A cap-and-trade system will not by itself eliminate dirty energy’s unfair advantages
On p. 57 of Fred Krupp’s (generally excellent) new book Earth: The Sequel, it says this:
In essence, renewable standards, subsidies, and other mandates assume that the government has all the answers, rather than letting the market figure out the best way to produce clean energy at the lowest cost.
I’m never satisfied with how people talk about this stuff. On one side you have this sort hankie-waving fear of besmirching the virtue of the virgin market. On the other side you hear about how Society worships Capitalism even though the Market wants to Kill Us All.
What both sides seem to agree on is the premise — that clean-energy regulations disturb the functioning of a free market.
I don’t see why we should accept that premise. The market to which clean-energy mandates would apply is not "free" in the sense of being otherwise unburdened with preferential government policies. In fact, a whole network of subsidies, tax breaks, weak safety and environmental standards, and lax law enforcement tilts the market in favor of dirty energy. For a century, U.S. gov’t policy has actively supported road-building, sprawl, large, inefficient centralized power generation, and fossil-intensive agriculture. That’s left behind a deep legacy of practices, habits, and infrastructure — an enormous socioeconomic inertia.
Take, oh, just to pick an example out of a hat, coal. Do coal companies pay the full social and environmental costs of mountaintop-removal mining? Mercury and particulate emissions? Polluted groundwater from coal ash? No. Laws are weak; enforcement is lax. (See here, for the latest in a long, long string of examples.)
Do centralized coal-fired power plants compete on a level playing field with smaller, decentralized source of energy? With energy efficiency? No; utility regulations incentivize large, capital-intensive projects.
Do courts, government agencies, and legislators treat energy sources dispassionately? No. Coal companies have spent decades stacking state houses, bureaucracies, and courts with loyalists.
In all these cases, coal has socialized its costs and privatized its benefits.
That’s the market we have: not a theory or an abstraction, but a reality, a living system that carries with it its past and its current biases.
In that market — the real market — how do you treat clean energy?
Krupp argues that cap-and-trade is enough. It is "the market." Additional regulations, investments, and mandates just interfere with the smooth functioning of the market. This is virtually identical to what John McCain believes.
I can’t get on board with that. Cap-and-trade is a weight on the scale, but does it balance the scales? Does it fully internalize the costs of dirty energy? I don’t see how.
I can see a case for working diligently to remove all of coal’s implicit and explicit subsidies (removing weights from one side of the scale). I can see a case for supporting clean energy subsidies and mandates (pushing on the other side of the scale). Both those would come closer to yielding a bona fide competitive market.
But stopping with cap-and-trade? That’s hardly a sign of fealty to The Market. If you reduce dirty energy’s head start by half, you’ve helped, but you’ve not created a fair race.
(Perhaps I’ll ask Krupp about this when I interview him later today!)