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the chairman of the president's Council
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of economic advisors Jason Ferman joins
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us today to talk about climate change
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and the administration's policies for
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addressing it thank you for being here
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with us thanks for having me uh about a
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year ago a little more than a year ago
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June
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2013 uh President Obama announced his
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plans for addressing climate change over
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the second half of his
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administration um what's been happening
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in the ensuing 15 months and um is he is
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the administration on track with what
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they hope to accomplish um we've been
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working really hard since the president
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first announced that climate action plan
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and that plan has three parts which
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involve almost all the agencies in the
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federal government the first is to
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reduce the amount of carbon we emit the
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second is to be able to better deal with
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the changes that climate change will
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bring because we can slow it but we
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can't stop it and third is to better
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enlist the World in that effort and if
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you look at just the last week um you
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see things in a lot of those different
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areas last week we had a number of
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companies at the White House talking
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about how they could phase out their use
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of
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hydrocarbons increase their use of solar
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and this week the discussion at the
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United Nations will help advance that
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third prong of the climate action plan
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engaging with the rest of the world
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recently 12 States mostly coal producing
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states have sued the EPA uh claiming
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that the rules which I believe the
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administration would like to uh impose
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on uh air emissions greenhouse gas
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emissions uh would affect the coal fired
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plants in these states uh drastically
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causing some of them to close there's
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been protests among uh by coal miners uh
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for example um and
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so these are these are charges which U
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sort of the mirror image of that are the
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states that are feeling that this the
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either pollution or Andor greenhouse
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gases are sort of wafting over state
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lines into their territory and are
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trying to put
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a a stop to that so where where does
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this all stand I mean this is really
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about jobs and climate change and uh
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tradeoffs and that kind of thing I'm an
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economist not a lawyer so let me give
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you an economic perspective although I
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should say that the lawyers I talk to
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think this is clearly in the statute the
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Supreme Court um basically has said that
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in the past but um it's very much sound
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economic policy and it's consistent with
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what we always try to do in
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environmental regulation which is look
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at the costs and look at the benefits
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electricity is responsible for 32% of
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our greenhouse gas emissions that's
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larger than any other source of
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greenhouse gas emissions most of those
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emissions are coming from coal fired
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power plants when we look at that we
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think there's a number of things you can
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do to improve you could have more
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efficient Coal fire power plants you
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could shift to a transition fuel like
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natural gas you could instead build um
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capacity in Renewables or you could use
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um less electricity and the combination
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of those four tools means that we could
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bring our emissions down and we could
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bring them down in a very coste
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effective way the benefits of bringing
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them down are many multip of the cost
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both direct health benefits like
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reductions in asthma and premature death
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and then longer term benefits from
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mitigating some of the potentially worst
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impacts of climate change okay um so the
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standard argument oftentimes when you
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discuss environmental issues is that
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there has to be some kind of a trade-off
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between uh the the good effects that
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might come from from these kinds of
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things uh and the
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the negative economic effects so it's
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not to say there aren't economic effects
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you're saying that the that the the good
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that is produced outweighs it but how do
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you think about trading these things off
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because there would be some jobs lost or
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maybe there's jobs created somewhere
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else um but you know obviously U there
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are some winners and losers even if as
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you argue the winners might be
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outweighing the losers MH right so first
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of all I'd look at the costs and the
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benefits and here the benefits are in
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the range of 50 to 90 billion dollar per
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year and the costs are in the range of
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eight or9 billion dollar per year so
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it's many multiple benefit um to cost
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ratio I would then um you know note that
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there's a lot of ways in which this will
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help the economy and create jobs whether
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that's in natural gas or Renewables and
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you see jobs booming in those sectors of
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the economy I certainly think that
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preventing asthma premature death
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respiratory illness all of that actually
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can can help make people more productive
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and help the economy the IMF has a
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recent study that has um documented that
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and finally most importantly there's the
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economic costs of inaction those are
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really large and they're the more we
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delay the more they are we wait extra
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decade the costs go up about
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40% we wait extra decade and don't do as
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much so the temperature goes up an extra
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degree Centigrade the costs go up by the
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equivalent of 100 50 billion for the
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United States so there's a lot of cost
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um you know to
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inaction when uh projections are made
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for the growth of alternative energies a
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lot of times you see kind of simple
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straightforward projections um solar
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energy will likely increase by a certain
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amount you sort of see these straight
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line projections and it it strikes me a
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lot of times that that that doesn't take
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into
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consideration unexpected breakthroughs
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although there's maybe likely to be some
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breakthroughs even if we don't know what
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they're going to be by definition and
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also that you can reach a Tipping Point
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so some are arguing that that's what's
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that's the point that we're at now so
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solar energy costs per dollars per watt
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of electricity generator have been
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dropping something like 5 to 7% per year
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for 30 years almost in a predictable way
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um to the point now that it's getting
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very close to parity in in terms of cost
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with fossil fuels uh what's your view on
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on this is are we likely to see a sudden
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and dramatic increase uh in in
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reductions in cost that would cause
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people to want to use these alternate
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sources more uh and what is your growth
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projection for uh alternative energy use
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over the next couple of decades right so
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in the last few years we've seen wind um
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power produced by wind grow three-fold
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and solar grow um tenfold and I expect
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they're going to continue to grow
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rapidly
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um I'm not the best person to predict
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just how rapidly but what I can tell you
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is if we have the right public policies
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in place that would help and those
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public policies are appropriate because
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you have an externality here which is
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other forms of um Power produce carbon
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which creates a worldwide harm um
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Renewables don't and in the face of that
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externality policies like the production
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tax credit we have in the tax code the
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investment tax credit that the those two
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benefit wind and solar and the clean um
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Power plan for existing power plants lot
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of states are going to figure out how
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they want to adopt that rule and
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implement it and I think many of them
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will create incentives for Renewables so
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I think all of this will help provide an
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impetus to um accelerate the work on
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Renewables okay I would be remiss if I
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had the chairman of the president's
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Council of economic advisors here and
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didn't ask him what you see coming ahead
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for the economy so in terms of GDP
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growth over the next two three four
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quarters what what do you think is going
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to happen uh we've seen growth uh speed
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up in the second quarter the indications
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are good for the third quarter I'd never
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want to venture a quarter by quarter
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forecast but one of the things I think
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we have going for us and it's one that I
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hope we don't interrupt um and mess up
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is we've had a somewhat more predictable
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fiscal environment with less of the type
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of uncertainty that hurt the economy in
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the past and a more neutral fiscal
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policy without the types of large fiscal
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contractions that were helping to go
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against our growth before I think if we
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can continue that then there's every
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reason to believe the private sector can
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continue to make um you know its
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contributions to Growing our economy and
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bringing the unemployment rate down and
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on a percentage basis for GDP what kind
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of I don't have a particular forecast
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for you but we're still
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um in the phase of growth where we get
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extra growth by bringing our
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unemployment rate down putting more
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people to work and adding to our growth
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rate um after we're fully
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recovered then growth will only come
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from expanding the economy's potential
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which depends more on the types of
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Technologies we have at our disposal the
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the quality of the capital Investments
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we're making but still right now um
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we're we're you know in the final stages
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of the cyclical recovery and that will
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be boosting growth in the term there's
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been an interesting release of studies
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recently from the oecd organization of
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Economic Development World Bank the ILO
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International labor organization they're
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all looking at this question of wage
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stagnation which has been a problem in
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the US uh but also around the world so
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in a nutshell the idea is that a lot of
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companies or economies are having
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relatively decent productivity gains but
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those gains are not flowing much down to
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workers whose wages haven't increased
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much if at all uh for a very long time
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and that uh has not only an effect on
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the workers but it also has the effect
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of dragging down uh the potential of the
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economy if if uh people don't have
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enough money to spend so what's what's
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your view of that particularly in in the
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US what are some of the causes what
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could some of the solutions be for that
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well I'd love to spend an hour with you
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on that topic I think if you look at
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Family incomes um there have been three
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important things that have happened
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first um productivity growth matters a
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lot and it isn't as fast as it was in
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the 50s and 60s it's a lot faster than
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the 70s and 80s but it still hasn't uh
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you know it still could be faster the
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second is the big increase in inequality
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that we've seen since the late
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1970s and the fact that a lot of the
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gains in the economy are going either to
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higher earners or to um the business
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side of The Ledger and the labor share
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of income has been falling since about
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2000 and then the final issue is one
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that I don't think is fully appreciated
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but even against those two forces family
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incomes continued to rise in the 70s 80s
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and 90s and that's because there was
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pressure on wages but a lot more
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households had two earners rather than
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one as women um came into the workforce
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and droves now that that which was
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helping to compensate and offset some of
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these other ch es has stopped and
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women's labor force participation has
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basically flattened out and started to
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fall that means that we're feeling the
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productivity growth and the inequality
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you know even more than the ways in
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which it was masked in the 70s 80s and
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90s um which is creating I think a very
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serious challenge for the typical fam's
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income and one that I think needs to be
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the central focus of Economic Policy um
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not one that has a onep part agenda or
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even a three-part agenda it's more like
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uh as many parts of an agenda as you can
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you can throw at the issue because it's
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a big one what what are just some of the
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potential tools that could be used uh to
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address this problem in your view I
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think we need to expand our growth rate
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we can do that with immigration reform
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business tax reform investing in
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infrastructure improving education
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expanding trade then I think we need to
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make sure that more of the benefits of
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those growth are shared across the board
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um the minimum wage is one particularly
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powerful tool we have to do that another
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one is expanding the earned income tax
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credit for workers um without children
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or non uh custodial parents and um you
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know but I think we just need to keep
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working on you know every aspect and you
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know I'm not one the person who says um
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let's just focus on distribution let's
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focus on growth I think we need to focus
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on both I think a lot of the instruments
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we have
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um working on both of them uh
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simultaneously thanks very much for
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joining us thanks for having
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me and
