Environmental policies must be carefully structured and predictable if they are to enhance rather than undermine competitiveness. On this score the United States falls woefully short. Its climate policy in particular has been adrift during the nearly two decades since the U.S. ratified the 1992 UN Convention on Climate Change. Without a coherent framework for pricing greenhouse gas emissions, American companies have been unable to make rational decisions about investments that carry significant energy implications, such as spending on factories, equipment, and product design. This uncertainty has cast a pall over the entire U.S. economy. It has dampened innovation and put U.S. companies at a serious disadvantage when competing with businesses in countries where clear policies have sharpened the corporate focus on waste and inefficiency and spurred innovation.
Green Rules to Drive Innovation
Reprint: R1203L
Incoherent U.S. energy and climate policies have cast a pall over the entire economy and are putting U.S. companies at a serious global disadvantage. The authors offer 10 prescriptions for reforms, two of which they describe in detail. First, they argue that the U.S. should impose a gradually increasing carbon charge; this would help internalize environmental costs, drive investment in energy efficiency, encourage innovation in renewable power, and raise substantial revenues that could reduce the national debt. Second, they say, the government should curb or redirect unwise energy subsidies and increase funding for clean-energy R&D. Environmental stewardship need not be an economic burden, they emphasize; on the contrary, investing in sustainability can enhance corporate and national competitiveness.
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