What Californians know that Shellenberger & Nordhaus don’t
“The kind of technological revolution called for by energy experts typically does not occur via regulatory fiat” claim Shellenberger & Nordhaus. Actually, that is typically the only way it occurs. I defy anyone to name a country that has successfully adopted alternative fuels for vehicles without employing some kind of regulatory mandate.
This is also true in the electricity sector. Consider that in terms of electricity consumption, the average Californian generates under one third the carbon dioxide emissions of the average American while paying the same annual bill.
Did California accomplish this by technology breakthroughs that S&N mistakenly say we need? Not at all. They did it by accelerating the deployment of boring old technology — insulation, efficient lightbulbs, refrigerators, and other appliances, light-colored roofs, and so on — through tough building codes and intelligent utility regulations, especially ones that put efficiency on an equal footing with new generation. The result: From 1976 to 2005, electricity consumption per capita grew 60 percent in the rest of the nation, while it stayed flat in hi-tech, fast-growing California.
S&N think we must have massive $30 billion-a-year government programs and clean technologies. One of their central arguments is that “big, long-term investments in new technologies are made only by governments.” This is perhaps half true, but 100 percent irrelevant. What we need is big, long-term investment in existing technologies — and that is made primarily by the private sector stimulated by government regulations.
Why isn’t government spending more important? Let me relate an eye-opening story from my time in government.
When I was at the Department of Energy in the 1990s, we partnered with GM, Ford, and Chrysler to speed the technological development of hybrid gasoline-electric cars, since increased fuel efficiency was (and remains) clearly the best hope for cutting vehicle greenhouse-gas emissions by the year 2025. This partnership was part of an informal deal between the Clinton administration and the car companies, whereby we did not pursue fuel economy standards and in return the car companies promised to develop a triple-efficiency car (80 miles per gallon) by 2004.
Ironically, in the mid-1990s, the car companies were actively lobbying to cut funding for hydrogen car development and to shift that money into near-term technologies like hybrids. Even more ironically, the main result of our government-industry partnership (which had excluded foreign automakers) was to motivate the Japanese car companies to develop and introduce their own hybrids.
During the 1990s, the government — partnering with industry — spent money almost on a scale that S&N said we need to. But what happened?
In one of the major blunders in automotive history, GM walked away from hybrids as soon as it could — when the Bush administration came in — after taxpayers had spent over $1 billion on the program. The result: Toyota and Honda walked in. GM, which had had a technological lead in electric drives, let its number one competitor, Toyota, achieve a stunning seven-year head start in what will likely be this century’s primary drivetrain. GM was publicly criticizing the future of hybrid technology as late as January 2004, and announced later in that year a half-hearted effort to catch up to Toyota.
Let this history give pause to anybody who promotes a primarily technology-based solution to greenhouse-gas emissions (and gasoline consumption) in the transportation sector.
Now let me take up the question from my previous post on S&N: Why don’t never-been-seen-before breakthroughs change how we use energy? Why don’t breakthrough energy technologies enter the market the way breakthroughs in consumer electronics and telecommunications seem to? If we focus on the two most important sectors for global warming, transportation and electricity generation, the answer is fairly straightforward: the barriers to market entry for new technologies are enormous. The entire electric grid — from power plant to transmission line to your house — represents hundreds of billions of dollars in investment, much of which has long since been paid off. We have coal plants and hydropower plants that are several decades old and still running. This keeps electricity widely available, and much lower in price here than almost any other industrialized country. And it keeps competing technologies at a permanent disadvantage — especially for utilities in states with regulations that only permit them to make profits by selling more electricity, not energy efficiency.
The entire gasoline fueling delivery infrastructure — refineries, pipelines, gasoline stations, and the like — also represents hundreds of billions of dollars of investment that assures widespread availability, low-price, and very tough competition for any potential alternative fuel. A comparable investment has been made in automobile manufacturing plants, a key reason why we have not seen a new American car company successfully launched for a very long time.
Perhaps the best example of a breakthrough that is changing the vehicle market is the nickel metal-hydride battery currently being used in virtually every hybrid gasoline-electric car today. The key to making hybrids work is the battery. Research on nickel metal-hydrides began in the 1970s. In the early 1980s, a U.S. company, Ovonics, introduced nickel metal-hydride batteries into the market for consumer electronics. At the Department of Energy, we were interested in hybrids in the mid-1990s because a few years earlier, Ovonics had developed a version of the battery for cars under a partnership with the government in the U.S. Advanced Battery Consortium. (Yes, government technology partnerships have value.)
Hybrids were introduced into the U.S. car market by the Japanese car companies Toyota and Honda in 1997. Sales began to soar after 2000, thanks to improved engineering, high gasoline prices, and government incentives. Even so, in 2005, eight years after they were introduced into the U.S. market, hybrids were only slightly more than 1 percent of new-car sales — even with high oil prices and government subsidies. But here we want to know how long before a breakthrough significantly affects how we use energy or how much energy we use. So the question is: How long before hybrids reduce U.S. gasoline consumption?
Consider first that the average car now lasts for nearly 20 years, making it difficult for any breakthrough technology to have a rapid impact on the market. Second, consider that engine technology has gotten dramatically more efficient in the past two decades, but the average vehicle on the road has not gotten more efficient. Why not? The efficiency gains have been offset by increased performance (faster acceleration) and the increased weight of the average car (thanks to the growing popularity of sport utility vehicles and light trucks).
How soon will hybrids begin reducing U.S. gasoline consumption? The best answer is “maybe never.” Why should hybrids increase the average efficiency of the U.S. cars and light trucks any more than the steady advances in engine efficiency of the past two decades did? The good news is that hybrid drive-trains provide enough efficiency improvement and their electric motors develop such high acceleration that automakers have used the technology to raise both horsepower and fuel economy simultaneously. But a number of hybrid models have been introduced that achieve only a very modest efficiency gain. Moreover, vehicle efficiency must rise significantly over the next two decades just to keep gasoline consumption — and hence greenhouse-gas emissions — constant, just to make up for the increases that would otherwise come from more and more people buying more and more cars and driving farther and farther.
If we want to reduce U.S. oil consumption and greenhouse gas emissions from cars, the most obvious strategy is the one that we already employed successfully to double the fuel economy of our cars from the mid-1970s to the mid-1980s: tougher government mileage standards. No other strategy has ever worked for this country.
And based on the experience of this and every other country, if we want alternative fuel vehicles to succeed in the marketplace, regulations will be as important if not more important than new technology.
Now, I do support an increase in government spending on clean technology — I just don’t consider it the most important thing, as S&N do, but way down the list of policies, after a cap-and-trade system, tougher CAFE standards, changing utility regulations to put efficiency (and cogeneration) on an equal footing, and so on.
As long as S&N keep insisting we need breakthrough technologies, they are playing into the hands of delayers like President Bush who only want to talk about technology. I will discuss the many technology-related strawmen S&N create in Part IV.