November 22, 2004
CONSERVATIVE ENVIRONMENTALISM:
Energy Saver (Gregg Easterbrook, 11.22.04, New Republic)
John Kerry ran on a platform that called for dramatic changes in United States energy policy, and George W. Bush ran on a platform that called for keeping the energy status quo. Bush won, yet my guess is that change will soon win on energy policy. [...]Now Resources for the Future has called for substantial alteration of U.S. energy policy, especially on fossil fuel use. New Approaches on Energy and the Environment is a powerful and important volume--my only complaint is that it does not roll the drums for increased use of zero-emission nuclear power and for building the badly needed natural gas pipeline from Alaska's North Slope to the lower states. Otherwise the volume brims with appealing ideas.
The analysts of Resources for the Future offer these basic possibilities for progress on greenhouse gases and foreign-oil dependency: higher taxes on gasoline or on any carbon-containing (fossil) fuel; higher federal miles-per-gallon standards on vehicles; or a carbon-allowance trading system modeled on the acid-rain trading system. If you polled economists, I bet 95 percent of them would prefer higher gasoline taxes, though many would want such taxes to be revenue-neutral, meaning other federal taxes would decline to the same extent the gasoline tax rose. Greg Mankiw, the president's chief economic advisor, favored a revenue-neutral 50-cent gasoline tax increase--favored it, at least, until he accepted his White House job. I'd love to see a dollar-per-gallon increase in the federal gasoline tax, so long as it was revenue-neutral. This would discourage the mega-SUVs and mega-pickups that waste fuel and cause hundreds if not thousands of avoidable highway fatalities annually, while reducing road rage, oil imports, and greenhouse emissions. But what are the odds of a higher gasoline tax going through Congress? You know the answer.
So what about stricter federal MPG standards for vehicles? Resources for the Future adds the nimble idea that stricter MPG standards could be tradable--if one car company's vehicles did better than the standards, it could sell the credits to car companies whose vehicles fell short. Lack of progress on MPG standards, which have not risen since 1988, is the single greatest problem in American energy policy. But the reason MPG standards have not risen since 1988 is that Congress has repeatedly voted not to raise them. The House and Senate have both totally sold out on this issue, and that's just the reality. So the odds of stricter MPG standards are low.
That leaves carbon trading, and here I am guardedly optimistic. The emission-trading regime worked incredibly well for acid rain. "Tradable" is a good word in economics and in politics; systems based on trading allow individuals, not government officials, to be the ones who make the decisions about environmental priorities. Resources for the Future proposes a pilot program that would place a five dollar-per-ton charge on carbon emissions. All companies, such as electric utilities, that emit carbon dioxide would pay five dollars per ton, while companies that sell fossil fuels to individuals, such as gasoline retailers, would factor the charge into consumer prices. Every carbon-emitting corporation would get a maximum level--a "cap." The cap is what causes the reductions, by setting an upper limit. Any company that reduced emissions below the cap would be awarded tradable credits. As with the acid-rain trading program, the latter provision creates an economic incentive to invent ways to reduce greenhouse gases, since extra reductions create a product that can be sold. The product in this case is an emission allowance. Right now, no one is working on technology to limit greenhouse gas emissions because there is no economic incentive to do so. Experience teaches that once there is an economic incentive, human beings prove to be spectacularly ingenious.
There's no more conservative idea than making people bear the cost of their behavior. Posted by Orrin Judd at November 22, 2004 4:05 PM
Cap-and-trade worked for NOx and SOx2 because there are only a limited number of corporations (power companies) that generate the stuff. By contrast, every small business and sole proprietor is a CO2 generator -- why, even your tiny brain probably produces measurable quantities of the stuff when you're "working." Imagine the possibilities for political hardball, and the additional leverage big business gets over small business, when you have to get a government permit to light a !@#$% fire. There's nothing conservative about cheerleading for that. (By the way, Gregg Easterbrook drives a 250 hp minivan.)
Posted by: joe shropshire at November 22, 2004 4:47 PM"There's no more conservative idea than making people bear the cost of their behavior."
Quantitatively, what exactly are those costs?
Posted by: Bret at November 22, 2004 4:49 PMGreater than they'll be made to pay.
Posted by: oj at November 22, 2004 5:16 PMI think the net cost over the next few millenium will be very low, perhaps negative (i.e., beneficial) so we should pay SUV owners to drive more.
From http://www.geocraft.com/WVFossils/Carboniferous_climate.html,
"The Carboniferous Period and the Ordovician Period were the only geological periods during the Paleozoic Era when global temperatures were as low as they are today. To the consternation of global warming proponents, the Late Ordovician Period was also an Ice Age while at the same time CO2 concentrations then were nearly 12 times higher than today-- 4400 ppm. According to greenhouse theory, Earth should have been exceedingly hot. Instead, global temperatures were no warmer than today. Clearly, other factors besides atmospheric carbon influence earth temperatures and global warming."
Posted by: Bret at November 22, 2004 6:01 PMForget it. All his ideas amount to nothing more than extortion. Particularly the bits like "carbon trading", MPG standards, etc. How is this substantively different from Vinnie telling you "If you want to keep your picture window intact, you'll have to pay me."
Posted by: ray at November 22, 2004 6:19 PM"Greater" is comparative, not quantitative, BTW.
Posted by: Jeff Guinn at November 22, 2004 6:30 PM"As with the acid-rain trading program, the latter provision creates an economic incentive to invent ways to reduce greenhouse gases, since extra reductions create a product that can be sold. The product in this case is an emission allowance."
Let's rewrite this a little :
"As with the acid-rain trading program, and the carbon-trading program, the latter provision creates an economic and social incentive for activists to invent new environmental threats, since each new threat creates a product that can be sold. The product in this case is a cap-and-trade or other regulatory scheme."
Incentives matter, oj. That is a conservative idea. Every time you play footsie with these people you help them win; and every time they win they want to play again. I'm all for internalizing the externalities, but you'd better come up with a way of slowing down the externalities industry. Conservatism's been notably unsuccessful at that.
Posted by: joe shropshire at November 22, 2004 7:08 PM"As with the acid-rain trading program, the latter provision creates an economic incentive to invent ways to reduce greenhouse gases, since extra reductions create a product that can be sold. The product in this case is an emission allowance."
Let's rewrite this a little :
"As with the acid-rain trading program, and the carbon-trading program, the latter provision creates an economic and social incentive for activists to invent new environmental threats, since each new threat creates a product that can be sold. The product in this case is a cap-and-trade or other regulatory scheme."
Incentives matter, oj. That is a conservative idea. Every time you play footsie with these people you help them win; and every time they win they want to play again. I'm all for internalizing the externalities, but you'd better come up with a way of slowing down the externalities industry. Conservatism's been notably unsuccessful at that.
Posted by: joe shropshire at November 22, 2004 7:09 PMHow can someone as smart as Easterbrook say Kerry represented the greatest change and Bush represented the status quo?
With Kerry, we would get Energy Crisis redux (a la Carter), with Bush, at least there is the possibility of an energy bill that will start the transition to post-oil.
Posted by: jim hamlen at November 22, 2004 7:28 PMSo-called "acid rain" was reduced naturally beause it was a consequence of the reversion of farmland to forest. Once that reversion peaked, and subsided, so did "acid rain" as a new equilibrium was achieved.
Posted by: Raoul Ortega at November 23, 2004 1:31 PMjoe shropshire: "Cap-and-trade worked for NOx and SOx2 because there are only a limited number of corporations (power companies) that generate the stuff. By contrast, every small business and sole proprietor is a CO2 generator..."
But this is easily solved, by issuing the emission permits to (or levying the equivalent emission tax on) the fossil-fuel producers and importers, since we can reasonably assume the fuels will eventually get burnt by someone. Once the cost of a unit of fuel's CO2 emission is included in the price there's no need to track its sale and resale down to the end-user.
It'd be only slightly more complicated to include carbon requestration efforts, allowing them to sell permits for the emissions they negate.
Posted by: Bill Woods at November 23, 2004 3:28 PM