The Role of Government in the Transition to a Sustainable Economy

The private sector cannot make the transition from a waste-based economy to a renewable one by itself. This transition can only happen if we can create a public-private partnership.
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The Need for Governmental Sustainability Policy

It's a great paradox that the moment the United States needs government the most, we don't seem to have one anymore. As a student of public administration, like many of my generation, I was motivated by John F. Kennedy's call to public service. I "asked not what my country could do for me" and, despite my concerns about the direction of our foreign policy in the 1960s and 1970s, I went to work for the Environmental Protection Agency in the late 1970s asking, "what can I do for my country?" Six months into Ronald Reagan's term, after he defined government as a problem rather than a calling, I was gone. I was not alone; many left and many who were needed never arrived. State and local governments continued to attract the best and brightest of our young people, but fewer and fewer seemed interested in working in our nation's capital. Most headed for private nonprofits and for-profits. In Washington, public service went out of fashion, replaced by the ambition-fueled revolving door.

Today, Washington seems a place of palace intrigue, arcane policy debates, campaign cash and a political spin on everything and everyone. I suppose for me, the final breaking point was the Obama team's failure to launch a functioning web-based sign-up system for national health care. Over a half-century of struggle to establish national healthcare culminated with a sign-up process that didn't work. We now have a federal government so incompetent that it can't manage the contractors setting up a website. President Reagan set in motion a self-fulfilling prophecy; government, at least the federal kind, has become a problem.

With this as the backdrop, we have a planet that is trapped in an economic system based on the one-time use of fossil fuels and other material resources. The population of our planet has grown from 3 billion when JFK took office to over 7 billion today. We need to develop and deploy the technology to create a renewable resource-based economy. We simply cannot continue using up materials and dumping the waste in a hole in the ground.

The private sector cannot make the transition from a waste-based economy to a renewable one by itself. This transition can only happen if we can create a public-private partnership. This is nothing new; we've been through this before. The transformation from an agrarian economy to an industrial economy could not have been done under the laissez-faire economic philosophy of the early industrial age. Teddy Roosevelt and his allies understood that and began to regulate the marketplace. Food, drugs, labor and monopolies were regulated at the start of the 20th century. FDR continued the process of increasing the role of government in our mixed economy. Government was needed to establish the rules of the game-a social safety net-along with transportation, energy and water infrastructure. Now, as we begin the transition from a fossil fuel-based economy to one based on renewable energy and other reusable resources, government has a critical role to play again.

While I am focusing here on the role of government, it is important to understand that the private sector has a much larger and even more important role to play in the transition to a sustainable economy. It is the private sector that produces the goods and services that modern life relies on. We like and want these goods and services and without capitalism's power to motivate and reduce inefficiency, there would be far fewer of these goods and services to consume. This is not an argument that government knows best. It is the argument that effective competition requires rules, referees and meaningful penalties for anti-social, criminal behavior. I am saying that in a complex economy on a crowded planet, we need a set of rules that respond to the complexity and planetary stress that our global economy has created. Just as the regulation of Wall Street builds confidence in the public marketplace for capital, we need rules to ensure that economic life does not destroy the planet that provides us with food, air and water.

The role of government in building the sustainable economy includes:
  1. Funding basic science needed for renewable energy and renewable resource technology.
  2. Using the tax system, government purchasing power and other financial tools to steer private capital toward investment in renewable energy and other sustainability technologies and businesses.
  3. Investment in sustainability infrastructure, such as smart grids, electric vehicle charging stations, mass transit, waste management facilities, water filtration systems and sewage treatment systems.
  4. Regulating land use and other private behaviors to minimize destruction of ecosystems.
  5. Working with private organizations as well as state and local government to ensure that the transition is well-managed in the real world.
  6. Measuring our society's progress toward sustainability by developing and maintaining a system of generally accepted sustainability metrics. This in turn should facilitate the integration of sustainability into our overall management of the economy along with the setting of national sustainable economic policy.
  7. Transferring sustainability technologies to the developing world.

1 & 2. Funding Science and Providing Incentives for Private Investment

One of the fundamental tasks that can only be done by government is to fund the science needed to build the technological base for a sustainable economy. America's research universities remain the best in the world. They are funded by peer-reviewed, competitive government grant programs. When coupled with the creativity hard-wired into American culture, they create a unique asset that can be used to develop a leadership position in sustainability technologies. The work of our scientists and engineers could not be more important. We need to develop a way to get off of fossil fuels and more efficiently store energy. We also need more effective ways of managing and recycling our waste stream. Government must fund the basic research and enough of the applied research to demonstrate possible profitability. The tax code must then provide private firms with incentives to invest capital in these new and speculative technologies.

3. Funding Infrastructure

Just as government built ports, canals, dams and highways--the infrastructure of the 19th and 20th centuries--it must build the energy, communications, waste and water-management infrastructure needed for the 21st century. Constructing and operating these facilities will probably be the work of private firms, but the vision and financing will need to come from taxpayers and their government. Infrastructure requires an imaginative and aggressive government. It cannot be seen as a residual category. The neglect of investment in infrastructure is obvious to even the most casual observer of America's political economy. Our roads, railways, water systems, electric grid, broadband speed, bridges, airports and schools show signs of disinvestment and neglect. Our anti-government and anti-tax ideology has made investment difficult and will make the transition to a sustainable economy even more difficult.

4. Setting and Enforcing Rules to Protect the Environment and Maximize Resource Efficiency

Anti-tax and anti-government sentiment is also reflected in reflexive opposition to so-called job-killing environmental regulations. Even though the economic benefits of environmental rules are far higher than the economic costs, our delegitimized federal government has not enacted any new environmental laws in over two decades. Many sustainability-oriented local officials understand the clear connection between environmental quality and economic growth. Unfortunately, the old mindset persists: we must trade off environmental quality to achieve economic growth. While short-term benefits can be obtained by ignoring environmental conditions, our polluted land, air and water must eventually be cleaned if we are to remain healthy. The long-term costs of clean-up are also far greater than the long-term costs of pollution prevention.

Our more complex economy and the increased use of toxics in production require rules that keep pace with economic, demographic and technological change. The food, water and air that sustain human life must be protected; only government rules and enforcement can ensure that those critical resources are maintained. Rules must prevent damage to the environment, but also must ensure that energy efficiency, recycling and water efficiency are integrated into our structures, institutions and daily routines.

5. Working to Ensure the Transition is Well-Managed

Making policies and setting rules is only the start of the process; these rules must be altered and adjusted to deal with the real world. Some rules prove to be impractical. Some become outdated by new technology and new social behaviors. In some cases, new rules require the use of new technology, equipment and standard operating procedures, and require a period of learning, pilot tests and experimentation. Very few new activities match the plans they are based on. Edicts from faceless bureaucrats reinforced by arrogant, "tough enforcement" attitudes almost always backfire and should be avoided. As my friend and retired EPA manager Ron Brand used to say, "Focus on the real work. There are no cash registers in headquarters." Revenues and expenditures are driven by the people on the production line delivering services and manufacturing goods. Once policies and strategies are developed and the money to implement them is allocated, the action shifts to operational management, assessment and learning. It is a mistake to ignore operations management.

6. Sustainability Metrics and Management

As management guru Peter Drucker famously stated, "You can't manage something if you can't measure it." Without measures, you can't tell if the actions taken by management are making things better or worse. In some respects, sustainability metrics are as primitive as accounting was before the Great Depression. While the imposition of income and corporate taxes at the start of the 20th century resulted in the growth of the accounting profession, early accounting principles were not consistently applied. According to financial writer Andrew Beattie:

In 1917, the Federal Reserve published Uniform Accounting, a document that attempted to set industry standards for how financials should be organized both for reporting tax and for financial statements. There were no laws to back the standards so they had little effect. The stock market crash of 1929 that launched the Great Depression exposed massive accounting frauds by companies listed on the NYSE. This prompted stricter measures in 1933, including the independent audit of a company's financial statements by public accountants before being listed on the exchange.

Sustainability metrics are still under development. Each corporation, locality and think tank seems to have their own favorite measures and methods. Some focus on physical issues such as water, waste and energy, while others include issues of equity, fairness and environmental justice. In the end, government will need to set reporting standards. Perhaps they will be integrated into standard accounting definitions and practices as the U.S. tax code evolves to encourage sustainability. Perhaps a separate set of measures will be developed. I have proposed that the U.S. government establish a National Commission on Sustainability Metrics to bring academics, government officials, industry, labor and environmentalists together to develop a set of generally accepted sustainability metrics. I have also begun a major research project to inventory and assess the current state of sustainability metrics now in use throughout the world.

7. Transferring Technology to the Developing World

As the developed world makes the transition to a more sustainable, renewable resource-based economy, it is important that newly developing nations are provided with incentives to use the new technologies instead of older ones that might get cheaper as they are discarded by the developed world. Coal and coal-fired power plants could get very inexpensive as they are replaced by cleaner sources of energy, and if the U.S. lowers its greenhouse gas emissions while developing nations increase theirs, the climate will continue to be degraded. I believe that the mitigation of climate change will require new energy technology, but without effective technology transfer, the climate problem will remain. Fortunately, a variety of financial tools could be used to lower the cost of new technology for export to the developing world.

Government Needs a Sophisticated, Agile Sustainability Policy

The issues identified here cannot be addressed by the private sector and the free market alone; they require government action. Unfortunately, it requires a degree of management savvy we have not seen in the United States' federal government in decades. The people that rolled out Obamacare, bailed out the financial system at the expense of the middle class, and invaded Iraq to destroy non-existent weapons of mass destruction will not be able to handle the management challenges of this transition. Nevertheless, there is no choice. The U.S. government will need to assume global leadership of the transition to a sustainable economy. The probability of this happening today is low. I see far more evidence of this capacity in local government than I do at the federal level.

The future well-being of this country and of the planet as a whole depends on the U.S. government playing a more strategic and future-oriented role to bring about the transition to a renewable resource-based economy. This country seems to do its best work when confronted with a crisis. While this crisis has arrived, many people do not believe it is here. We need a national leader willing to communicate the need for change and a strategy for getting from here to there. While no one immediately comes to mind, perhaps someone will emerge.

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