Innovation Is The Only Answer, But There's No Reason To Wait
The climate debate is kind of funny. Leave aside the denialists; I’m talking about the debate between people who think global warming is real and potentially quite serious, but who disagree about what (if anything) we should do about it.
The funny thing is that the debate tends to start with solutions (Kyoto, cap-and-trade, Copenhagen) and proceed to debate whether to vote up or down on same, rather than starting with problems and debating the best way to get to a solution.
The non-denialist conservative critics of the mainstream proposals to tackle climate change don’t spend most of their energy debunking the potential dangers of global warming. Jim Manzi, for example, has taken to task folks on the other side for the discount factor they use, for the time-frame used, for the precise probabilities imputed to various scenarios – but this isn’t the core of his argument, and he never denies that extremely bad downside scenarios are very possible.
Rather, the case against these proposals is anchored in three arguments: that American action will be swamped by larger global forces (the industrial rise of China and India being the biggest); that politics will so thoroughly corrupt the process of trying to properly price carbon (and evaluate carbon offsets) that much of the value of American action will itself be dissipated; and that the economic costs of these actions will be so large as to vastly exceed the expected costs of climate change.
The proposed alternative is to encourage innovation to eventually make the fossil fuel economy obsolete. Jim Manzi specifically thinks the government should be spending a few billion dollars a year on such efforts – a drop in the bucket relative to the costs of climate change legislation.
But sensible advocates for climate change legislation don’t deny the necessity of innovation. Indeed, it’s central to their case that the projected economic costs of the legislation are wildly overstated, as were the projected costs of the Clean Air Act. If a cap-and-trade scheme actually leads to the rapid development of a larger and cleaner electricity-generation capacity, and also to the development of cheaper, longer-lasting batteries suitable for transportation, then you’ve got the basis for replacing carbon in just about everything but jet fuel. And at that point the economic drag of cap-and-trade falls away as well.
So I would argue that there are two key points of agreement between the opposing camps. First, that climate change is a real and potentially very serious threat. Second, that significant technological innovation is an absolutely necessary component to addressing that threat.
Which leaves as the proper question to debate: what is the most effective way to get that innovation, “effective” being defined as some function combining “shortest time” and “lowest economic cost” (the precise function being left open as a side debate).
My impression is that government grants are not generally considered the best means for driving incremental innovation. Where they’ve been much more effective is in driving very expensive basic research.
To make our energy, industrial and transportation sectors less carbon-dependent, we mostly need incremental innovation. If we’re looking for the cheapest marginal ways to reduce carbon consumption, whether by reducing energy consumption or by substitution of other energy sources, the right mechanism is the market, and the right way to drive the market to look for those marginal savings is to tax the thing you want to discourage. Similarly, if you’re trying to increase returns to an incremental innovation that would help achieve these goals, the right way to do it is with a tax.
What would be the consequences of implementing a tax on carbon only in the United States, without coordinated global action? You’d see some carbon-intensive activities move offshore to lower-carbon-cost regimes; this would probably increase the global carbon load. You’d see some reduction in carbon-intensive activities; this should reduce the global carbon load, but some proportion of this reduction would be due to a simple drop in consumption and hence lower economic growth. And you’d see some increased private investment in making existing activities less carbon intensive, and in providing non-carbon energy sources to substitute; this should also reduce the global carbon load, and any associated economic cost should be temporary. It’s difficult to predict what the net effect on carbon emissions would be in the short term – but it doesn’t really matter, because the goal isn’t to directly reduce emissions but to encourage that investment in incremental innovation.
Of course, the tax on carbon will itself have a negative economic effect. But this could be offset by reducing other taxes, the payroll tax and the corporate income tax being two obvious targets.
If one were to try to evaluate such an approach versus the Jim Manzi approach of spending money on government research, there would really be two questions to ask: first, what’s the net economic drag (if any) associated with shifting the tax burden from one set of taxes to a carbon tax versus the net economic drag (if any) associated with increased government spending on whatever research he favors; second, which approach is more likely to yield substantial dividends in terms of incremental innovation more quickly?
This is not by any means my field of expertise, but I would think that a carbon tax, offset with appropriate other tax cuts, should have a fairly limited economic drag, and should be considered much more likely to lead to successful innovations than direct government spending, simply because the innovations we’re looking for (marginally cheaper nuclear and wind and solar power, marginally more efficient grids, marginally cheaper and more powerful batteries) are incremental. And, as a side benefit, you’ll be creating incentives to do simple things that actually improve economic performance while also achieving an environmental benefit (e.g., retiring dirty coal-fired plants).
Where I think direct government investment in “breakthrough” research is more important is on the other side of the carbon ledger. A great deal of energy in cap-and-trade has to go into calculating the value of carbon offsets. But this is the least-accurately measurable part of the carbon cycle, and the most obvious area for political corruption. It’s the part of cap-and-trade that most clearly smacks of the desire for a “total” solution to the problem, which usually results in no solution at all.
But technologies to capture or remove carbon from the atmosphere are going to be an essential part of the any effort to stop global warming. No matter what the United States does – no matter what the entire developed world does – the amount of carbon dioxide in the atmosphere is going to go up for the next few decades. In fact, no matter what China and India do, it’s going to go up, because the laudable efforts they are going to make to improve the energy efficiency of their economies are going to be swamped by the rate of increase of energy use. (If China and India get 2% more energy efficient every year but their economies also grow by 8% per year, then their energy usage will still grow by a bit less than 6% per year. Which is a lot. And, in fact, energy use is going to grow much faster than that because individual consumption is going to skyrocket even if industrial uses get more efficient.) This trend could reverse itself quickly if non-carbon energy sources come on line that are cheaper than fossil fuels, which is the whole point of trying to encourage the development of these sectors through a carbon tax. But that’s not going to happen overnight.
So we should indeed be looking for effective mechanisms for removing carbon from the atmosphere. That’s going to require breakthrough research, and is an ideal area for government investment because incremental progress will have no economic value to an investor.
That’s my suggestion in a nutshell. Drop the idea of trying to capture every aspect of the carbon cycle via cap-and-trade. Instead, just tax carbon, offset that new tax with appropriate other tax cuts, and spend a bunch of money on breakthrough research aimed at developing technologies to remove carbon from the atmosphere.
Is it a total solution to the problem of global warming? Of course not – but there are no total solutions to complex policy problems, and aiming at them is sometimes a great way not to get any loaf at all. Is it politically feasible? Well – compared to what? Cap-and-trade just died. Could you get Republican votes for a carbon tax offset with other tax cuts? I don’t know – if the GOP playbook after November remains “say no to everything” then, by definition, no, you can’t. But the political calculations for GOP Senators change after November – they won’t be able to count on having the wind at their backs to the same degree two years later. And the political calculations for the GOP in the House change if they take the majority.
I’d be interested to see whether after November the Obama Administration actually tries to put feelers out to see whether there’s something genuinely bi-partisan to be done. And I’d be interested to see whether, after November, center-right opinion makers like David Brooks and Ross Douthat and Reihan Salam, who all believe that global warming is real and serious, start arguing that Republicans should be leading on this issue, simply because it’s a real issue and real parties lead on real issues, and, if so, what they should argue for.
I should think that setting the boundaries as no net tax increase, minimize the degree of political intrusion into the economy, and try to get the most bang for the buck in terms of incentives to innovate, there should be lots of room for real proposals from the GOP side of the aisle. If they are interested in leading.
I think this is pretty my position as well (I know my opinion is important to you Noah). One thing to think about regarding innovation emphisis is the history of success of forced innovation. The clean air act, as you mention, is a good example. People talked about these restrictions exactly the same way they talk about cap and trade or whatever. Auto safety is another. The currrent level of safety in our cars is a direct result of government regulation. The nuclear bomb is another example. They went from abstract theory to Hiroshima in something like 4 years. The pressure to figure out a way to stay in business is very strong (as is the pressure to survive as a nation).
Another thing to think about is that if we impose unilateral restrictions on greenhouse gasses and the pressure leads to successful innovations, those innovations can be shared with the rest world. Say we get a breakthrough in solar cells. We can liscense that to other countries. It’s a lot easier to ask China to decommision coal plants if you have a better alternative to offer.
— cw · Jul 28, 05:34 PM · #
I’m 100% on board with this. Google “Mankiw Pigou Club” for some great discussion of it.
1) I really think we need to have some push into geoengineering. If an average temperature change of 4 degrees celcius up or down can be catastrophic, then is it really enough solely to limit carbon? The world has had temperature swings before, without the help of human industry — we need to look into orbital mirrors/shields/bioengineered carbonfixing algae, etc.
2) The major political problem is in ensuring that the carbon tax is tax neutral. A lot of the cap and traders/Pigou club members would like to use a carbon tax as a net revenue generator. That’s not even a crazy idea, since the consensus is that we need to do something to raise more money over the next 20 years, but it makes it difficult to promise budget neutrality. The last umpteen years of budget tricks by various administrations also make it difficult to credibly promise neutrality.
3) The other major problem, even if you can get a tax-neutral carbon tax, is which taxes to cut. The egalitarian possibility is payroll taxes, but that exacerbates one current problem, which is that a lot of the population doesn’t pay for the benefits it votes for. The efficient possibility is corporate income taxes, but that will stoke class resentment.
Still, yes, it’s a good idea.
— J Mann · Jul 28, 05:44 PM · #
But technologies to capture or remove carbon from the atmosphere are going to be an essential part of the any effort to stop global warming.
Oh, then we’re all dead, because that is simply not going to happen.
People should be very clear about this. If I suggested that we could reduce carbon emissions by genetically engineering humans to fly, I would be laughed out of the room, and rightly so. The same is true of any suggestion that we could build a device that would cost-effectively remove billions of tons of carbon dioxide from the atmosphere. It’s just not going to happen.
There is one device that safely and efficiently removes carbon from the atmosphere: it’s called a tree, and we are unlikely to improve on it. And we cannot plant enough trees to undo the damage we are doing. That would require a medium-size continent.
— alkali · Jul 28, 06:44 PM · #
Alkali, I’ll take your word for it, although I will note that basically all of human society depends on our ability to take nitrogen out of the atmosphere. (There’s an alkali-ammonia pun someplace, but I’m not enough of a chemist to make it work).
In any event, we could still reduce or increase the amount of sunlight hitting the ecosystem, right?
— J Mann · Jul 28, 07:06 PM · #
Alkali, I’ll take your word for it, although I will note that basically all of human society depends on our ability to take nitrogen out of the atmosphere.
True, just as my not dying depends on my ability to take oxygen out of the atmosphere. But those activities take vanishingly small quantities of those gases out of the atmosphere. Removing a significant fraction of the atmosphere’s greenhouse gases would be a gargantuan task.
In any event, we could still reduce or increase the amount of sunlight hitting the ecosystem, right?
We could cause a lot of particulate pollution, which reduces the amount of sunlight hitting the ecosystem, but that has other costs.
The basic problem is that the atmosphere is very very large and the amount of carbon dioxide and other greenhouse gases that we are emitting into the atmosphere is very very large. Any method of removing greenhouse gases from the air after they are emitted will therefore require a very very large expenditure of raw materials and energy, and also can’t be something that destroys us or the ecosystem.
Similarly, the earth is very very large and the sun is very very bright. Accordingly, any method of controlling the amount of sunlight that hits the earth is also going to require a very very large expenditure of raw materials and energy, and (again) can’t be something that destroys us or the ecosystem.
By way of example, if you develop some chemical that sucks carbon dioxide out of the air, great, but you will have to make billions and billions of tons of it to make a difference. If that gigantic production effort would require more minerals than human beings actually have access to, would require more energy than the world can supply, or would poison all living things, then you can’t do it regardless how clever you are.
Even if it is achievable, and I don’t think that is, it seems like a lot of trouble to avoid paying $5/gallon for gas and subsidizing some public transit infrastructure.
— alkali · Jul 28, 07:48 PM · #
What about if we dug caves and everybody lived underground? We could bio-engineer our eyes so we saw infrared and our skin so we didn’t need vitamin D. We could have algae ponds (we’d have to bioengineer some grow-in-the dark algae) for oxygen and food. Maybe we could take chinchillas with us for thier super-soft fur. We could do that, I’ll bet.
— cw · Jul 28, 09:25 PM · #
The reason i think we don’t have this debate today is because it’s a debate that’s old as dirt.
Why not a carbon tax? Too much guess work in pricing a Carbon tax (too easy to not do enough, or do too much) while Cap and Trade prices itself. Even the arguments about implementation seem tired… it’s not like we haven’t had successful emissions caps in America before.
— Console · Jul 28, 09:32 PM · #
“The reason i think we don’t have this debate today is because it’s a debate that’s old as dirt.”
I am skeptical of this claim. It certainly wasn’t debated anywhere that I’ve been. Can you list dates, places, and participants? If it was thoroughly debated, you should be able to summarize the best arguments on both sides for us. If you can’t, then the debate hasn’t been thorough enough.
“Too much guess work in pricing a Carbon tax (too easy to not do enough, or do too much) while Cap and Trade prices itself.” Not true on both counts. Cap and Trade gives a lot more opportunity for juggling on the basis of political partisanship. It doesn’t price itself because the entities being traded don’t define themselves.
“Even the arguments about implementation seem tired… it’s not like we haven’t had successful emissions caps in America before.”
Emissions restrictions, yes, but emissions caps? As far as I know there has been all sorts of political jockeying to set baselines for these things, and to decide who gets grandfathered in, etc. It’s political corruption on a smaller scale than what cap and trade would bring.
— The Reticulator · Jul 29, 02:12 AM · #
“We could do that, I’ll bet.”
In the same spirit, we could invade Iraq for the sake of Democracy and freedom from terrorism. And we could invade and conquer our health care system and produce lives full of sunshine and rainbows.
— The Reticulator · Jul 29, 02:17 AM · #
Nobody is serious about limiting carbon emissions who won’t discuss limiting immigration to the United States. Nobody.
The population of the U.S. in 1980 was 227 million. Today it is 310 million. The latest Census Bureau projection for 2050 is 439 million.
Most of that growth is due to immigration, and immigrants to the U.S., on average, emit far more carbon than if they had stayed home.
And how many people discuss immigration limitation as one way to limit carbon emissions. Almost nobody. Ergo, almost nobody is serious.
— Steve Sailer · Jul 29, 03:54 AM · #
“And how many people discuss immigration limitation as one way to limit carbon emissions. Almost nobody. Ergo, almost nobody is serious.”
You are seriously obsessed.
— cw · Jul 29, 04:49 AM · #
“And we could invade and conquer our health care system and produce lives full of sunshine and rainbows.”
Will there be chinchillas? Because I’d be for it if there were. Sunshine, rainbows, and chinchillas: I feel a song coming on.
— cw · Jul 29, 04:54 AM · #
@ The Reticulator
http://www.smithsonianmag.com/science-nature/Presence-of-Mind-Blue-Sky-Thinking.html
There’s a long history behind why cap and trade has become the primary solution. The emissions trading side won the argument when the problem was acid rain, why does it magically start up again for climate change? The problems with pigovian taxes are the same today as they were in the 70’s. Why are we reinventing the wheel?
— Console · Jul 29, 05:56 AM · #
Steve Sailer, you’re life as farce is impressive. Not since Alfred Jarry or Andy Kaufman, has somebody constructed an unsavory, slightly deranged alter-persona with such persistence and attention to detail. Those commenters who scoff at you as an obsessive mental midget are like the people who booed Tony Clifton. They don’t get the joke, but in the process they make it even funnier! Well played.
— Mexico Tate · Jul 29, 01:16 PM · #
“Steve Sailer, you’re life as farce is impressive.”
I never thought of it, but that might be the most logical explination.
— cw · Jul 29, 02:07 PM · #
That’s a vast exaggeration, Steve. You’re right that increased immigration leads to increased carbon usage, all else being equal. But that’s true about free trade, coal mining, restrictions on the ability to build nuclear plants, and the failure to engineer and release a human extintion bio-weapon.
The fact that a group might find one of those options unacceptable doesn’t mean they’re not serious about global warming. I’m open to arguments that owning four homes and flying around the world on a private jet means you’re not that serious.
— J Mann · Jul 29, 02:17 PM · #
Actually, phytoplankton do most of the heavy lifting on that one as I understand it, and even if they don’t there are plenty of other non-tree organics involved in carbon fixation, most of them microbial.
— K.Chen · Jul 29, 03:05 PM · #
My regrets for the embarrassing misspelling in the above post. Change “you’re” to “your.”
— Mexico Tate · Jul 29, 03:09 PM · #
Cap n Trade is a solution in search of a problem, which is not we have too much cheap energy
— ian cormac · Jul 29, 04:35 PM · #
Should the US do cap and trade even if it will have no impact on global warming? Because without China and India, we’re not slowing down global warming with cap and trade. That’s true of an optimal CnT regime, which we won’t get.
And we’re almost certainly not getting China and India on board with anything but cosmetic restrictions on emissions. So again, should we do CnT anyway? Clearly no, right?
— KVS · Jul 29, 04:45 PM · #
To the extent we can move to biofuels (this is just solar energy in a convenient-to-use form), we get the carbon collection. It’s just that instead of burning oil for energy and then trying to somehow capture the CO2 from it, we first have the plants capture the CO2, and then burn the fuel and release it. Unfortunately, I think biofuels based on existing crops have the problem alkali pointed out w.r.t. trees—it would take a lot of land, enough that it would seriously impact food production.
— albatross · Jul 29, 04:47 PM · #
This is a good post, Noah, and I thought I’d add a bit of context to the discussion, as this happens to be the field I work in.
1) Although you’ve pitched your idea as a GOP-friendly policy proposal, what you’re describing also happens to be what most environmentalists want. Feel to draw any or none of the following conclusions: you’re secretly an environmentalist; mainstream environmentalism is secretly quite moderate (or maybe more properly, non-ideological); the GOP could quite easily lead on this issue; the GOP will never in a billion, billion years embrace this issue.
2) You mention that an analysis of the economic effects of a carbon tax are not your area of expertise. Fair enough. Many non-partisan groups have looked at this question and concluded that the economic effects are de minimis.
3) You are absolutely correct that the type of innovation needed is incremental, rather than fundamental. To expand on this a bit: the innovation required is more on the technology deployment side of the ledger than on the technology innovation side. It is well-established that manufacturing processes undergo a downward-sloping cost curve as a result of learning effects. Further, there is a mountain of empirical research showing that it takes many decades for fundamentally new energy technologies to gain even a toehold in the marketplace. In other words, the best course forward is steady, incremental improvement in deployment of existing technologies, and this is precisely the sort of innovation that markets, rather than government, are good at rewarding.
4) Although much is made of the long-term problem of China — for good reason — people tend to ignore the fact that fossil fuels have many, many negative externalities other than climate change (and no, I’m not just referring to energy security issues, although those are real). Further, most non-experts tend to be unaware of just how grossly energy-inefficient the American economy is, due in large part to our bizarre system of utility regulations. In other words, although China poses a very serious long-term problem, a carbon tax absolutely makes sense even before climate change is taken into account. This is especially true of a revenue-neutral carbon tax.
5) When I use the term “carbon tax,” I’m including cap-and-trade schemes under that umbrella, because they are for practical purposes equivalent.
6) Regulatory reform is another ripe — although extremely boring — area for bipartisan consensus. No one of any ideological stripe can mount a sensible defense of the way we run our utilities.
7) I’m not quite sure why you’re focusing so much on carbon offsets. Although the issues there are real, they’re a bit of a side show. Offsets are meant to be a cost-containment mechanism, not a search for a “total” solution. In general, this post is at its shakiest when it strays from general principles into policy particulars (see #5). Which isn’t that big a deal, but since you do kick off by criticizing a debate that tends to start with solutions rather than problems, I thought I’d point out that pretty much everyone is guilty of this sort of thing. Especially environmentalists.
— Adam · Jul 29, 06:14 PM · #
“http://www.smithsonianmag.com/science-nature/Presence-of-Mind-Blue-Sky-Thinking.html”
Thanks for the link. We subscribe to Smithsonian Magazine, and keep a stack of them in the reading room (a.k.a bathroom). I’ll give give the dead tree & clay version a read some time.
Keep in mind, though, that while there is much that is worthwhile in that mag, the organization has ties to the government industry. If I tried to post an article about carbon regulation written by a group that received funding from BP, I’d be hooted off the internets. So I will take the Smithsonian spin with the same-sized grain of salt I would need in reading a BP-funded article.
And it is curious that you claim that the subject has been thoroughly debated, but what you come up with is an article from a source like that. Are you really sure you know each side’s strongest arguments?
— The Reticulator · Jul 30, 04:42 AM · #
So if I get this post right, forestalling potentially catastrophic climate change will require not one but ALL of the following:
- a tax on carbon – government-spurred investment in clean energy technologies that lead to the transcendence of the carbon economy in power generation and ground transportation – proliferation and mass adoption of those technologies in the major growing Asian economies – government-spurred development and deployment of high-volume atmospheric carbon-removal technology
I’m going have to be with alkali here.
— Michael Drew · Jul 30, 07:13 PM · #
J Mann claims:
“The fact that a group might find one of those options unacceptable doesn’t mean they’re not serious about global warming.”
No, it’s not as if the people who are raging at me in the comments about what a crackpot I am for mentioning the obvious fact that immigration policy will mean that in 2050 the population of the US will be about 150 million greater than it would be without immigration have given careful thought to the tradeoffs between restricting immigration and Saving the World.
No, they have never, ever even thought about it. Look on Google and see how often the subject comes up — CAPS brings it up, CIS brings it up, I bring it up, that’s about it.
Here is the level of intellectual sophistication we’re dealing with:
- Carbon emissions are Bad – Immigration is Good – Therefore, immigration can’t be related to carbon emissions. It just can’t. – And anybody who says it can is Bad.
— Steve Sailer · Jul 31, 02:18 AM · #
@ The Reticulator
It isn’t so much about knowing the strongest arguments as far as I’m concerned. It’s mostly the fact that one side won out and that the outcome was positive (i’m referring to acid rain) that moves me. I’ll admit that I’m mostly going with conventional wisdom on this rather then an exhaustive investigation of the points, but in reality the best rebuttal anyone can come up with is saying that “emissions restrictions on sulfur may or may not have worked, let’s try something completely different.” Not exactly compelling to me if i’m a legislator or a policy wonk
— Console · Jul 31, 05:54 AM · #
It’s often assumed that obsoleting the fossil fuel industry can only be achieved through policy.
A growing number of private innovators are discovering just how possible it can be, not because of expected policy changes, but because of potential profits. As a (profound) fringe benefit, their innovations may also have a beneficial impact to climate change.
http://www.greendesignbriefs.com/component/content/article/8344
— Jim Belfiore · Aug 3, 02:18 PM · #
Nice post, Noah. Let me endorse all of Adam’s comments above, especially #6, which is hugely important but widely overlooked.
The only thing I’d add is that you, like seemingly 95% of the people involved in this issue, focus entirely on technological innovation. The background assumption, though rarely explicitly articulated, is that our present social and economic circumstances are at market equilibrium and therefore only something exogenous could shift it to a new equilibrium.
But that’s not so. Energy markets are riddled with failures and distortions. For instance, the public pays the costs of the asthma the coal industry creates. Why? Why isn’t that included in the price of coal power? “The market” didn’t make it be so — it’s just a transfer of wealth from the public to coal executives, maintained by lobbying and political influence. Etc. etc. etc.
What I’m getting at is, at least half the problem is about innovation in our social and economic affairs. Changing the way we live, behave, and structure markets can be innovative too! People are doing it all over the place in local communities — and no, not just DFHs.
I wrote more on the subject here:
http://www.grist.org/article/2010-02-17-why-bill-gates-is-wrong-on-energy-and-climate
Cheers,
DR
— David Roberts · Aug 3, 09:09 PM · #
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— designer clothes · Aug 4, 08:22 AM · #
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— ClimateTF · Aug 5, 07:01 PM · #
Noah: an excellent post, with some very good reader’s comments. For an example of a specific proposal which incorporates many of your suggestions please Google the Lincoln Plan, and note especially the update. In brief, this plan would implement a tax of about $10 per ton on CO2 (for gasoline, 10 cents a gallon), cut the corporate income tax to around 30%, and refund households over $200 in dividends. Most households and most businesses would come out ahead. And a few percentage points of the tax revenue could be used to fund essential R&D.
— Huon P. · Aug 7, 10:54 PM · #