Varieties of Derisking

In recent years, the debate over climate policy has moved away from the earlier consensus in favor of carbon pricing and towards an investment-focused approach, illustrated by the passage of the Inflation Reduction Act, along with other similar measures in the US and, to an extent, in Europe. On June 6, the Polycrisis and Phenomenal World convened a panel to discuss these policy shifts around green industrial policy and the role of macrofinance.
There are good reasons to welcome this shift, both as a more promising response to the challenge of climate change and as a turn away from the neoliberal consensus of previous decades. Industrial policy is better able to address the real requirements and constraints of decarbonization than carbon pricing. It offers the possibility of a more robust political coalition in support of aggressive climate policy, and a way to overcome the long-standing problem of chronically weak demand in the advanced economies.
At the same time, the specific approach to industrial policy embodied in measures like the IRA raises a number of concerns. Among these:
Do these policies target the right constraints and the most important barriers to rapid decarbonization? Do the subsidies and incentives impose sufficient discipline on private business to meaningfully redirect investment? Will the direct-pay provisions meaningfully increase the role of public and nonprofit enterprises, or will the IRA further entrench the dominance of for-profit businesses in energy and other sectors-ultimately undermining both climate and broader economic objectives? Does the industrial policy approach risk a zero-sum competition between national governments to support their own businesses? And in particular, will it exacerbate tensions between the US and China? Is the industrial policy approach suitable for today’s macroeconomic environment? Is boosting demand and employment still a meaningful goal in an environment of global inflation and, in some views, labor shortages? The goal of this panel is to present a range of views on how serious these (and other) concerns about the new industrial policy are, and what can be done to address them. The panel featured:
Skanda Amarnath, director of Employ America, pushing Congress and the Fed towards high employment and wage growth policy.
Daniela Gabor, professor of Economics and Macro-Finance at UWE Bristol.
Chirag Lala, the Center for Public Enterprise.
Melanie Brusseler, senior researcher in macrofinance and industrial strategy in a transatlantic context at the UK-based Commonwealth.
Moderated by Josh Mason, professor at John Jay College and fellow at Roosevelt Institute.
Read the panel brief here: www.phenomenal...
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