The Green Economy

Corporate decarbonization policy has stagnated under ideological divisions. Arguing that anthropogenic emissions are driven by customer preferences and that such preferences can shift with improved information, Karthik Ramanna advocates for a new approach: an economy-wide system of reliable and comparable accounts of the embedded emissions in products to allow customers (and investors) to make more-informed decisions aligned with underlying preferences. In part II of his two-part series (read part I here), Ramanna explores the principles of an accounting methodology to provide better greenhouse gas emissions data to business customers and consumers and the reasons why, based on historical precedent, such a system is readily adoptable and likely to prove effective. 

Corporate decarbonization policy has stagnated under ideological divisions. Arguing that anthropogenic emissions are driven by customer preferences and that such preferences can shift with improved information, Karthik Ramanna advocates for a new approach: an economy-wide system of reliable and comparable accounts of the embedded emissions in products to allow customers (and investors) to make better-informed decisions aligned with underlying preferences. In the first of two articles, Ramanna discusses why top-down regulatory approaches to reduce greenhouse gas emissions have failed to generate decarbonization at meaningful scales and the virtues of a pro-market approach to incentivizing and enabling greener corporate and consumer behavior.

In new research, Jitendra Aswani and Roberto Rigobon find that investments raised on sustainable bond markets force firms to make material changes to corporate...

Karthik Ramanna writes that if the United States adopts a trade policy based on a dynamic emissions accounting method, it can achieve President Donald Trump’s goal of leveling the manufacturing playing field for American companies by penalizing foreign “dirty” producers, while also mitigating inflation and the risk of a trade war.

Recent negative news on the production of electric vehicles in the United States call into question the government’s industrial policy boosting Detroit’s efforts to go green. Susan Helper writes that not only have there been significant benefits from President Joe Biden’s industrial policies, but promoting the production and adoption of electric vehicles remains essential to achieving national decarbonization targets and increasing resilience, innovation, and national security

As financial markets take on societal challenges like climate change, new research from Robin Döttling, Doron Levit, Nadya Malenko and Magdalena Rola-Janicka explores how shareholder democracy interacts with the political process to impact public goods provisions. The authors investigate the potential of investor-driven governance to supplement the shortfalls of the regulatory system, highlighting both benefits and risks posed by wealth inequality and ESG backlash.

The United States power grid is increasingly strained by the surging electricity demand driven by the AI boom. Efforts to modernize the power infrastructure are unlikely to keep pace with the rising demand in the coming years. Barak and Eli Orbach explore why competition in AI markets may create an electricity demand shock, examine the associated social costs, and offer several policy recommendations.

Based on a new report from the Institute for Local Self-Reliance, John Farrell argues that the monopoly granted to private, investor-owned electric utilities by state governments is preventing the United States from accessing cheaper, cleaner, and more dependable electricity.

Environmentally conscious critics of artificial intelligence worry about the massive amounts of energy and fresh water its data centers require. Alessio Terzi writes that in the long term, and with the help of government regulation, the benefits of AI-accelerated innovation will outweigh the short-term environmental costs we now observe.

Roy Shapira discusses the problem of wasteful consumerism and society's throwaway culture, arguing that while the "right to repair" movement is important, antitrust policy is unable to address the underlying social and psychological drivers that push consumers to constantly purchase new items and can even hinder bottom-up pressures to reduce waste. Shapira analyzes various policy proposals and legal avenues to help change companies' and consumers' incentives in order to reduce environmentally harmful product obsolescence.