A reply to Shellenberger & Nordhaus
It’s rare for any environmental book to receive the attention garnered by Ted Nordhaus and Michael Shellenberger’s Break Through, particularly outside the usual green circles. Anything that prompts conversation on these issues is, in and of itself, a good thing. So one hesitates to point out that beneath all the hype — the "death" of this, the "fundamental break" from that — the book’s arguments are fairly modest. Banal even. The word from the "bad boys of environmentalism" is that environmentalists should be more positive and support greater public investment in clean energy technology.
Well … OK.
The argument about positive messaging is familiar and, in my view, correct. Relentless derision of America, Americans, capitalism, and technology has put environmentalism in a political box where it can be easily contained. Many people (including me) have argued that the conventional environmental narrative of fear and guilt will never build a popular base of support for the fight against climate change. My sense, though, is that this has become conventional wisdom, if not common practice. Most NGO types and legislators I talk to are enthusiastic about the idea that a greener world can be better and healthier, with more high-quality jobs, improved international economic competitiveness, and a greater sense of community and purpose. S&N bring some welcome social science data to this argument, mainly via American Environics.
On policy, too, there’s less than meets the eye. As they’ve made it clear over the course of exchanges on this site and others, S&N are not arguing against regulatory efforts to put a price on carbon. They are not arguing for delaying our deployment of existing clean technology. The argument is simply that those efforts will be insufficient; alongside them should be a concerted push for more public investment in disruptive clean energy tech, to drive prices down and make clean energy competitive with dirty, even in the absence of a price on carbon (in, say, China).
I have nothing against greater public investment in clean tech. If I were choosing between a carbon tax without $30 billion in revenue for clean-energy investment and a carbon tax with it, I’d choose the latter, and I can’t envision an enviro on the planet that would do otherwise. (It may be that the agendas of the big, mainstream green groups focus too much on regulation and too little on investment, but those groups are not the most significant or interesting players in the climate change debate.)
My problem with S&N’s policy prescriptions are twofold:
1. Public investment is not a panacea or a guarantee. To paraphrase Rumsfeld, you invest with the government you have, not the government you might wish to have. In practice, "alternative energy" subsidies have overwhelmingly gone to things like corn ethanol, nuclear energy, "clean coal," and hydrogen; the way things are going we can expect liquid coal to hop on the bandwagon as well.
Those are not the investments I’d make, but I don’t get to decide. Neither does Greenpeace or NRDC; neither do S&N. Congress decides, and Congress is heavily subject to the very power dynamics that have kept fossil fuels on top for so long. Perhaps green groups know this, and know that a massive push for public investment would likely be co-opted in ways that do more harm than good. Even a Congress acting in good faith is unlikely to prove particularly adept at selecting the technologies that will "break through." The mix of technologies and practices that will reduce and eventually eliminate our GHG emissions is impossible to predict in advance. And the ones that have the best chance — I’d pick solar, electricity grid systems (including smart loads and storage), cogen, carbon-neutral building, and public transportation — have the least powerful lobbies.
A price on carbon is one of the few energy policies that’s guaranteed, or at least strongly predisposed, to be agnostic toward different technologies. It applies uniform pressure on the market. (It also sidesteps the familiar tax-and-spend attacks on liberals.)
This isn’t to underplay the importance of public investment, particularly R&D. But saying you could tackle climate change with "pork-free" public investment is like saying you could win the blue ribbon at the pony show if you had a pony.
2. S&N have both too much and too little faith in markets. This point is a bit more complicated and probably deserves a post of its own, but I’ll try to sketch the idea.
By too much faith in the market, I mean that S&N accept a central fallacy of economists the world over: that we have a free market economy wherein resources are optimally deployed. On this (unstated but widely shared) view, government regulation by definition "restrains" the economy, hampers economic actors, and raises costs — after all, regulation pushes the economy away from its optimal state.
It’s not true, though. Free markets exist only in textbooks and libertarian wet dreams. All extant market economies are social artifacts, constructed and shaped over time in ad hoc, unplanned, and frequently perverse ways. To say that clean energy "costs more" is not a statement of objective economic fact; it’s a political statement that makes sense only given a contingent set of laws, practices, and market institutions.
"Regulatory paradigm" is a reductive and dismissive way of describing something that is in fact much broader and more ambitious: purposefully reshaping market economies to decouple economic growth from environmental destruction. There are myriad ways to to do so, including regulation, legislation, litigation, shareholder activism, consumer activism, and, yes, direct government investment. Some of these tactics will raise short-term costs, some will lower short-term costs, some won’t affect costs at all. All of them will pay off, assessed over a sufficiently long time scale.
Public investment and putting a price on carbon are not remotely exhaustive of our policy options. A price on carbon is only the first step, a macro effort that must be followed by hundreds of micro efforts focused on particular segments of the economy. To take just one example, most utilities in the country still get paid more the more electricity they sell. In California, where that model has been changed — where utilities like PG&E are initiating programs to help their customers use less electricity — power use has remained steady while economic growth has continued.
We’ve only barely started reshaping our economy along post-fossil lines. It would be the height of folly to frame everything outside of public investment as some sort of gloomy technocratic obsession with pollution. Public investment is one way of reshaping the economy, but it’s a fairly limited tool, since it does nothing to change the underlying distortions and biases that created the need for public investment in the first place.
By too little faith in the market, I mean that S&N underestimate what markets are capable of when incentives are properly aligned. If everyone who created value by finding a way of emitting less carbon was able to capture and profit from that value, change would be drastic and non-linear. The basic insight behind market capitalism is one shared by brain scientists, computer programmers, ecologists, evolutionary biologists, and social change theorists, to wit: a large assemblage of dumb (limited information) actors will make, in the aggregate, better decisions than a small set of smart (high information) actors. Widely distributed decisionmaking works better than command-and-control decisionmaking.
No set of government officials is going to deploy capital more effectively than the aggregate of millions of private investors. The market, properly designed, is more powerful than any possible public investment.
To my ear, it sounds like S&N are giving up too easily on designing 21st century markets and resorting too quickly to a lesser (if politically simpler to achieve) tool.