When I sat down to write about why so-called “command and control” methods are often the most effective and efficient means of fighting climate chaos, I found that Kevin Drum had posted exactly the argument I wanted to refute.
After conceding that it will take more than emissions pricing to lower greenhouse gas emissions, and that response to price signals tends to be small and slow, Drum argues that a price mechanism should be the primary means to fight climate chaos: “Still, generally speaking, taxes and carbon trading are more efficient regulatory mechanisms than command and control, so the more you can rely on them the better.”
I think this default conventional wisdom is just plain wrong. Not only is elasticity low, but there are also simple standards by which we can measure energy and greenhouse-gas efficiency. Further, suitable means for increasing efficiency and lowering emissions are known. Given these three conditions, price is not the most efficient way to change behavior.
As examples, consider weather and duct sealing. It’s widely acknowledged that sealing buildings yields fast paybacks—two years or less. Yet most buildings remain under-sealed, with leaky frames and ducts. How do we change this? Well, we can raise the price of energy until people become desperate and seek out contractors. But since we already have quick paybacks, any amount we raise the price is far beyond the cost of saving the energy.
If, as I have suggested in surveys of the literature, demand response to price increases is around -.5, that means it will require $200 in emissions charges to motivate each $100 of consumer investment in energy efficiency. In contrast, investing public funds could insure that a nice woman working for an energy-efficiency utility could seal your home for around $100, plus a bit for administration. Even if that $100+ came from regressive taxation, it would still cost consumers less than a primarily price-driven policy. And if the payback is really two years or less, the government could use its ability to borrow to provide low interest financing, thus bringing the cost to consumers down below the business-as-usual price.
One obvious response would be to look on this as an anomaly. Orwell’s sheep used to bleat, “Two legs bad, four legs good.” I think the 21st-century version is, “Public bad, private good.”
In most economic sectors, clear, measurable standards can compare where we are to where it is possible to be. For buildings, we know the potential for lowering emissions per square-foot and per person. In transport, we know it is possible to improve efficiency per passenger-mile and per ton-mile. In power generation, we know how much we can lower emissions per kWh. In land use, forestry, and agriculture, we want to build rather than to erode soil and we want to generate net sequestration rather than net emission of greenhouse gases.
Similarly, in most sectors >we know the means to accomplish these things. In buildings we want to see well-known efficiency means implemented, along with use of solar and ground source heat pumps. For freight we know that a switch from long-haul trucking to freight rail is an opportunity for huge savings at a low price. In ground passenger transport, we know that some mix of electric cars, passenger rail, increased use of buses, ride sharing, increased telecommuting, increased use of bikes and walking paths, and urban infill will give people options for living closer and reducing emissions.
There are varied but well know means of transforming agriculture and forestry from net emitters of greenhouse gases to net sequestrators. These include organic and low input agriculture, conservation tillage, and a greatly reduced use of wood and forest products. In electricity generation we know that a national grid, a smart grid, and storage are all needed for any low-carbon means of electricity we adopt. We also know that there are only a few means of low-carbon electricity generation that could be implemented quickly on a large scale with today’s technology: wind, CSP solar, photovoltaic solar, and nuclear. Yes there is plenty of room for argument. (For example, I think new nuclear reactors are a waste of money.) Moreover, there are tons of alternatives I have not mentioned, but other alternatives either have limited potential with today’s technology or are much more expensive at present than the means listed.
When clear, simple standards are possible for the ends and there is a limited menu of options for the means, circumstances are ideal for “command and control.” The limited menu of means implicitly lets us know how stringent our regulations can be. The advantage is not that we want to require certain methods be used, but that we can require results at least at the level we know is practical. The availability of clear, simple standards lets regulation specify ends, not means. And this is possible in most sectors of our economy.
The exceptions represent 20-30 percent of U.S. emissions: industries other than agriculture and forestry, plus water and air transport. Even in these areas, there is substantial room for regulation and public investment. It is just that in these sectors, emissions pricing, whatever elasticity problems exist, has to be the primary driver for change. That still means that ~75 percent of U.S emissions come from sources where “command and control” measures are superior to prices for reducing emissions.
This is not just a case of the split between private and public goods. Oh, the classic public goods are there: railroads, grid improvements, and so forth. But we would not normally consider weather stripping, insulation, and electric cars public goods. Similarly, some of the areas where price mechanisms make sense as primary drivers are completely dependent on classic public goods. For example, airlines may be private, but they are completely dependent on airports, air traffic control, and extensive public infrastructure. The problem is that there is not currently a technical solution to the problem of reducing air travel emissions because the primary forcing from air travel is not fossil-fuel use, but water vapor released at high altitudes. Ultimately the solution to air travel will be to ration it, to tell the industry: “This is the maximum emissions you are allowed. Air industry permits will be auctioned quarterly. Fight it out amongst yourselves as to who gets what permits, and by all means use any technical means you can figure out to get more passenger miles out of each unit of emissions.”
Merkley wants Senate jobs bill to help finance building efficiency retrofits
‘Heretic’ battles straw man
Comments
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Peter B. Meyer Posted 9:44 am
02 Jan 2009
Next, let's get around to the reality of so-called market mechanisms: they only work if there is a market. That makes sense, right? And can there be a market when the supply (as in the supply of the right to pollute or be profligate with emissions, or to sell with pornographically low gas mileage) is infinite? NO -- no one would buy if the supply were there for the taking.
Without COMMAND, that is a Cap on something, then that something cannot be Traded ... so Cap and Trade depends on public sector coercion; it does not replace it.
Then the question is not whether or not public coercion is good ... we've already settled that. The question is what coercion is more efficient, so we can accomplish our ends with the least coercion.
That's were Gar have given us some good guideposts. I thank him for them.
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Gar Lipow Posted 12:44 pm
02 Jan 2009
However I use and will continue to use the term "Command & Control". That propaganda battle is lost. Even the most leftwing economists I know use that as the technical term.
That "Command &
Control" is the technical term for rule based regulation is one of the great propaganda victories for the Friedmanites. The distinction I made remains important. For the majority of sectors, rule-based regulation
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Colin Wright Posted 2:30 pm
02 Jan 2009
I know there are some successful neighborhood weatherization programs (eg. Milwaukie) out there, and I don't expect you to have all the answers, but I'd like a few more concrete examples to see how some of these (excellent)ideas might pan out.
Also I think using the C&C label gives the Friedmanites too much power. There is always a battle for words. Could we not come up with something a little friendlier, that will not frighten the average American?
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JMG Posted 3:13 pm
02 Jan 2009
The 5% Project
Let's live on the planet as if we intend to stay.
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amazingdrx Posted 4:08 pm
02 Jan 2009
Subsidy diversion is the simple solution. Based on quantity of GHG-free kwh generated or kwh saved through conservation. Payed to homeowners and businesses directly, with money from cancelled oil industry subsidies.
That's 18 billion per year. Use the coal industy's corporate welfare too. Nuclear too. Are we up to 50 billion per year yet?
Trading carbon credits is way too complicated to explain or understand for most of us, with all the "free" market theories and cap and trade and auction and offset.
Experts believe they do understand credit default swaps and derivatives and how these could be worth 100 times the total global GNP. They likewise believe that this is the way to save the climate and restore the economy.
Many observors are skeptical about their claims, that they know their asses from holes in the ground.
http://amazngdrx.blogharbor.com/blog John Schneider, Northern Wisconsin
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spaceshaper Posted 4:57 pm
02 Jan 2009
The limited menu of means implicitly lets us know how stringent our regulations can be. The advantage is not that we want to require certain methods be used, but that we can require results at least at the level we know is practical.
This is very much the model used by the UK's Building Regulations which focuses on the long term via performance standards in its primary code while a parallel "deemed to satisfy" document, regularly updated as technology improves, offers means which are acceptable but not required to achieve those standards. This enables and implicitly rewards innovation as it offers straightforward solutions to the less adventurous and neatly sidesteps the "picking winners" critique of prescriptive legislation.
Quibbles: I do share the misgivings expressed by other commenters about the phrase "command and control". I understand that in a literal sense it is not incorrect and that there is value in tackling the pejorative usage head-on, but the association with notoriously disastrous Soviet economic policies for me at least is hard to get past. I'd love to see some additional memes in circulation to support Gar's perspicacious approach - JMG makes a good start.
I'd also suggest that $100 weatherstripping is a massively under-ambitious example of the kind of public investment that is going to be necessary to achieve major goals such as retiring coal-fired power plants. Not even with the swiftest possible implementation of new renewable and environmentally-benign energy sources can we ignore the need for massive energy demand reduction, well beyond what a tube or two of caulk can achieve. A standardized package of sealed crawl space, upgraded attic insulation and ground source heat pump might be an order-of-magnitude example of the kind of intervention required for most older homes and even many new ones, if we are truly serious about getting our residential energy consumption to where it needs to be. Such a package, even with major economies of scale, is going to run $10K - $15K or more. And yes, Colin, homeowners who have already paid for such upgrades without program assistance will be by some standards 'losers'. Another word would be 'pioneers', and we should honor them as such.
The true meaning of life is to plant trees, under whose shade you do not expect to sit.
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Pangolin Posted 5:13 pm
02 Jan 2009
Even if the remediation is free but the building owner or resident has to pay some other cost such as supervisory time for off-site workers or lost billable hours remediation will be deferred. If the benefit falls to the tenant and the expense to the landlord remediation will be deferred. I have seen free utility energy upgrades deferred for all of these reasons.
What if the cost isn't directly fiscal? Water companies routinely demand certification of anti-siphon valves or the service is shut off. Rendering building uninhabitable and rents or billable hours moot. Water valve certifications are rarely deferred.
There we have a different kind of cost. The entire value of your building is lost until the required standard is met. These types of controls are standard for fire, structural and biological hazards and there is no reason that energy standards shouldn't be included in that group considering the massive threat climate change poses.
Fix your building (we'll help mind) or lose it's value is a cost owners deal with every day. It also doesn't fit neatly into cap-and-trade arguments designed to create rents for trading exchanges.
Put the Carbon Back
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Gar Lipow Posted 3:37 am
03 Jan 2009
In terms of Colin's request for more details. Many different ways to implement this. In Olympia for example, many low income people own their own homes. And there are heating assistance programs available. And if you use one of them you will be encouraged to get a free energy audit, and if there is room for improvement there are programs that will upgrade your home's efficiency, adding the cost as lien against your home when you sell it or move out or when you die and your heirs sell it or take it over.
Now that is a very specific case. And we are talking about making it available to everybody. The key to take from this is that education about availability has to come from a trusted source. That may be your local utility or a government office. It has to come from someone you are in contact with anyway - perhaps when you renew your drivers license, or a booth at markets and bus stations. I can't be specific because there are lots of ways to do it. The key I think are the two criteria mentioned: someone we are in contact with anyway, and someone there is a certain degree of trust in.
In terms of financing. I think my proposal for a subsidized efficiency utility is a good example. You make a monthly payment lower than your savings, and it is a utility bill, not structured as a loan, so it does not count against credit. Though for very low cost measures like weather sealing, there are good reasons to simply offer it for "free" i.e. completely paid for by tax dollars. (Stimuli, very quick lowering of emissions at a very low cost.)
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ce1907 Posted 4:23 am
03 Jan 2009
Summers put up a short blog this week saying that Obama stimulus should be only about tax breaks to spur the credit markets -- not about direct public spending. There is a voice in Obama's ear every day.
Also, Ba*cus runs the Finance Comm, trying to rule the world through tax breaks.
Also, B*ngaman wants energy policy on the cheap (to placate conservatives on his committee, and probably because he believes it) and is always talking about tax breaks as the key to stimulating green energy.
Memo to Old White Guys: credit markets are dead.
But I digress.
The key is to come up with specific ideas that can be labeled "common sense."
This means dipping into particulars. In general, I always seem to agree with you. But who is following up with the specific proposals to whomever?
Waiting for Obama is a thin reed indeed. He has surrounded himself (on purpose, wake up, progressives) with B*ngaman and B*ucus staff and fellow travelers. They are not planning to re-invent themselves; they are planning to put their mark on the energy world.
Having given up on Gar and Rynn as the vanguard of an assault for smart grid, I looked at some internet pages. As best I can tell, the key is a Fed buying program for meters that is conditioned upon state regs that make it legal and advantageous (to both small energy providers, consumers, and utilities) for small sales to grid and for conservation. Further, as far as I can tell, this worthy public investment is not feasible at the moment because the computer software interfaces for the gadgets are not settled. And do not appear on track to be established for years. That is a process that bad actors could take advantage of.
Anyway, Gar and Rynn were probably the wrong crowd. Need some computer software experts who can break the logjam.
Right now, NIST is nominally in charge, but the guy at NIST leading it got an engineering degree 25 years ago and it was not in computer stuff. Also, NIST only gets to recommend to FERC. Great.
I think smart grid is the key for much needed public investment. We need to cut the Gordean knot over computer standards, push through state reg action combined with Fed spending.
Much could grow from that, I think.
cryptically yours
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Jon Rynn Posted 4:27 am
03 Jan 2009
I'm not sure if this is what Gar was referring to, but let's say the nation got that "World War II" spirit that Romm, Gore, etc. keep talking about, and the government just built all the stuff we need: a new national electric grid, wind farms feeding into the electric grid, municipal PV farms on various buildings, a national biochar system, and yes, a national corps of people who, say, went around for free retrofitting buildings, just for the sake of argument.
The companies that carried out the construction activity would not necessarily have to be government owned, they could mostly be private, but the main idea is that the government would provide the financing and the government would make at least general decisions on what to build (there could be a wide mix: municipalities, building owners, etc. could have control over certain details).
Or take your pick. It could "just" be a national high-speed rail system. Whatever it is, the main point is that the government decides what is to be constructed (at varying levels of detail), and provides the money to do it.
The real meaning of "command and control", taken to it's fullest extent, is central planning, which is not regulation based but completely based on decisions made by the government. That's not what Gar is advocating either, so I don't know if "command and control" is the proper phrase. "Government regulation" covers regulation pretty well, and some phrase, such as "government construction", perhaps "government planning and construction", would cover the more "command" part of government intervention, it seems to me, instead of using "command and control" to cover both regulation and construction.
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hapa Posted 7:46 pm
03 Jan 2009
this NYT piece on wall street collusion brought it to mind.
but in the middle was an important point about "public" and "private" in today's america.
there's no line. there's a door, it goes around and around and around and around and around and around and around and around until you get the job you want at the company you want.
i mean if everybody in government -- even "career bureaucrats" -- sees their current job as a stop on the way to a fully padded nest -- really, isn't that the end state of thatcherism, you want public service but you get the public served on a tray as individuals compete to be most cooperative -- try to imagine a legal system where jurors were eligible to be hired directly by the law firms presenting the cases.
you don't have to! it just cost you trillions of dollars.
such a systematic corruption -- mundane -- blended with some kind of chicago school-flavored stockholm syndrome -- and you're talking about not just deprogramming, you're talking about generations of central people for whom "long-term" and "risk" have little real meaning outside personal finances and some narrow job-related sense.
there's no commons, no common good, no common ground, except job hunting, house hunting, personal faith, family, and the undergirding automaticity of markets.
when people say "ecological imbalance is in large part due to multiple catastrophic market failures" they might as well be speaking sumerian. the market is all-encompassing, there's nothing outside it, failure is impossible. the "public" is a branch office.
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aullman Posted 7:58 am
04 Jan 2009
The simplest solution is to provide tax incentives to employers that support remote work programs for employees. Rather than spend 2 hours a day commuting, workers can work remotely from a Remote Office Center. ROCs lease individual offices, internet and phone systems to workers from different companies in shared centers located around the city and suburbs.
The technology already already exists to support remote work initiatives. All that is needed is a incentives to get the programs moving.
ROCs are fairly new, but can be found in many cities by searching the internet for "Remote Office Centers" in quotes, or by going to a free web site that lists centers:
http://www.remoteofficecenters.com
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