The Crucial Role of Policy

In the previous chapters, we laid out the case for a clean energy transition to reduce climate risk. This transition is both economically necessary and technically feasible. Now we turn to the key operational question: how do we get it done?

We believe businesses must act to reduce their climate risk and help to slow the march of climate change. Indeed, the clean energy transition can happen only if the private sector invests in clean energy and efficiency, deploys low-carbon technologies, and continues to innovate.

But the private sector, in turn, will take these actions at the necessary speed and scale only if they can do so on the back of a clear and consistent policy and regulatory framework that provides incentives for innovation and deployment of clean energy systems, and helps business adapt to those climate impacts that are inevitable due to past emissions.

A strong policy foundation sets the stage for strategic climate-related decisions by executives and boards. And in fact it is a core responsibility of government to take the long view, and to provide support for the infrastructure, innovation, and investments that will underpin the clean energy economy across every region and sector of this country.

Policy Principles

With this understanding, we recommend establishing legislative or regulatory policies that promote the clean energy transition, avoid actively subsidizing economic activities that increase climate risk, and avoid negative economic and social impacts in the future.

These policies must:

  • Internalize the true costs of carbon pollution through legislation or regulation, e.g. through a mechanism that puts a price on carbon emissions.
  • Avoid actively subsidizing activities that increase climate risk, e.g., tax incentives for fossil fuel extraction or subsidized flood insurance in high-risk areas.
  • Coordinate and streamline government investment in research and development, infrastructure, and education and workforce training to provide consistent and comprehensive support to the clean energy transition.
  • Lower regulatory and financing barriers to clean energy projects.
  • Require corporate disclosure of material climate-related risks.
  • Include measures to help those Americans negatively affected by the clean energy transition as well as those who are most vulnerable and least resilient to the physical and economic climate impacts that are no longer preventable.

Across all policies, the U.S. must consider its position in the international context, in a manner that maintains and increases the global competitiveness of U.S. firms. The Paris Agreement, signed by 197 countries that committed to addressing climate change through domestic policy, provides a basis for international action. The Paris Agreement would not have happened, and will not be implemented effectively, without U.S. leadership. The U.S. may have a small percent of the world’s population, but it accounts for one-fifth of the global economy, produces more than one-sixth of global GHG emissions, and has outsized influence on global policy. It is therefore this country’s job to lead by example, both in the public and private sectors.

We have no doubt that the U.S. can reduce its overall economic risks from climate change by investing in a clean energy economy, and encouraging other countries to do the same. Business will play a critical role in this transition, as it has in the past. But, as in the past, government must provide the underlying policy framework to support innovation and to encourage the transition. It must also reduce the negative impacts on those workers and communities most dependent on the status quo, and provide support for those who are most vulnerable to the climate impacts that are already inevitable.

We have no doubt that the U.S. can reduce its overall economic risks from climate change by investing in a clean energy economy

The impacts of climate change are happening now, faster and stronger than expected.

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