Guest essay by Eric Worrall

Harvard appoints “Brilliant” Obama era advisor James Stock to guide their efforts to have more impact on climate change.

Harvard names vice provost for climate and sustainability

Nate Herpich Harvard Correspondent
DATE September 7, 2021

James H. Stock to build on existing efforts, develop new initiatives to maximize global impact of University research

James H. Stock, a Harvard professor and economist known for his expertise on energy and environmental policy, has been named the University’s inaugural vice provost for climate and sustainability, Provost Alan M. Garber announced today.

“There is deep interest in climate change throughout the University. Each of Harvard’s Schools teaches and conducts extensive research on climate change,” said Garber. “Meanwhile, the United Nations Intergovernmental Panel on Climate Change has reinforced the urgency of addressing climate issues in a more focused, deliberate, and systematic way, further underscoring our own call to a greater cohesion of our efforts. Jim’s appointment is the critical next step in developing such a coordinated University-wide strategy to address climate change.”

“I’m both excited, and humbled, to begin in my work,” said Stock, who is the Harold Hitchings Burbank Professor of Political Economy, “because there is so much opportunity here, for us, together, to make a major impact on climate change.

“Harvard has a critical role to play in this effort. Our faculty and students are uniquely positioned to make key advances in the science of climate change, in its implications for human systems, and in how society can succeed in preventing the worst of those damages yet to come. It is also important to recognize and address the human side of the disruptions that will be caused by the transition to clean energy. All of this requires integrating different aspects of the problem: in the sciences, in green engineering and design, in health, in interactions with business, public policy, economics, and more.”

“As a brilliant econometrician, Jim has a broad view of the environmental community at Harvard, as well as a deep understanding of climate change and energy policy,” said Daniel  Schrag, Sturgis Hooper Professor of Geology, director of the Harvard University Center for the Environment, and co-director of the Science, Technology, and Public Policy Program at the Kennedy School. “Jim also appreciates how important Harvard can be in helping our country and the world understand and manage the grand challenge of climate change. He is committed to building and nurturing our community of scholars and educators, as we engage with the world through our research, in our classrooms, and through our interactions with leaders from every sector of society.”

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Going on his previous work, James Stock will be teaching Harvard students that applying a carbon tax would have a “negligible” effect on the economy, though there would be some “job displacement effects”.

There exist many challenges for an energy transition. To displace all natural gas and coal with solar and wind, we would need to build hundreds of wind and solar farms every year over the next 15 years. In addition, there are concerns over carbon tax bills regarding  jobs and economy, regressivity, the impact on coal mining and similar sectors, and that such taxes would not produce necessary emission reductions. 

Regarding the macroeconomic effects of carbon tax, standard calculations of the effects of carbon taxes on GDP are done using computable general equilibrium models, which indicate a small decrease in GDP per capita, along with some job displacement effects. The new work here is an empirical analysis of data from 15 European countries that adopted a carbon tax at different points and different levels, and 16 that did not. That analysis finds effects of an increase in the carbon tax on GDP and employment over the first six years of the tax – the years in which one would see the largest reallocation and displacement – that are both economically negligible and statistically insignificant. The EU carbon taxes were on the transportation sector, and there was only a modest effect (2-6% reduction) from a $40/ton tax, consistent with gasoline and diesel demand being inelastic. 

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The following is a video presentation by Marcus Brunnermeir of Princeton and Harvard’s James Stock. They both agree in video that the Biden climate plan and imposition of climate taxes or pollution permits would increase employment and boost the economy.

They describe alternatives to the Biden Plan of a heavily regulated economy as the “Malthusian Approach”

I haven’t had a chance to fully delve into James Stock’s position, but from what I have seen I think he is making some fairly optimistic assumptions about the falling cost of solar and wind, and some pessimistic assumptions about the consequences of doing nothing.

There are many more ways for things to go wrong than right. In my view, macroeconomic engineering on the scale James is proposing rarely works out for the best. Just ask Venezuela.

via Watts Up With That?

September 12, 2021