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.
Comments
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Sean Casten Posted 8:03 am
01 Oct 2007
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Jason D Scorse Posted 8:12 am
01 Oct 2007
J.S.
I teach environmental economics and blog at http://www.voicesofreason.info.
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sunflower Posted 8:31 am
01 Oct 2007
Environmentalists are caregivers and are often innocent when they try to help antagonists. I am more jaded than that, with more scars. I see not friends, rather hidden agendas and self interests. I see alignment with President Hillary's agenda, her $50 billion public investment program (now reduced to $30 billion?). I hear staid bureaucratic lingo from these word smiths. Is S&N Hillary? As a developer of new technologies, the ideas expressed by S&N are useless to me, and if this is Hillary then the program is seriously flawed. The absence of inquiry, of reflective listening, is suspect and not smart.
New markets will respond when there is stimulus and smart due diligence, which often rely on smart independent scientists working at our national labs. We do not need to push on strings. We need well funded peer review and university RD&D.
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Jon Rynn Posted 8:55 am
01 Oct 2007
For some reason my brain likes to think in terms of a linear scale -- left/right would be a crude way to put it, and not particularly popular, and maybe not so useful. But it would be nice to set up a range -- maybe S&N are closer to the "public investment" pole, DR et al closer to the "market", by which I mean, the government, by creating the proper structure within which the market can operate, will be the preferable solution. My recent posts would put me (way?) beyond S&N -- I think we are at the point that we can't screw around experiment with tweaking the market, we need to dive in and force things...On the other hand, DR, I could cherry pick many of your comments to make you sound very "public investment-y", particularly when it comes to public transit. Is there one scale for what is politically possible and another for what would be ideal?
Or maybe this is what happens when you get a Ph.D. in political science, you want to organize everything even when it's unorganizable.
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Sean Casten Posted 9:25 am
01 Oct 2007
Competitive markets are way better at governments at deploying (relatively) near term capital.
Governments are way better than businesses at addressing big, long-term issues that can't create relatively near-term (e.g., <5 year) returns
Where policy works really well is where it maximally uses markets to do 1, and then steps in to address what's left under 2. Energy policy has never been thus. We throw massive government pork at things that would benefit from competition (see: the entire US electric system, since a regulated electric monopoly is simply a for-profit arm of the gov't) while at the same time failing to address long term issues (see: Bush and GHG).
And since it's been so massively inefficient for so long, we have huge amounts of carbon reduction that could be very quickly and very efficiently deployed if only we would unleash the power of competitive markets. This will be done way faster than gov't investments in favorite technologies. There is such a huge volume of stuff out there that would deliver <5 year paybacks but for a regulatory obstacle that the removal of those obstacles ought to be step 1. But getting to that step requires first taking off the assumption that our perfectly efficient markets mean that all such options don't exist.
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Colin Wright Posted 9:41 am
01 Oct 2007
I only offer the following quote to illustrate the complexities of our situation, in order to open seemingly glib statements to intellectual rigor. To be honest, I haven't a clue what these theorems are about (maybe Jason could enlighten us?). (Wikipedia can make anyone sound like an expert.) But it does seem odd to me that the future of the planet may depend on obscure economic theorems, and that so much hinges on crash courses in economics! I just note that Stiglitz is a nobel-prize winning economist.
But the Greenwald-Stiglitz theorem posits market failure as the norm, establishing "that government could potentially almost always improve upon the market's resource allocation." And the Sappington-Stiglitz theorem "establishes that an ideal government could do better running an enterprise itself than it could through privatization"
PS I thought these were towo great pieces of writing by both DR and Rynn.
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Jon Rynn Posted 9:58 am
01 Oct 2007
Colin, those quotes from Stiglitz are pretty amazing, because the core of neoclassical economics is a collection of models of the completely free markets -- the models become suboptimal if anything, including government (and things like unions and environmental regulations) interfere. That's not to say that many economists don't try to deal with actually-existing economies, although in my opinion they're burdened with fighting an uphill battle with the core of the theory. I think Herman Daly and a few others have tried with varied success to break out of that core, but none have really succeeded, in my opinion.
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David Roberts Posted 10:04 am
01 Oct 2007
grist.org
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Charles Komanoff Posted 11:19 am
01 Oct 2007
Dave, you say you can't envision an enviro on the planet who would choose a carbon tax without $30 billion in revenue for clean-energy investment over a carbon tax with it. Well, try me. Because we won't have a carbon tax at all (not one worth fighting for) unless it's virtually 100% revenue-neutral. It's not "just" distributional equity, it's being able to tell every citizen that s/he will come out ahead if s/he is an above-average carbon performer. And that requires revenue-return.
Can we mute the applause for American Environics' social science? Though their framing of their carbon-tax questions was better than the norm, it still didn't convey the punchline given above. Lacking that, the responses need to be discounted. (Though the pro-tax percentages weren't bad at all.)
Great post, though. Much food for thought, and beautifully written.
Charles
http://www.komanoff.net
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Biodiversivist Posted 12:13 pm
01 Oct 2007
It will be non-linear because of the exponential nature of technology growth. Unfortunately, global warming is going to be non-linear as well if we hit a tipping point, assuming we haven't already.
"...decouple economic growth from environmental destruction"
Rather than stop economic growth and finally,
"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."
Case in point: Local and federal government mandates have mixed corn ethanol and soy biodiesel into our fuel supply. Both have just been shown by two independent studies to be worse GHG emitters (for independent reasons) than the fuels they displaced. Anyone expecting our government to pull the plug on them anytime soon, if ever?
In the end, it all comes down to biodiversity. Poison Darts--Protecting the biodiversity of our world
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A Siegel Posted 12:27 pm
01 Oct 2007
And, absolutely, there are many regulatory/policy changes that will foster real change. You mention Profit Decoupling (e.g., utility no longer incentivized for greater power delivery), but also, for example, regulatory standards for energy efficiency from home electronics to utility transformers; high-albedo roofing and other building code improvements; etc ...
Now, the "investment" -- why not high investment in energy efficiency & renewable energy to make government structures throughout the United States work more efficiently. Energize America's Energy Smart Communities Act (ESCA) would put $11 billion / year into local/state government infrastructure for energy efficiency and renewable energy. This would improve capacity throughout the nation for executing such programs in homes and businesses. (See http://www.ea2020.org ) And, well, it would make governments less expensive to run while lowering US governance GHG footprint. And, last study I saw said that it would take just $80 million/year to bring $1.3 billion in school construction up to LEED standards.
In any event, I digress ... excellent discussion.
Blogging regularly at Energy Smart to Energize America .
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apsmith Posted 1:14 pm
01 Oct 2007
I like your comments (and enjoyed your and Bill McKibben's discussion at YearlyKos!) but I'm not sure I agree with your arguments here. In particular you write
"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."
But there is an objective physical issue behind the economic costs which boils down to essentially an "Energy Return on Investment", though the issue is more complex than a single number. Energy input costs for potential technologies are time-dependent and widely variable, including the costs of the basic R&D to make it possible, capital costs to deploy it, the costs of providing any needed fuel, maintenance, or other consumables or short-lifetime capital expenses, and end-of-life/disposal/cleanup costs.
We artificially subsidize fossil fuels because the cleanup costs associated with emitted CO2 are not accounted for. But then it's not clear what those costs actually are, so cap-and-trade or a carbon tax are part of the solution to make that more accountable.
The general objective problem for clean energy is two-fold: (A) capital costs (in energy or dollar terms) tend to be much larger than for fossil technologies, requiring large up-front investments and (B) the "Energy Return on Investment", however you may define it (basically it's a maximum potential growth rate in energy use for the technology) tends to be a lot lower than for fossil fuels, with current technologies.
But - many of us believe that technologies will become available to greatly improve that "return on investment" for clean energy. The question then is what is the best route to get to those clean technologies with the greatest return, that can grow the fastest in the end?
David, your line here may sound contradictory to some, but it is a very common environmental stance to favor market-based solutions that encourage the growth of "green" businesses. I see the Apollo Alliance as in that same arena; I haven't read S&N's new book yet, but I'm guessing from what I've heard that they're arguing for a different focus.
It's possible that businesses spawned by carbon taxes and the like will come up with the needed innovations, but what I see happening recently is only slow improvement in costs, for example in the solar and wind industries. And this is typical of industrial innovation.
Advanced technologies primarily come out of government and university research - in particular, the dramatic drop in commercial solar costs in the early 1980s seems to have been a direct result of a huge bump in government/university R&D investment in the field during the Carter administration.
We could make do with the technologies we have now, but it's going to be very costly (in dollar terms and in the limited speed with which we're able to invest and respond to the threat). Or we could at the same time invest a much lower dollar amount in government-funded R&D in the expectation of far better technology allowing much faster response ten years down the road.
Of course if we had continued Carter's R&D investment over the last 27 years we wouldn't be in this pickle.
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David Roberts Posted 1:43 pm
01 Oct 2007
One thing that trips us up, I think, is thinking about electricity purely in terms of generation, and the commodity costs of various generation methods. For reasons I'll get into more soon, that kind of thinking distorts as much as it clarifies. We should be thinking not about electricity as a commodity but about energy services (heat, comfort) and the systems that deliver them. That means whole systems, including generation, distribution, and load (appliances, etc.). A more holistic perspective reveals some of the hidden costs of our current hub-and-spoke centralized generation system. Anyway, more later.
(Oh, one more thing: government R&D cannot produce guaranteed new technologies in 10 years. The lifecycle for developing new technologies is very long. Commercializing and deploying existing technologies is faster, but that's just the kind of thing markets do well. Basically, we're going to have to get at least a substantial start with existing technologies.)
grist.org
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Jon Rynn Posted 2:05 pm
01 Oct 2007
However, and your site looks like a good source of information on this, a tremendous amount of solar/wind/geothermal energy is available; however, unlike fossil fuels, the capital costs are high, but the fuel is essentially free, so there is a very severe bottleneck of building the energy systems. Wouldn't this be an ideal place for governments (national and local) to step in and pay at least part of the costs of such systems? In other words, public investment is perfectly suited to help renewables overcome the impossible job of short-termlooking less costly than fossil fuels.
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apsmith Posted 10:57 pm
01 Oct 2007
In fact, this is even more important on the personal consumer level where efficiency improvements and retrofits of housing and transportation (which is where I'm guessing David is promising to go) also have high capital costs and where even large savings down the road rarely seem worth the big up-front cost to the individual who has to pay.
On your first point - I'm a physicist by training, and I know of no physical reason preventing "EROI" being as high as you like for, for instance, solar power. If you make components that last a million years, a zero-maintenance solar cell with a 5-year energy payback has an EROI of 200,000 to one. And furthermore, I don't know of any really good reason that solar panels can't have energy paybacks closer to 1 month or less - the materials inputs aren't necessarily very large, and some of them could be grown organically with little or no energy required.
Fossil fuels are pretty ideal for transportation because of their high energy density, but electrified transportation seems to be quite doable on the ground (we have quite a bit of experience already with electrified rail). Air travel will probably be hardest to tackle.
Rather than EROI which I consider to be ill-defined, I believe a better way to think about the energy return problem is as a self-doubling time: how long would it take to double this energy resource if the only energy inputs we had were from that resource itself? That's slightly more concrete than the "energy payback" I mentioned earlier, since it involves doubling manufacturing plants, and doubling the other necessary inputs to the process that aren't already plentiful. And it's that doubling time that ultimately limits the growth rate of new energy technologies, though an infusion of outside energy can greatly boost those growth rates at first.
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drosenblum Posted 11:09 pm
01 Oct 2007
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Jon Rynn Posted 12:24 am
02 Oct 2007
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sunflower Posted 2:52 am
02 Oct 2007
I have found that motivation is more important. Investment of time, capital, and career choices are ruled by the imagination of fast growth with a sense of building empires. Those conditions certainly apply to sustainable low-carbon energy innovations. It is an emerging trillion dollar industry, and a global gold rush.
A $30 billion per year government investment is tiny, does not rise to the occasion. The US spends $600 billion per year for just oil, and a trillion on defense. The solar resource is larger.
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Jesse Jenkins Posted 4:26 am
02 Oct 2007
As I wrote in my post on N&S:
"Putting a price on carbon is necessary to send the correct market signals and to spur private sector innovation. But this innovation can and must be accelerated by public-sector research and investment. We've got to make the transition to a carbon neutral, prosperous America as quickly as possible, and that requires public as well as private investment in our common future. Auctioning emissions allowances or taxing emissions can not only send the right market signals to the private sector, but can also raise the necessary billions in funding for massive public investment to drive down the cost of clean energy technologies, a down-payment on a carbon-neutral, prosperous America.
It breaks down like this, in my opinion:
We need to put a price on carbon emissions to harness the innovation and power of markets to find solutions to the climate crisis and ensure we reduce global warming pollution to a safe level.
The atmosphere is a common good, owned by all Americans, not just polluters. We should therefore force polluters to pay for the privilege to emit global warming pollution, raising billions of dollars in the process.
Putting a price on carbon is necessary as is forcing polluters to pay for their mess, but doing so will raise energy prices. The good news is, it will also raise a lot of money that can be pumped into making sure average Americans end up better off than before. We can do this in two ways:
a) we can pump much of that money into accelerating the transformation of our energy economy to a sustainable, low-carbon system. We can provide incentives to lower the costs of clean energy technologies, provide R&D and fund public-private partnerships to accelerate the deployment of the next generation of clean energy technologies and support the innovation fueled by the carbon regulation itself, all the while building a new energy economy and millions of "green collar" jobs.
b) we can use some of the money to reform our tax structure so that it is more progressive and leaves more money in the pockets of average Americans. These reforms will more than offset the increases (if any) in your energy bill (remember that increased efficiency can offset the effects of increased energy prices too) so in the end, the average American will be better off under a cap-and-auction system than her or she was before.
That's the recipe for a carbon-neutral, prosperous America in my mind, and it doesn't seem like I'd get much argument from environmentalists or from Nordhaus and Shellenberger on that point.
This is the platform that we should all be rallying behind, rather than fighting over which is better, regulation or investment. The answer is that neither will solve the climate crisis without the other - and we all seem to be in agreement there too!"
Jesse Jenkins
_____________________
WattHead - Energy News and Commentary
http://watthead.blogspot.com
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Jon Rynn Posted 5:14 am
02 Oct 2007
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