The Economic Opportunity of the Green New Deal
In Wealth of Nations, Adam Smith writes “"It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest” (Smith 1776). Essentially, Smith believes that the division of labor and the existence of a free market–activated by individuals pursuing their interests–results in societal progress. While I agree that a free market best propels the economy, the government must shape the legislation concerning the market/enact policies to mitigate the effects of whatever problems arise beyond the scope of the industry’s players. One of these problems is the environmental impact of economic growth. The excessive use of fossil fuels and deforestation have greatly contributed to climate change and soil erosion. In the world’s greatest period of economic growth, 1960 to 2021, the “global temperatures have risen 0.7 Celsius higher than our 1960s baseline” (NASA 2022). This is an increase of over 33 degrees Fahrenheit! These rising temperatures have quickly grown past the control of corporations, who are now losing customers and investors that are conscious about the environment.
Economic growth leads to increasingly negative environmental impacts, creating problems that the industry’s entities cannot ultimately handle, resulting in the need for government interference. In the same way trucking companies need government funded interstate highways, technology companies need government assistance to lessen their environmental impact. This governmental interference/service was established in the United States through the Green New Deal. The Green New Deal was a 2019 resolution, though initially proposed in 2007, “calling for a ten-year national mobilization to transition the United States to a carbon-neutral economy, with the goal of meeting 100% of the country's power demand through clean, renewable, and zero-emission energy sources. The plan also included provisions for investing in infrastructure, transportation, and other sectors to create millions of high-wage jobs while ensuring that vulnerable communities and workers are not left behind” (Friedman 2019). The GND (Green New Deal) was created to reduce greenhouse gas emissions, increase the number of jobs, and spur economic growth. It has been successful in moving towards a cleaner economy. This implementation of an environmentally conscious deal by the government allows industry players to work towards solving the problem of climate change. Although the GND has increased companies’ sustainability efforts, there are still significant flaws in global economies/modern economics.
According to Economist Partha Dasgupta, “Nature is a blindspot in Economics,” especially concerning the calculation of Gross Domestic Product (Dasgupta 2023). The world’s major economies measure their strength using the conventional GDP (Gross Domestic Product) -- each country’s overall output of products/goods. Environmental impact is not included in this calculation, which Dasgupta compared to “a football team who measures their success by the overall number of goals scored rather than wins and losses (or aggregate/net goals scored)” (Dasgupta 2023). Countries calculating economic activity without considering environmental impact “could be losing without even noticing” (Dasgupta 2023). Overall, it has been shown that though the GDP may be rising, “when looking at real growth over the years (including loss of nature), countries have barely grown upwards” (Skarsgård 2023). Including a cost for this damage will add further perspective to its damage and thus reduce our contribution to the world’s pollution. Including the value of nature destroyed in the calculation of GDP will make GDP outputs more realistic, allowing countries to target sectors that most need reforms and government assistance. In economic terms, Dasgupta’s proposed plan and the Green New Deal aim to be Kaldor-Hicks efficient. Decisions and policies are Kaldor-Hicks efficient when their total benefits exceed their total costs. Thus, policies aimed at bettering the environment or even lowering the damage done to the environment are naturally considered efficient. Further, KH (Kaldor-Hicks) efficient policies push economies towards Pareto optimality–a steady state where policies can no longer benefit one without damaging another. Dasgupta and the US Government aim to reach this Pareto point of maximized welfare. Some companies are already considering the value/size of their environmental impact and working towards this Pareto efficiency.
The addition of green technology helps bring society towards Pareto optimality. New entities have been focusing on tackling this problem of environmental impacts. Startups such as FirstMode and FloorFound have just received series A’s (first round of venture capital financing) to pursue their green tech goals. FirstMode, similar to Partha Dasgupta, focuses on solving problems deemed impossible or too large to consider, aiming “to clean up the industries that create, move, and transform the materials we all use every day” and helping to “identify and replace equipment that generates greenhouse gas emissions in the most extreme environments” (FirstMode 2023). One of FirstMode’s projects has culminated in creating the world’s first hydrogen-powered haul truck, used to transport over 290 metric tons of ore on mining sites. The car is projected to reduce the world’s biggest mining corporations’ carbon emissions by at least 30% (FirstMode 2023). In reducing the carbon emissions without removing value from the mine, FirstMode’s invention is both Kaldor-Hicks efficient and pushes the economy towards Pareto optimality. Another startup, FloorFound, aims to profit from discarded furniture. The startup’s multi-step re-commerce process plans to pick up, inspect, clean, re-sell, and deliver previously unwanted furniture. Their success is undeniable, as they have already repurposed 610,000 pounds of unused furniture, lowering pollution and waste while bettering consumers' lives. With these two startups receiving term sheets adding to over $20 million, the future for green tech looks bright. The success of these startups has kickstarted a new phenomenon–the shifting of already established companies to include explicit missions to lower their environmental impact.
Within green tech, startups make up the majority of big names. After all, it is easier for a new company to focus on reducing emissions than a large, already autonomous company. However, large companies have started to “go green.” In fact, “Google and Apple have already cut their energy use by as much as 40%. Microsoft plans on becoming carbon negative by 2030” (Cole 2023). Companies worldwide have begun to use sustainably sourced materials, and fewer natural resources, implement green initiatives, and decrease waste. Doing so will help reduce harmful environmental effects while promoting economic growth.
Overall, the majority of the world wants the same thing: a healthy economy and environment. Dasgupta has laid out the foundations for this coexistence–including the value of the environment destroyed in the calculation of GDP. Though they have not committed to this directly, the US Government, startups, and established corporations have begun to work towards considering the environmental cost of economic growth through the development of Green New Deal policies and the evolution of green tech. If all goes to plan, we will reach Pareto optimality and live on a cleaner planet, satisfying economists and civilians alike.
References
2023. “Firstmode.” FirstMode. https://firstmode.com/.
2023. “FloorFound.” FloorFound. https://floorfound.com/.
Cole, Stephanie. 2023. “17 Big Companies Going Green This Year.” The Round Up. https://shorturl.at/abLNW.
Friedman, Lisa. 2019. “What is the Green New Deal? A Climate Proposal, Explained.” NYT.
https://www.nytimes.com/2019/02/21/climate/green-new-deal-questions-answers.html.
Lewsey, Fred. 2023. “Dasgupta’s Review: Nature’s Value Must be at the Heart of Economics.”
Cambridge University. https://www.cam.ac.uk/stories/dasguptareview.
Skarsgård, Alexander. 2023. “The Answer to Everything.” NYT. https://shorturl.at/fosC7.
Smith, Adam. 1776. “An Inquiry into the Nature and Causes of the Wealth of Nations.”