Last night, I watched a lively debate organized by Intelligence Squared, a nonprofit that brings smart people together for Oxford-style debates on big issues. The proposition: Clean energy can drive America’s economic recovery. Former Colorado Gov. Bill Ritter and investor Kassia Yanosek of Tana Energy Capital argued on behalf of clean energy, while Steven Hayward of the American Enterprise Institute and author Robert Bryce argued against it. I watched from D.C., at a dinner sponsored by EnergyNow, a weekly TV show about energy issues, soon to be seen nationally on Bloomberg TV.
So can clean energy drive America’s economic recovery? It’s the wrong question, unfortunately, and one that reflects the misguided nature of the conversation we’re been having in the U.S. about climate and clean energy. Environmental groups, understandably desperate to get climate regulation passed during a recession, made all kinds of claims about clean energy–that it would spur the economy, that it will create green jobs, that we need to invest in clean energy to compete with China. On the other side, coal and oil interests and the U.S. Chamber of Commerce, who are fighting to preserve the status quo, argued that climate regulation will destroy the recovery, and perhaps the U.S. economy, too.
They’ve both overstating their case. Most economists agree that the decarbonizatoon of the U.S. economy will cost money–just not a whole lot, and certainly much less than the damage that will eventually be caused by global warming. (See my former FORTUNE colleague Eric Pooley’s 2009 column, Economists Agree!, in Slate.) Mainstream economists estimate that the costs of “climate action” — i.e., moving away from fossil fuels and toward cleaner energy by putting a price on carbon — are about 0.5% to 1% of GDP.
It makes sense, doesn’t it? High oil prices are bad for economic growth. So are high electricity prices. If consumers spend more for cleaner electricity or transportation fuels than they would on fossil fuels, they’ll have less money to spend on other things. So it’s highly unlikely that clean energy–if by that we mean wind, solar, biomass and even nuclear–is going to drive America’s economic recovery. Only cheaper energy will drive an economic recovery.
Energy, by the way, accounts for about 9% of the U.S. GDP, so to ask clean energy (or any one sector of the economy) to drive an economic recovery is to ask an awful lot. Again, it’s the wrong question.
Given that, it’s no surprise that those arguing against clean energy–Hayward and Bryce–had a better time at the debate than did advocates Ritter and Yanosek.
Clean energy is the “new domain of free-lunch economics,” said Hayward. “The basic problem of clean energy is that nearly every form of it is more expensive than the fossil fuels it would replace.”
Solar and wind “cannot scale up without subsidies,” he went on. He cited Solyndra, a California-based solar firm that recently laid off workers after receiving “nearly $1 billion” in federal loan guarantees and subsidies.
As for green jobs, Hayward said: “If you mandate or subsidize something, of course you’ll create jobs. If you have a defense plant in your area, you’ll have lots of job. No one thinks that (building prisons) is the path to prosperity, although of course they create jobs.”
Ritter had mostly anecdotes to offer in response. In Colorado, he said, renewable energy mandates had attracted jobs to the state from manufacturers like Vestas. “When we’re talking about wind manufacturing, you can’t do those jobs in China,” he said.
He made the point, too, that the costs of wind and solar power are coming down. A flat screen TV “cost $1,500 four years ago,” he said. “Now it’s $350. Should we have given up on flat screen TVs?”
Yanosek said that, as an investor, she believes that clean energy is growth opportunity. “Innovation drives job creation,” she said. “Clean energy is where information technology was 30 years ago and biotech was 20 years ago.”
Neither of the clean-energy supporters made a more obvious point–that today’s price of fossil fuels like coal and oil does not reflect their true costs. Coal and oil benefit from government subsidies, as wind and solar do, and they have negative impacts on human health, worker safety and, eventually, climate instability that are not built into their price.
“Those costs are picked up by society at large,” said Dan Weiss, a senior fellow at the Center for American Progress, who commented on the debate after watching in D.C.
While the debate design was imperfect–the term “clean energy” was never clearly defined–some useful themes nevertheless evolved. The experts, for the most part, agreed that natural gas qualifies as cleaner energy (compared to coal) and cheaper energy (compared to solar and wind) and therefore can be a bridge to a decarbonized energy future.
What the future will look like remains unclear. Bryce argued that nuclear plants are by far the most efficient way to generate electricity because “you get incredible amounts of energy from a small amount of real estate and a relatively small amounts of steel and concrete.” Wind and solar can’t get big nough to deliver baseload power, he said.
Said Bryce: “If you are anti-carbon dioxide and anti-nuclear, you are pro-blackout.”
Maybe a better proposition to debate would have been: America can afford to pay more for cleaner energy. Or, better yet, America should impose a cost on carbon to drive a transition to a clean energy economy. I’d be interested to hear Hayward and Bryce argue against that.