There is no one correct climate policy
… the benefits of the bills that died in the Senate — which would have raised the cost of carbon emissions, through a system known as cap and trade — were sometimes exaggerated. Once the necessary compromises were made, the bills might not have raised the cost of carbon by much. And they obviously wouldn’t have done anything about fast-growing emissions in China and India.
“The first best hope was getting a world price for carbon, and that now looks remote in the coming years,” he says. “But there are ways in which the other options may be preferable to a price only in the U.S.”
To put it another way, the death of cap and trade doesn’t have to mean the death of climate policy.
Right up to that point I’m nodding along. The benefits and the costs of cap-and-trade have been exaggerated, particularly regarding the next 10-20 years. Its effects would have been fairly modest relative to the furious hype that surrounds it. And (sigh) no, it would not have magically transformed Chinese and Indian domestic policy. There are plenty of public policy and diplomatic tools yet to be deployed, a portfolio of which can serve just as well as the bill that died in the Senate this year.
This is where I get off the train: “The alternative revolves around much more, and much better organized, financing for clean energy research.”
Leonhardt is referring to a new proposal from the Breakthrough Institute, the centrist Brookings Institution, and the conservative American Enterprise Institute. The self-styled “post-partisan” energy policy revolves around a massive increase in energy R&D spending.
I have nothing against R&D spending — far from it — but I object to the notion that it’s an alternative to cap-and-trade or that it will prove, in practice, any less partisan.
One of the most important lessons from the implosion of cap-and-trade is that monocrops are as dangerous in policy as they are in nature. It’s time to get over the notion that climate/energy efforts need to “revolve around” any single policy strategy. More importantly, we need to leapfrog the poisonous notion, relentlessly pushed into the national bloodstream by Breakthrough’s Ted Nordhaus and Michael Shellenberger, that different policy approaches are at war with one another, that one approach is the Brave New Paradigm for the 21st Century and all others tattered remnants of an exhausted and discredited worldview.
Clean energy advocates are in a war against a politically entrenched, well-financed, and fairly monolithic status quo. Those that benefit from the status quo don’t want their prerogatives and privileges put in danger. Any policy that threatens to do so will be met with the same furious demagoguery that met cap-and-trade. That’s precisely why the war needs to be fought on multiple fronts, in particular: legislation, regulation, and investment.
By legislation I mean efforts by state and federal legislative bodies to mandate the reduction of greenhouse gas emissions. On this front, the goal is to reduce climate pollution at the lowest possible cost. That’s what a price on carbon is for and what a cap-and-trade program should be designed to do. The investment crowd is absolutely correct that a price on carbon — at least a politically palatable price on carbon — will not spur the creation of domestic clean energy industries. But that’s fine; that’s not the goal here. The goal is lowest cost, and for the next few decades, mandated GHG reductions are likely to be achieved through some mix of efficiency and fuel switching from coal to natural gas.
By regulation I mean efforts to protect public health and welfare by forcing industry to absorb some of its externalized costs. The EPA is in the process of updating a whole host of air and water regulations that went dormant under the Bush administration, covering everything from mercury to SO2 to coal ash. Those will likely have a larger short-term effect on the nation’s coal fleet than any price on carbon. EPA is also attempting to get at greenhouse gases through the Clean Air Act, which isn’t an entirely elegant fit but is absolutely vital in the absence of a carbon price. The remainder of Obama’s first term is going to be filled with vicious partisan warfare against the EPA. It’ll be couched in dire economic predictions, but those predictions are almost certainly wrong. The real motive will be, as always, to defend the status quo.
By investment I mean, in part, just what Breakthrough et al. are preaching: a steady, long-term increase in RD&D spending, from the $4 billion or so the US spends today to something more like $25 billion. I also include in this category investment programs like the production tax credits, feed-in tariffs, and subsidized loans, along with mandates on regulated electric utilities to get a percentage of their power from clean, low-carbon sources — the Renewable Electricity Standard. An RES effectively forces investment by utilities, which are quasi-public (or at least heavily regulated) entities that do not operate in anything like a competitive market and so should not be left to the mercies of market forces.
Nordhaus and Shellenberger are eloquent and absolutely correct in decrying the neoliberal aversion to direct public investment. History is replete with economy-boosting innovations that had their origins in government investment, everything from railroads to telecom. In fact it’s hard to find examples of major new technologies or industries that didn’t receive a helping hand from government. Both direct investment and an RES fall under the rubric of industrial policy, and if America expects to compete in the great cleantech race of the coming century, it’s going to have to quit pretending it doesn’t have industrial policy and start doing it right.
Climate policy is not a zero-sum game. These policies work in concert. The carbon price raises the unit cost of dirty energy while efficiency and public investment drive it down. Charging polluters for their climate pollution (and removing existing subsidies to dirty energy) can help raise the money to spend on investment. Regulation can create tangible short-term benefits for the public and help drive industry to the table to negotiate legislation. All the pieces work together and there’s no reason they can’t all be pushed simultaneously at every level of government.
Yes, cap-and-trade became the subject of partisan warfare. It was a threat to the status quo, so the status quo marshaled billions of dollars, astroturf groups, and friendly politicians to demonize it. Massive clean energy R&D would also threaten the status quo, and so if it moved from a think tank fantasy to a live option, the status quo would demonize it too. (Remember, cap-and-trade itself started as the Very Reasonable centrist alternative to hippie regulations.)
There’s not going to be a pleasant post-partisan clean energy policy, at least not one that works. That’s not
how massive social change works.
The single most distorted aspect of the U.S. climate conversation is that it proceeds as though all the risks are on the side of doing too much. But that’s crazy. The latest science makes clear that the overwhelming balance of risk lies with our present course of action, i.e., too little too late. We should be erring on the side of redundancy, not parsimony; speed, not efficiency. What we face is not a singular problem waiting on the One True Policy. It’s a generational challenge, perhaps humanity’s first true existential challenge, and meeting it will require all our best ideas.