor of the House resolution, unleashed panic in the upper classes when she advocated that the United States raise additional revenue by bringing back the top income-tax rate of 70 percent or more that prevailed in the 1950s through the 1970s. Around the same time and un-related to the Green New Deal, then-presidential contender Elizabeth Warren proposed a wealth tax that would apply to all personal assets in excess of $50 million. More progressive taxes have been badly needed for decades, whatever the atmospheric Co2 concentration, and the climate emergency could boost the movement for fairer taxation.
In May 2019, Yeva Nersisya of Franklin & Marshall College and L. Randall Wray of Bard College published a paper, “How to Pay for the Green New Deal,” its title echoing that of John Maynard Keynes’s 1940 book how to Pay for the war. They argued that the U.S. government could handle the expense of the Green New Deal much more easily than it paid for the World War II effort, which from 1942 to 1945 consumed 35 to 45 percent of all federal spending. In fact, they showed how costs of the Green New Deal’s big industrial effort and universal job guarantee, which would make up the bulk of the expense, could be largely paid for by cuts in military spending along with savings in administrative and drug costs under another big GND component, Medicare for All.
Others have pointed to economic growth as a source of revenue. New Consensus, arguing that the Green New Deal could be paid for with “carefully targeted, Congressionally authorized spending,” predicted that “the new prosperity that the Green New Deal will bring to scores of millions of Americans below the top of the income and wealth distributions will rapidly grow the nation’s tax base, vastly expanding federal revenue even without raising marginal tax rates.” In 2019, a fact sheet accompanying the House resolution for the Green New Deal stated, “At the end of the day, this is an investment in our economy that should grow our wealth as a nation, so the question isn’t how will we pay for it, but what will we do with our new shared prosperity.”
Paying for a green transition through economic growth sounds easy and painless, but it would be self-defeating. If, say, a twenty-five- year renewable buildup were to stimulate a consistent 3 percent growth rate in the broader economy, that would double the GDP within twenty-five years, swamping any achievements in decarbonization and energy efficiency. As discussed in the previous chapter, renewable energy cannot support an economy’s growth to that size and beyond. If we’re expecting the just transition to increase prosperity, then we’re going to need a new definition of prosperity. If emissions are going to be quickly brought under control, prosperity should not signify rising profits and growing wealth; rather, it should indicate the high degree of economic and ecological stability necessary to provide security for all, and excess for none. The Green New Deal was envisioned as a path to those goals, but aiming to “grow our wealth as a nation” will push demand for resources ever higher, making the renewable energy target harder to hit. That effort will fail in the end. Naomi Klein sums up the situation in her book On Fire:
Any credible Green New Deal needs a concrete plan for ensuring that the salaries from all the good green jobs it creates aren’t immediately poured into high-consumer lifestyles that inadvertently end up increasing emissions—a scenario where everyone has a good job and lots of disposable income and it all gets spent on throwaway crap imported from China destined for the landfill. This is the problem with what we might call the emerging “climate Keynesianism”: the post–World War II economic boom did revive ailing economies, but it also kicked off suburban sprawl and set off a consumption tidal wave that would eventually be exported to every corner of the In truth, policymakers are still dancing around the question of whether we are talking about slapping solar panels on the roof of Walmart and calling it green, or whether we are ready to have a more probing conversation about the limits of lifestyles that treat shopping as the main way to form identity, community, and culture.
In an ecologically rational economy, production must be reduced and redirected, not redoubled. The bulk of the employment, skills, facilities, and resources going into car, truck, and aircraft manufacturing can be redirected into solar and wind energy and public transportation. Construction currently dedicated to the wealth-oriented real estate industry can be redirected toward green infrastructure and retrofitting for energy efficiency, as well as affordable housing. And the Green New Deal’s job guarantee could be fulfilled much more easily if the number of hours in a full-time workweek were reduced nationally.
The 33 Percent
If we manage to achieve a fair, effective climate-emergency policy, the 33 percent of American households with highest incomes will most likely bear the greatest economic burden. I’m not just talking about more progressive tax rates; I’m suggesting that the kinds of efforts that will be most effective in reducing emissions while ensuring good quality of life for everyone will require a far greater economic sacrifice from the top 33 percent than from the rest of the population. And within that top one-third, the richer the household, the heavier the burden will have to be.
Thirty-three is not a magic number. But as we free ourselves from the catastrophic impact of fossil fuels, I would expect the actual percentage to end up within shouting distance of that figure. In his 2017 book dream hoarders, Richard Reeves suggests that the top 20 percent of income earners in the United States, those whom he calls the upper middle class, are unfairly garnering the lion’s share of the nation’s quality education, housing, health care, and other necessary goods and services. The remedies he suggested for this problem, he writes, will be costly, and the funding for them will have to come from those same top 20 percent.
Future sacrifice should indeed come from the upper part of the economic pyramid, especially when a transition to social, racial, and economic justice are accepted as essential to a deep-green society. As we succeed in creating a more equitable, just, and ecologically sustainable society, the economy will come to look less like a pyramid and, as proposed by economist Kate Raworth, will better resemble a doughnut, with everyone living within its “safe and just space,” neither in the “hole” of insufficiency nor in the ecologically insupportable space beyond the doughnut.
For the sake of argument, let’s say that taking this path will impact the top one-third of today’s economic earners—those in households with incomes that annually exceed $95,000. Together, this one-third of U.S. households now receives two-thirds of the U.S. population’s total income. The 33 percent owns 94 percent of stocks by value. Their inflation-adjusted incomes are higher now than before the Great Recession hit in 2008, while the other 67 percent’s average income remains lower. The 33 percent have an average household net worth of approximately $700,000, in contrast to the 40 percent of households at the base of the economic pyramid whose average net worth is less than zero, at negative $22,000. This country’s 33 percenters are also 4 percenters, with higher incomes than 96 percent of the world’s people. And 33 percent doesn’t mean 33 for everyone. only 18 percent of all Latinx households belong to the national top 33 percent for income, and only 15 percent of all Black households are members of that overall top third.
The costs of the conversion to green energy capacity and infrastructure have been optimistically estimated at $15 trillion for the United States and $100 trillion globally—and the latter will require a large U.S. contribution. No one really knows with any precision how much it will cost to stop global warming before it’s too late, but I doubt that the eventual sum will be handled as casually as Nersisyan and Wray have predicted. The conversion required to free ourselves from fossil fuels will have to be heavily subsidized, with the money coming from taxation of higher incomes and deep cuts in military appropriations and other wasteful spending. And it will have to be regulated so that it provides plenty of employment and no profiteering.
To pay for the conversion, the more steeply progressive income tax rate suggested by ocasio-Cortez will be necessary, but for the 33 percent, the bigger impacts will be indirect. Protecting the ecosphere from fossil fuels will initially impact most industries. Stock prices and corporate valuations will likely contract. Owners, investors, and upper managers, the great majority of whom belong to the 33 percent, will take a big hit. If the economy stagnates or if shortages and inflation strike, then price controls, subsidies, and other assistance will have to be directed at essential goods and vulnerable households. That will require even greater shifts of income and wealth from the 33 percent to the 67 percent.
For purposes of funding the transition, the largest contributor will be the ultra-rich one-percenters—1.2 million households—at the peak of the economic pyramid. This small group of Americans now earns approximately $1.8 trillion in annual income and pays $600 billion in taxes. Nevertheless, wealthy as they are, the one-percenters’ contribution alone will not be sufficient to fund and sustain the conversion to a just and sustainable society. An additional 32 percent or more of high- earning households are going to have contribute as well.
This book is focused primarily on domestic climate policy, because neither we as individuals nor our government can, with a straight face, presume to advise the wider world on climate issues unless we ourselves have at least started the journey toward life within ecological boundaries. In preparing for that journey, we need to weigh the various actions that our country should pursue as it addresses the global climate emergency, as well as those it must abandon.