Maybe it’s time to stop talking about climate

Maybe it’s time to stop talking about climate change.

And to stop pushing for comprehensive “climate policy.”

That’s what New York’s mayor, Michael Bloomberg, did last week when he gave $50 million to the Sierra Club to fight coal plants. Coal plants should be shuttered, he said, because they endanger public health, pollute the air, deposit mercury in lakes and contribute to asthma. “This is not about the future,” he said, “This is about today.” [See my blogpost, Mike Bloomberg takes on coal.]

Now here comes a group of international scholars and analysts, known as the Hartwell Group, with a new report called Climate Pragmatism, [PDF, download]  which argues that the best way to enact policies around climate change is to talk less about climate and more about curbing air pollution and promoting clean energy innovation.

Telling people to study climate science and make sacrifices–in effect, what Al Gore has tried valiantly to do–hasn’t worked and won’t, the report says.

Nor will the argument that we need to “save the planet” for future generations.

The report says:

The old climate framework failed because it would have imposed substantial costs associated with climate mitigation policies on developed nations today in exchange for climate benefits far off in time–benefits who attributes, magnitude, timing and distribution are not knowable with certainty.

By contrast:

The new framework now emerging will succeed to the degree that it prioritizes agreements that promise near-term economic, geopolitical and environmental benefits to economies around the world, while simultaneously reducing climate forcings, developing clean and affordable energy technologies, and improving societal resistance to climate impacts.

I called Michael Shellenberger, president of the Breakthrough Institute, to talk about the report. [click to continue...]

Webinar: Nuclear power, after Fukushima

I hate to paraphrase a terrible sexist joke but when it comes to nuclear power, I sometimes feel like we can’t live with it and we can’t live without it.

There are lots of reasons to worry about nuclear power. No. 1 may be cost. As I noted last weeka recent report from the Union of Concerned Scientists tallied up the costs of government support for nuclear power from uranium mining to waste disposal, and it concluded that “subsidies to the nuclear fuel cycle have often exceeded the value of the power produced. This means that buying power on the open market and giving it away for free would have been less costly than subsidizing the construction and opera­tion of nuclear power plants.” Those costs, if anything, will only get higher because of the added scrutiny that the nuclear accident in Japan has brought to the industry.

And yet…without preserving and expanding nuclear power as an energy source, it’s extremely hard for me to see any path towards the low-carbon future that we need. As Robert Bryce, the author of Power Hungry: The Myths of ‘Green’ Energy and the Real Ruels of the Future, once put it, “If you are anti-carbon dioxide and anti-nuclear, you are pro-blackout.”

These issues, and more, will be the topic of a live webcast on Wednesday June 29, 3 PM ET / 12 PM PT, presented by The Energy Collective, a website about energy and climate. I’ll be moderating. Registration is free and available here.

We’ll be talking about the following issues: [click to continue...]

Environmental Defense: living up to its name

Fred Krupp

What a different just a few years can make. Hard as it is to believe, there was a time not long ago when Congress appeared to be on the verge of a bipartisan agreement to regulate global warming pollution.

Republicans John McCain, John Warner, Newt Gingrich and Tim Pawlenty all supported efforts to put a cap on greenhouse gas emissions. Gingrich and Pawlenty went so far as to appear in commercials with the Environmental Defense Fund supporting climate regulation. And now?  “It was a mistake, it was stupid, it was wrong,” Pawlenty says.

The radical shift in the political climate means that big NGOs like the Environmental Defense Fund, the Natural Resources Defense Council and the Sierra Club now must fight merely to  preserve the status quo in Congress.

Environmental groups are playing defense rather than offense in Washington, said Fred Krupp, the president of the Environmental Defense Fund,  during a panel today on climate policy that opened FORTUNE’s Brainstorm Green conference.

He noted that House Republicans have voted to block funding not just for EPA’s efforts regulate carbon pollution (efforts that are required by a Supreme Court decision) but also for EPA efforts to control, on public health ground, mercury pollution from cement factories.

On climate issues, Fred said: “It’s hard to have a meaningful exchange of viewers, a serious conversation in Washington.”

That’s a big, big problem because, as he noted, every major piece of environmental legislation in the U.S has been enacted with bipartisan support. Fred himself was a leading advocate for the  late 1980s cap-and-trade system–to regulate sulfur dioxide pollution–that was put into place by President George Bush and his EPA chief, Bill Reilly. [click to continue...]

A new energy conversation?

A coalition of think tanks–The Breakthrough Institute, Brookings and the American Enterprise Institute, along with the Information Technology & Innovation Foundation (ITIF)–today organized a conference of policy makers, scientists and business people in Washington to talk about a big question: how to stimulate energy innovation.

The backers of Energy Innovation 2010 want to do nothing less than reframe the national conversation about energy. They’d like to see less talk about the question of how to make dirty fuels more expensive (the goal of cap-and-trade or carbon taxes) and more about ways to make clean energy cheaper, largely by driving innovation.

Michael Shellenberger

“We need much more radical innovation–scientific breakthroughs–in order to replace fossil fuel power,” said Michael Shellenberger, the president of the Breakthrough Institute. In an excellent essay published this week called The New Energy Conversation, Shellenberger, his colleague Ted Nordhaus and Rob Atkinson of ITIF write:

The new conversation about energy innovation begins from the recognition that the cost and functionality gap between today’s fossil energy and its alternatives remains wide, and that any serious effort to move away from fossil energy requires closing it – not through unsustainable subsidies to reduce prices, but through innovation that will drive down the real cost of clean energy.

This idea of a new conversation is appealing on its face. Goodness knows we’re all sick and tired of the old one. And who can be against innovation? It’s not a red state-blue state issue, thank goodness, although it will cost money. In report cleverly titled Post Partisan Power released last fall, Breakthrough, AEI and Brookings called for

increasing federal innovation investment from roughly $4 billion today to $25 billion annually, and using military procurement, new, disciplined deployment incentives, and public-private hubs to achieve both incremental improvements and breakthroughs in clean energy technologies.

But the question, how?

How should that money be spent, and who gets to decide how to spend it?

How should be allocated between basic R&D and commercialization, between stimulating the demand for clean energy (through policy like renewable portfolio standards or tax breaks) or stimulating the supply (through policies like loan guarantees for solar-panel factories or nuclear power plants)?

How, most of all, can we muster the political leadership to shake America out of what Andrew Revkin, the Dot Earth climate and energy reporter and a conference moderator, called America’a  long, and bipartisan, slumber party on energy innovation? (You can read Andy’s take on the event here) [click to continue...]

Cancun can’t: Ten reasons why the climate talks will fail

For the next couple of weeks, thousands of government officials, NGOs, environmental activists and reporters will gather in Cancun, Mexico for international climate negotiations, officially known as the Sixteenth Conference of the Parties (COP-16) of the United Nations Framework Convention on Climate Change (UNFCCC). It’s fitting that the talks are being held in a vacation resort, where people go to escape–because only by ignoring what’s happening in the rest of the world is it possible to take these UN negotiations seriously.

Heading into the Cancun talks, expectations are low. They aren’t low enough. Here are 10 reasons why it will be hard, if not impossible, to bring about meaningful action to curb global warming through this UN process. Many are admittedly U.S.-centric, all of them matter and if you want to skip ahead through this unusually long post, No. 10 is the biggest reason why I doubt that these Cancun talks, or the successor negotiations–COP17 in South Africa, COP18 in South Korea, etc.–will get us the change we need.

So as not to be too gloomy, I’ll conclude with a thought or two on what might work instead…but first the discouraging news.

What's the climate equivalent of a river on fire?

1. Global warming pollutants are invisible. So it’s hard to get people to care about them. Winning broad public support to regulate soot or smog or soiled rivers or polluted beaches iseasier. A 1969  fire in the Cuyahoga River in Cleveland lasted just 30 minutes, but it helped fuel the environmental movement and  passage of the Clean Water Act in 1972.

2. The costs of curbing climate change are immediate and the benefits are in the future. Any effort to reduce emissions will cost money because low-carbon energy sources (solar, wind, nuclear) are more expensive than burning fossil fuels. Electric cars are pricier than gas-powered vehicles. But Americans don’t like to sacrifice today for a better tomorrow. We’re lousy at saving. Instead of  raising taxes or cutting government benefits, we run up huge deficits that will burden future generations. Government debt is close to 90% of GDP. Deferred gratification is not our strong suit.

3. Environmentalists have been disingenous about the climate issue. They’ve argued that regulation of carbon dioxide will create green jobs and grow the economy. Typical is this graphic from Environmental Defense. (“Get a step-by-step picture of how a carbon cap will spark new jobs, lift the economy and clean the air.”) Uh, no. Most economists agree that dealing with global warming will entail short term costs. (See Eric Pooley’s excellent analysis at Slate.) Their estimates of those costs are generally in the range of 0.5 to 1% of U.S. GDP (Harvard’s Robert Stavins) or 1 percent of global GDP (The Stern Review, PDF). The costs of inaction will eventually be much greater. But carbon regulation will likely slow economic growth in the short run by raising energy costs. It’s not a free lunch, and we should be honest about that. [click to continue...]

Watthead: In defense of big government

I’m on vacation this week, making my first trip to Israel where I’m visiting my aunt, a pioneer of the Kibbutzim movement. But I can’t shake off my Internet addiction, alas, and so I came across this response from Jesse Jenkins, AKA Watthead, to one of my blogposts last week bemoaning the Obama’s administration’s ever-increasing intervention in the economy. (See Uh-Oh: Obama’s Battery Gold Rush. Jesse responded at The Energy Collective, where the two of us blog.) Jesse, who works for the Breakthough Institute (and not the Breakthrough Collaborative as I said last week), believes that significantly more R&D spending from the government will be required to speed up the clean energy revolution. He’s thought a lot about this, and he’s also looked carefully at  the Waxman-Markey climate legislation now making its way through Congress, so I thought I would post his response here, with some minor edits. It’s well worth a look, and for those of you who care about energy policy, be sure to check out the links provided by Jesse.

I’ve spent the past two weeks digging deep into the Waxman-Markey ACES climate bill, peering beneath rocks and shining my flashlight into its dark recess to figure out what it will and will not do.  You can find that analysis at the Breakthrough Institute site here, and I highly recommend you take a look so you can get an accurate picture of what this “light touch-high impact” carbon pricing policy will actually accomplish.

The short answer: not very much at all.

The carbon price the bill will implement is likely to be between $12-20 per ton for the first decade-plus, according to the EPA analysis of the bill.  That’s about 12 to 20 cents per gallon of gasoline, which on the low end is about as much difference as you can find between different gas stations on two sides side of town, and on the high end is lost in the noise of seasonal variation in gas prices.  If you have little faith in the power of government, then I challenge you to explain how that kind of meager price signal is going to shift private investment and dramatically transform the $1.5 trillion combined U.S. energy and transportation markets.  Please, tell me a convincing story about how that might work, because after spending two weeks reading the Waxman-Markey bill, I could use some more uplifting news.

The reason the CO2 price will remain so low is because the bill allows up to 2 billion tons of offsets (up to 1.5 billion which may be sources from overseas) to be used in lieu of cutting emissions here in supposedly ‘capped’ sectors.  That’s enough to legally permit U.S. emissions to continue to grow at business as usual rates through 2030. So Waxman-Markey gives us no real “cap” on carbon and no significant price on carbon.  Forgive me for looking for other ways to directly spur the transformative clean energy innovation we need — ways you may consider unfortunate degrees of “government intervention.”  Given what’s at stake after all…

Also, as a kind of test to consider: many European nations have had gas taxes for decades that implement an effective carbon price in the hundreds of dollars a ton range ($2-5/gallon tax = roughly $200-500 per ton of CO2 equivalent carbon price!).  So with such a powerful signal for private investors to develop alternative fuel vehicles, why haven’t firms in Europe invented and commercialized electric cars?  Why isn’t everyone in Denmark driving EVs, one might ask?

The answer is because that’s not really how innovation works.  Price signals alone do not spur adequate innovation.  There’s a multitude of market failures at work, especially in the energy innovation sphere.  I have a paper coming out in about two weeks which I’ll share with my readers and the The Energy Collective community that spells out a lot of these market failures (prelude: knowledge spillovers, very high capital barriers and non-differentiated commodities are three big barriers to sufficient private sector innovation investments).  These are the kinds of market failures, which when combined with clear public imperatives for change, simply demand more active government engagement with innovation and industry than we all may find ideal.

For now, I’ll again challenge the typical assertions that private entrepreneurialism and investment (and the proper price signals) are all that’s required to spur transformative innovation by pointing you to my publication, “Case Studies in American Innovation: A New Look at Government Involvement in Technological Innovation” [PDF] for examples of how active federal government engagement and investment paved the way for so many of the technologies we now take for granted, including microchips, personal computing, the Internet, commerical aviation and jet engines, gas combustion turbines, nuclear power, wind power, solar power, etc.  Take a look and see why I’m not as skeptical of the role of government as you are.

Finally, as a (mostly) side note, since you cite Tesla Motors targeting luxury car markets with their electric Roadster as a reason they should not receive federal incentives: the reason Tesla is starting with a $100k electric luxury car is because new technologies are routinely more expensive at their launch.  If there isn’t a market for early adopters, the technology will never reach the economies of scale and spur the learning by doing (and continued innovation) that drops the price and improves the performance of the technology over time.  Think flat screen TVs or cell phones: the first ones are far more expensive than most can afford.  But now these technologies have reached economies of scale that drove dramatic price reductions and the technologies are affordable and (because of that) ubiquitous.

Tesla is looking to use luxury buyers – who routinely pay more for the cool new thing – to drive those initial economies of scale. They plan to produce the Roadster on a scale of 1,000s and at a cost of $100k.  Their next model will use the same (and now cheaper) components and batteries at a larger scale and will be a luxury sedan selling for around $60k and at a scale of 10s of thousands.  They then plan to produce a $35-40k sedan at a scale of 100ks per year, if all goes well.  That’s just smart.  Please don’t use that as a reason not to incentivize their technology’s development with public investment.  If the government were willing to directly purchase batteries and serve as the early adopter themselves — as we did for microchips, radios, radar, lasers, early computers, and jet engines — we could bring this emerging technology to scale and down in price much more rapidly and pave the way for the kind of dramatic private sector innovation that occurred AFTER the government purchasing (and loss-leading) dropped these technologies in price.  In short: we should be seeing far more direct public investment in the technologies to enable electrified transportation, not less.

Marc, I challenge you to wrestle with the history of innovation in a real honest way, and look for the role of government engagement in these technologies.  The energy innovation imperative is simply too critical to leave to well-established (but quite inaccurate) myths about the infallibility of private sector innovation and the supposed ineptitude of any government engagement in the market.  If the financial crisis taught us anything, I’d hope it was that we should revisit those myths with a pretty damned critical eye, eh my friend?

Climate policy and The Black Swan

How we do we live in a world we don’t understand? That question has been on my mind lately because I’m again under the sway of Nassim Nicholas Taleb, author of The Black Swan. Taleb did a podcast recently with the free-market (or, if you prefer) the Smith-Hayekian) economist Russell Roberts, available here at EconTalk and highly recommended.

They didn’t discuss climate policy but their conversation got me wondering what Taleb would say about the threat of climate change, particularly since I’ve been thinking about how to respond to a thoughtful commentary on climate and energy by Jesse Jenkins of The Breakthrough Institute, who blogs as Watthead, Jesse and I serve on the blogger board for The Energy Collective, a website that attracts people who are interested in the nitty-gritty of energy and climate policy. It’s a good place to keep up with people like Joe Romm and Robert Stavins.

In his post, Jesse argues in his post that a cap-and-trade policy or carbon tax designed to “put a price on carbon” – that is, to raise the cost of burning fossil fuels – won’t do nearly enough by itself to reduce greenhouse gas emissions and respond meaningfully to the threat of climate change. That’s because any policy that drives prices high enough to discourage people from burning coal and oil will, by definition, be politically unpopular. Jesse writes:

The ultimate effectiveness of a strategy premised centrally on an effort to make dirty energy more expensive will always be limited by this fundamental reality of the political economy of energy — which we at the Breakthrough Institute have dubbed “Global Warming’s Gordian Knot.” If the price of carbon must rise too high to drive emissions reductions, various cost containment mechanisms or public backlash will kick in — either of which effectively abrogates the emissions cap. Yet if we constrain the price of carbon, it will have very little impact on emissions absent a steady supply of low-cost emissions reductions opportunities.

Instead of trying to make dirty energy expensive, Jesse argues, we need to make clean energy cheap. This requires what he calls “a coordinated, well-funded and effective strategy to accelerate clean energy innovation and drive major improvements in the price and performance of clean energy technologies.” Yep, that means lots of government spending, perhaps $50 billion a year.

What does this have to do with Taleb? I’m wary of trying to summarize his worldview but Taleb essentially argues that we know a lot less than we think we know. “My major hobby,” he writes on his website, “is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the courage to sometimes say: I don’t know….”  In essence, Taleb says we are not very good at understanding the past or present – his first book was called Fooled by Randomness–and that we are downright horrible at predicting the future. (Although he sort of predicted the global financial meltdown.)

I don’t know what Taleb thinks about climate policy or, for that matter, climate science, but I suspect that he would not have much enthusiasm for a federal government effort to spend $50 billion a year to research and commercialize technology to make clean energy cheap. None of us know  how to make clean energy cheap, and the government has a pretty poor track record of picking marketplace winners.

Here are several examples. In 1980, President Carter signed legislation to establish the U.S. Synthetic Fuels Corp., to find ways to create alternatives to petroleum and promote energy independence. It flopped, of course, and one reason why is that it got caught up in pork-barrel politics. “Fuel-cell projects under the SFC, for example, were allotted to each of the 50 states, regardless of economic viability,” according to a book called “The Government Role in Civilian Technology,” by the National Academies of Science and Engineering and the Institute of Medicine.

Not long ago, Congress gave us FutureGen, the “public-private partnership to design, build, and operate the world’s first coal-fueled, near-zero emissions power plant, at an estimated net project cost of US $1.5 billion.” Well, good luck with that. An environmentalist pal of mine likes to refer to FutureGen as NeverGen.

More recently, we had the biofuels mandate in the 2007 energy bill, which was a boon to Midwest farmers and the corn ethanol industry, at least until oil prices dropped last year and big ethanol refiners went bankrupt. The politics of biofuels are incredibly complicated – the mandate was opposed by environmental groups like Friends of the Earth and by oil-state Republicans – but figuring out which biofuels make economic and environmental sense and which do not is no job for Washington.

Only markets will do that.

Now let me be clear. I am not arguing that venture capitalists or energy startups or academics or big oil companies are any smarter or more capable than U.S. Senators or DOE researchers. What I am saying is more voices (i.e., the market) are better than a few (politicians and civil servants). The way to make clean energy cheap is to create a market that promotes as much tinkering and experimentation by as many people are possible (crowdsourcing, if you like) and not by giving the government $50 billion a year to spend. Nobody knows today how to make clean energy cheap. Together we may be able to figure it out.

Best as I can tell, the best way to unleash that experimentation is with cap-and-trade or a carbon tax, by making dirty energy expensive. Ideally, by making it very expensive. This is logical and just. So long as we allow the fossil fuel industry to dump global warming pollutants into the air at no cost, that’s what the industry will do, and future generations will pay a terrible price. Better to pay more for electricity and gasoline today, right?

The question remains, how can environmentalists and their political allies persuade people to pay more for fossil fuel energy in the short run? Americans haven’t been very good lately at making sacrifices today for the sake of future generations. But with the right leadership, that can change.

One way to begin is to get our metaphors right, as Steven Chu, the new energy secretary, has argued.

Some people have said the clean energy revolution will require a national effort like the Manhattan Project or the Apollo project to send a man to the moon. Wrong—those were government-funded efforts, involving small numbers of people, aimed at a very specific goals.

Here we have a much broader goal—cheap clean energy—but no clear path to get there. Will it be wind, solar, wave or geothermal power, or clean coal, or nuclear power, or all of the above? What we need—and all credit to Chu for this metaphor—is something more like the mobilization of the U.S. economy during World War II, which involved everything from Victory Gardens (local food!) to energy conservation (“Don’t Travel—Unless Your Trip Helps Win the War”).

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Put simple, the best way to untie the Breakthrough Institute’s Gordian Knot is with politics. We need to persuade people that it’s worth paying more for dirty energy today to save the planet for our kids and grandkids.