Jan 22, 2019

The anatomy of climate-change policy: A primer

Illustration: Aïda Amer/Axios

In Congress and on the presidential campaign trail, America is gearing up to tussle over big climate-change policy for the first time in nearly a decade. But what this actually means is up for massive interpretation.

Why it matters: How Washington considers tackling this problem, whether through a tax, regulations and/or something else, would affect almost every swath of the country and reverberate around the world.

The big picture: Everything old is new again. Most ideas floating around are actually adapted versions of proposals Washington has pursued before. At the heart of any climate policy is this tough task: Make fossil fuels more expensive without hitting American pocketbooks too much, and/or making cleaner energy technologies cheaper.

Regulations and mandates

The popular-but-vague Green New Deal championed by Democratic Rep. Alexandria Ocasio-Cortez probably fits in best here, judging by what we know about it now.

A draft legislative document lists numerous lofty goals, including:

  • 100% renewable electricity within 10 years (up from 17% today).
  • Upgrading all buildings to be more energy efficient.
  • Eliminating greenhouse gas emissions from sectors like manufacturing and agriculture.

But the document doesn’t say how they would occur. They would probably require, first and foremost, more regulations and mandates. That’s how Washington has conducted many of its biggest energy and environmental policies to date, including Energy Department efficiency standards and the renewable fuel standard.

Modeled after Franklin Roosevelt’s original New Deal, the Green New Deal is far larger in scope than what’s been done in recent history. It includes progressive policies as far-reaching as universal health care and a federal jobs guarantee.

Carbon tax and dividend

This is the other climate policy emerging in Washington in recent months. Economists, oil companies, Republicans and some environmental groups are getting on board, even as progressive politicians (and most of the media) focus on the Green New Deal.

Under this policy, the government would tax carbon dioxide emissions and send money back to Americans in the form of dividend checks.

  • At least three different bills featured this policy when Congress tackled climate policy a decade ago.
  • Today’s version and the earlier ones differ on important details, including how much money is rebated back and whether climate-change-related regulations are preempted.

But the basic idea is the same: Try to change business behavior by making fossil fuels more expensive while simultaneously shielding average Americans.


The opposite of a tax is a subsidy, where the federal government seeks to encourage behavior by giving money or providing specific tax deductions to projects or initiatives.

Because taxes are politically unpopular, politicians have often opted for subsidies, even though economists and many energy executives consider them less efficient than a tax.

Examples abound:

  • The massive stimulus law Washington passed in response to the 2008 economic crash included various kinds of subsidies for clean energy, totaling some $90 billion.
  • Temporary tax credits for wind and solar projects, as well as buyers of electric cars.
  • A slew of permanent tax breaks for oil companies.

While Congress passed legislation last year expanding tax credits for technologies capturing carbon dioxide emissions, I don’t anticipate a big appetite for lawmakers to create new subsidies.

Cap and trade

This is the policy the House passed a decade ago that died in the Senate a year later due to several factors, including lack of support from key Republicans and even some Democrats.

Cap and trade is a market-based system where the government caps the amount of emissions (in this case greenhouse gases) and creates a trading system.

  • Companies can buy and sell credits of emissions to comply, which often makes it more flexible than a tax.
  • The end result is the same though: lowering emissions while trying to minimize costs.

House Speaker Nancy Pelosi has indicated she might revive the bill from a decade ago, but for now the least amount of momentum is behind this kind of policy.

All or some of the above

This is self-explanatory but important to mention. Debate is often black and white, but reality isn’t. Any policy, particularly the Green New Deal with its sweeping narrative, would likely combine a few of these different levers.

What’s next: While the basic policies addressing climate change haven’t changed much in the last decade, the underlying political environment is changing. It’s now more conducive to climate action for a few reasons:

The bottom line: Whether things have changed enough for any of these new old ideas to pass the legislative finish line amid deep political polarization is an open question.

What else do you want explained via an Axios primer? Email me at amy@axios.com.

Go deeper:

Democrats' left turn on climate change

Want to tax carbon emissions? Just don't call it a tax

Energy and climate glossary for Trump (and everyone)

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