By David Roberts
Not that long ago, the only people thinking about energy were the ones selling it. That’s mainly because, with the exception of that unpleasantness in the ’70s, energy has been cheap for a long while. Why worry?
As for climate, folks have been preoccupied with arguing that it, like the moon landing and evolution, exists.
As a result, making policy in an energy-constrained, climate-imbalanced world is a fairly new undertaking for our fair democracy. Lots of people, inside and outside government, have been thrown into it with partial information, pre-existing biases and vaguely recalled fragments of folk wisdom.
Thus: Misconceptions. Mistaken conventional wisdom. Myths. They abound.
What follows is an effort to debunk the main myths standing in the way of smart climate/energy policy.
Climate policy is primarily about putting a price on carbon
Environmentalists and economists alike are obsessed with putting a price on greenhouse gas emissions, and with good reason: Climate pollution is a classic “externality,” a cost paid not by polluters but by society at large. Pricing carbon internalizes that cost. The policy is “market-based” because it is agnostic toward particular practices, products or technologies; the market’s “invisible hand” is set loose to find the cheapest emission reductions without undue micromanaging by the dread “government bureaucrats.”
Which is great, as far as it goes. But raising the price of carbon will lead to the cheapest, fastest emission reductions only if all else is equal and, in the real world, all else is not equal. Unpriced externalities are but one of many, many market failures around energy. Trying to correct them all with a carbon price is like trying to build a house using only a hammer. Not everything is a nail! Ultimately the effort will require lots and lots of what wonky greens have taken to calling, somewhat misleadingly, “complementary policies.” (Kind of like how the other members of a soccer team are “complementary” to the goalie.)
It’s difficult to summarize All the Other Stuff, but such policies include efficiency standards, low carbon fuel standards, reform of electricity grid interconnect rules, minimum renewable energy or efficiency mandates, infrastructure investments (think grid and public transit), and…on and on.
These policies are every bit as important—more important, in aggregate—as pricing carbon. They can help reduce the overall cost of a price-based policy. They can help address emissions sources that are not covered by a carbon pricing scheme (think agriculture). They can correct or compensate for other market failures. (For more on this topic, see Congressional Science Fellow Holmes Hummel’s presentation, “The Essential Role of Complementary Policies in Climate Policy Design”)
In other words, the work of tackling climate change need not wait for a price on carbon, and it will not end when a price is in place. That is but one step in a long road.
There is a “free market” in energy
To hear some people talk, you’d think the greatest danger of government intervention in the energy sector is that it will “distort the market.” Poor, tender market.
In fact, energy markets would give Adam Smith the screaming willies. The world’s biggest oil companies are state-owned members of anti-competitive cabals. Half the electric utilities in the US are regulated monopolies and all are governed by Byzantine state regulations. America’s transportation and electric infrastructures are largely financed by public money and built by government. This is to say nothing of the elaborate skein of tax breaks, loopholes, subsidies and cozy political relationships that overlays every bit of energy production and consumption.
Markets in something as central to industrial civilization as energy have never been “free” and never will be. Those who worry about government intervention distorting energy markets tend to be the very players benefiting from America’s current Rube Goldberg energy policy. Free marketeers they ain’t.
Pricing carbon will destroy the economy
Legislators from dirty-energy producing states, energy-intensive business lobbies and conservative think tanks struggle to outdo one another with apocalyptic predictions about the effects of mandatory greenhouse gas emission reductions. See, for example, the US Chamber of Commerce video showing children shivering in the cold (really). As climate legislation evolves this year, the rhetoric is ramping up again, led by the Wall Street Journal editorial page and doomsayers-for-hire at the Heritage Institute and the Chamber of Commerce.
The mainstream media passes along this kind of Chicken Littleism in gutless he-said, she-said fashion, so the public rarely hears the truth: Mainstream economists pretty well agree that the impact of a carbon pricing system on the economy will be modest.
Last year the Environmental Defense Fund did an analysis of six separate forecasts of the economic impact of a cap-and-trade, from leading nonpartisan academic and government agency sources. The median prediction was a hit to GDP growth of between 0.5 and 1 percent by 2030. Instead of doubling by January 2030, US GDP would, in the most pessimistic scenarios, double by…July 2030. (Doooomed!)
Some analysts are even more optimistic, projecting climate targets will be met at net-zero cost or even with a boost to GDP. Perhaps they recall that economists wildly overestimated the cost of the last US cap-and-trade program; the sulfur dioxide trading regime, designed to fight acid rain, came in about 90 percent cheaper than official projections.
Here’s a short list of things that will damage the economy far worse than tackling climate change: the current mortgage/banking/credit crisis, rising fossil fuel prices, competitive disadvantage in burgeoning global clean-energy markets and, oh yeah, climate change itself. Compared to the alternatives, reducing climate emissions looks like a spectacular bargain. (For more on this economic consensus, see Eric Pooley’s article “Surprise—Economists Agree!”)
Tackling climate change requires fundamental technological breakthroughs
No myth has done more to lull Americans into complacency or allow bad actors to fight off good policy.
The American people are deeply attached to the notion that any problem can be solved with a new doohickey. It would, after all, relieve them of the terrible responsibility of saving the world. (Surely a clever scientist in a lab somewhere will invent a Climate Stabilizer and we can all stop worrying about this nonsense!)
The powers that be in the energy world are deeply invested in persuading legislators that the technology just isn’t ready yet—that’s why it’s premature to start mandating emission reductions. This is what the perpetually 10-years-away “clean coal” is all about. More research!
It’s not hard to see the appeal of a techno-fix. The alternative to whizbang new technology is a list of thousands of changes in regulation, legislation, behavior and thinking, each one demanding the country’s collective attention, wit and wherewithal. It can seem overwhelming.
But a. fundamental breakthroughs in energy technology are extraordinarily rare, b. we don’t have time to wait for them and c. nothing spurs learning like doing. The best way to figure out better techniques and technologies is to start deploying the hell out of what’s already here.
Solving climate change is primarily about finding cleaner sources of energy
Wind! No, “clean coal”! Biofuels! No, natural gas! Idiots, it’s all about nuclear!
Conversations about tackling climate change are perpetually dominated by disputes over which cleaner energy sources will substitute for today’s dirty energy.
What’s left out? Using less energy. That is to say: demand.
As it happens, getting a handle on demand is the cheapest and fastest way to rein in greenhouse gas emissions. Every energy wonk knows this, but for some reason—psychological? cultural? lack of powerful business lobby?—demand has never taken the place of the primacy it warrants in the national psyche. Sourcing is seen as variable, adaptable, under human control; demand growth is implicitly viewed as inexorable, like a force of nature.
Meanwhile, the supply bias distorts thinking and policy, directing attention and resources toward some of the slowest and most expensive means of reducing emissions.
Using less energy = sacrifice
Mention “reducing demand” to Average Jane American and she’ll assume you mean conservation: turning off lights, drying clothes on a clothesline, riding a bike to work, wearing a sweater when it’s cold inside. And when she thinks conservation, she’ll generally think, “ugh, there go the dirty hippies telling me to feel guilty and be miserable again.”
Both these associations are bogus.
First, when energy wonks talk about demand reduction, they usually mean efficiency. That means consuming the same energy services—the same “warm showers and cold beers”—using less energy. For instance, driving a Prius rather than a Taurus offers the same comfort and mobility while using less gas.
The distinction matters. Efficiency can boost economic productivity and reduce emissions simultaneously; consultant company McKinsey says it can get us 40 percent to where we need to go, at negative cost (that is, profit). And it doesn’t require any individual lifestyle changes, so it’s not as politically perilous.
Conservation is a tough row to hoe because people associate it with sacrifice—shivering in the dark. What’s poorly understood, perhaps because greens aren’t very good at painting the picture, is that many changes that reduce individual energy consumption increase quality of life. Living in walkable, transit-accessible neighborhoods can lower gasoline consumption while improving health and sociability. Raising food in a garden is rewarding; shopping at farmers markets is fun; having fresh, local food to eat is, well, tasty. Doing more socializing and less TV watching/web surfing increases life span.
The high-speed, high-consumption American lifestyle is no longer increasing happiness. Slowing down, spending time rather than money, can be enormously gratifying. The greener life is a better life.
Consensus on policy is possible even among those who disagree about climate change
John McCain popularized this notion during his ill-fated presidential campaign, assuring skeptical conservative audiences that whether or not they believed in climate change, they should support clean energy policy.
The appeal is clear enough: Climate change is politically divisive. It’s “environmental” (ew!). It’s associated with Dirty F***ing Hippies (double ew!). If everyone can agree on the same policies for different reasons—national security, energy independence, clean air, whatever—why not just bracket the climate question?
Unfortunately, it doesn’t fly.
The reason is fairly simple: Climate change is urgent. Recent research from the National Oceanic and Atmospheric Administration demonstrates that irreversible changes are already underway; if humanity continues on its present path, those changes will include “irreversible dry-season rainfall reductions in several regions comparable to those of the ‘dust bowl’ era and inexorable sea level rise.” And that’s just if we peak at 600 parts per million of CO2 in the atmosphere. The Intergovernmental Panel on Climate Change says business as usual will lead to 1,000 ppm, which would be an unthinkable apocalypse. Holding atmospheric concentrations to 450 ppm, which many scientists now say offers about a 50/50 chance of avoidingcatastrophic and irreversible impacts, means global emissions must peak in the next decade and head down sharply thereafter.
Climate change sets an unforgiving time limit on the available solutions. It forecloses the option of leisurely conducting basic energy R & D. It forecloses the option of using dirty domestic sources like coal, natural gas, oil shale and tar sands. It adds problems like reforestation and adaptation to the to-do list. It will require a massive industrial mobilization, on the scale of US preparations for WWII, beginning immediately. No one can understand the challenge facing humanity without understanding climate change. It’s not politically convenient, but it’s the truth.
Europe’s experience shows that cap-and-trade can’t work
It is now widely acknowledged that Europe’s carbon trading program—the ETS—made several key mistakes in its initial trial period. The system covered a narrow slice of the EU economy, yielding a relatively small market wherein price fluctuations could not be effectively smoothed out. The data on baseline emissions was poor and industries self-reported wildly exaggerated numbers, leading to overallocation of pollution credits. Worse yet, the credits were given away for free rather than auctioned, resulting in windfall profits. The combination of overallocation and large profits yielded little incentive to change in the program’s early years.
None of these flaws, however, is intrinsic to cap-and-trade systems. European regulators are in the process of correcting them, and legislators developing a cap-and-trade system for the US are keenly aware of the lessons learned. The entire economy can be covered; permits can be auctioned; price fluctuations can be evened out with banking and borrowing of permits. It can be done right.
The ETS trial period represented the first fumbling steps toward a global effort to reduce emissions; it was bound to be a trial-and-error process. Despite its missteps, Europe has implemented a declining cap on emissions and created a market-based carbon trading system that is guiding long-term investment decisions—with little to no negative impact on the economy. The US should be so lucky.
Unlike cap-and-trade, a carbon tax is simple, immune to manipulation and politically palatable
A strange-bedfellows political coalition, everyone from the CEO of Exxon to climate scientist James Hansen supports a carbon tax as an alternative to cap-and-trade. Tax proponents allege that cap-and-trade is too complicated; too friendly to financial industry tricks and manipulations; too open to loopholes, cheating and special pleading; too weak to work.
This is all true. Or rather, could be true, if special interests are given too influential a voice in the process; if there is no organized grassroots movement applying pressure; if the legislators developing the policy allow it to happen.
The thing is, the same flaws could just as easily weaken a carbon tax. Just because it looks elegant sketched on an economist’s whiteboard doesn’t mean a tax can’t be corrupted in the real-world political process. (Have a quick look at the US tax code.)
To boot, taxes of any kind are notoriously unpopular among the US electorate.
It’s an article of faith among supporters that returning the revenue to taxpayers via rebates could bring public support behind a tax, even though just such a refunded tax was roundly rejected in Canada last year.
Furthermore, a comprehensive new survey out of Yale asked a representative sample of more than 2,000 people what means they favored to fight climate change and a fully refunded gasoline tax came in dead last. Finally, there is no real empirical evidence that taxes can be rendered popular with promises of rebates.
Pricing carbon will be a fraught political battle, in danger of being corrupted or dying in Congress. That’s true whether it’s cap-and-trade or a carbon tax on the table.
Democrats support good climate policy and Republicans oppose it
Energy and climate scramble the usual left-right political divisions. Many of the big fights are not among parties but among regions and levels of government.
In the US Congress, to be sure, the Republicans = obstructionists formula holds with virtually no exceptions, save a tiny handful of remaining Senate “moderates.” Republican obstructionists are joined in the House and—more problematically—the Senate by a group of Democrats from states with energy-intensive industries. Depending on how they’re counted, there are up to 15 such Senate Dems, more than enough to assist Republicans in a filibuster.
At the state and local level, the partisan picture is far more complicated. Some of the leading governors on the issue are Republicans, notably California’s Arnold Schwarzenegger and Florida’s Charlie Crist. Some of the most problematic are Democrats from energy states like West Virginia’s Joe Manchin and Virginia’s Tim Kaine. The city-level picture is even more muddled. At last count, 935 mayors, from every political party and every state in the country, have signed the US Conference of Mayors Climate Protection Agreement.
Ultimately, the political battle over climate and energy is how to manage the transition from a high-waste, high-pollution, cheap-energy economy to…the opposite. Those vulnerable to being hurt by the transition span political parties and demographics. Getting over the chasm will require fresh thinking. SFR
David Roberts writes about climate and energy at Grist, the nation’s leading source for environmental news and commentary. Join the conversation at www.grist.org. Reprinted by permission.