Most of the plans for fighting global warming now floating around Congress look to me like poll-tested half-measures that ignore the severity of the problem. Can the U.S. government possibly become a leader on this issue?
Sure. There are two possible things that we could do that seem realistic at this point. One is to implement a really good cap and trade system for all U.S. industry, modeled on the cap and trade system that was very successful in controlling acid rain. Remember, as recently as about 1990 acid rain was going to be the new silent spring; the Appalachians were going to be destroyed, et cetera. Congress enacted a cap and trade system in 1991, which meant setting a limit on the amount of acid rain that could be emitted by power plants and industrial facilities and then allowing them to trade the permits freely among themselves so that people could quickly discover the cheapest possible solutions. And what happened? People quickly discovered the cheapest possible solutions. At the time of passage, reducing a ton of sulfur dioxide—the main cause of acid rain—was expected to cost about $1,000. It ended up that most of the reduction was achieved at about $150 to $175 a ton; so less than 20 percent of the predicted cost. Acid rain is now off the political radar because the problem is, not solved, but it’s diminished so much that it’s no longer perceived as a threat.
So the first thing we could do is enact a similar system. We will probably price greenhouse gas reduction at about $25 a ton. That’s the equivalent of five or six cents on a gallon of gasoline. It’s enough financial incentive that people would discover that they had a profit motive for reducing greenhouse gases. And this would, I think, result in a burst of creativity and people coming up with cheap solutions. But it’s not so high that it would be likely to interfere with the economy. And in fact investors are already betting that this is going to happen. You can link to the Web site of the Chicago Climate Exchange in Chicago where, as of today (I just checked) greenhouse gas reduction futures are selling for $3.90 in the year 2010. In other words, investors are willing to promise that for $3.90, three years from now, they’ll eliminate a ton of greenhouse gases. Well, if Congress prices greenhouse gas reduction at $25 a ton, which is I think the number that they will choose, that’s a pretty good investment, isn’t it? People are already looking ahead to this.
The second and larger thing the United States could do, and I hope we will do it eventually, is join in some sort of greater international cap and trade framework. There is sort of one under the Kyoto treaty. It doesn’t work very well, and the Senate will never ratify the Kyoto treaty anyway. But there’s no reason why we couldn’t simply do this on a bilateral basis—say with China and India. If your goal is reduce greenhouse gases, it’s far more logical to spend your money and invest your capital in China and India than it is in the United States, because the bang for your buck in terms of greenhouse gas reduction there is many orders of magnitude higher there than it is here. A lot of the people who talk about greenhouse gas reduction focusing on the United States just seem to want some sort of punitive measure that harms American industry so they can feel good and go back to their Chablis and brie. If your real goal is to reduce greenhouse gas accumulation, or to at least slow the rate—slowing the rate of accumulation is the best possible scenario at the moment—you want to spend your money in China and India.
"Our Real China Problem" (March 2001)
Although the Chinese government knows the environment needs protection, it fears that doing the right thing could be political suicide. By Mark Hertsgaard
American coal-fired power plants, for example, average around 37 to 40 percent efficiency (that’s the percentage of the coal that they take in that’s converted into useful power). Chinese power plants right now are at 18 to 19 percent, so they’re burning twice as much coal and thus releasing twice the volume of greenhouse gases to produce the same unit of energy we produce here. If American capital and expertise did nothing in the next 20 years except raise the efficiency of Chinese coal-fired power plants—if that’s the only thing we did—it would be probably the single greatest contribution to slowing the rate of greenhouse gas accumulation that anybody could make in the world. It would certainly exceed any possible reform here in the United States. And so a really forward-looking program whose goal was to reduce the environmental harm, rather than engaging in some sort of therapeutic blame-shifting exercise about industry, would focus on China and India. And other developing nations, too, but there’s so much work to be done in China and India that you could spend a generation just helping them.
Why shouldn’t the government, with all its resources, take a much more active role in finding a solution—like, say, funding a research scheme along the lines of the Manhattan project, as many commentators have suggested?
"A Good Climate for Investment" (June 1998)
Reducing reliance on carbon for energy—to safeguard our atmosphere and our climate—could bring about not personal deprivation but a worldwide economic boom. By Ross Gelbspan
"Can Selfishness Save the Environment?" (September 1993)
Conventional wisdom has it that the way to avert global ecological disaster is to persuade people to change their selfish habits. A more sensible approach would be to tap the human propensity for thinking mainly of short term self-interest. By Matt Ridley and Bobbi S. Low
Oh, God, the last thing you want is for the government to try to figure out a solution! What the government needs to do is price the problem. In economics, greenhouse gases are a free good, there’s no cost involved in emitting them, so no one has any profit incentive to reduce the emissions. Government needs to create a framework in which a price is attached to the emission of greenhouse gases. The creation of a price will in turn allow people to make a profit by finding the solution. And once people have a profit incentive you’re going to find a huge outpouring of creativity on the part of engineers coming up with technical ideas and business people coming up with entrepreneurial ideas. But the last thing you want is for government to try to pick winners and losers in an industry. The government’s track record in energy research is pitiful. If you look at the billions of dollars that have been spent since the first Arab oil crunch of 1974, in the ‘70s and ‘80s we were spending eight or nine billion dollars a year (stated in today’s dollars) on federal subsidized energy research, and if anything useful came out of that research I’m sure not aware of it. All the breakthroughs in pollution reduction and energy efficiency—the things that actually work in the marketplace—have come at the behest of private entrepreneurs and engineers who are seeking profit. And so what we need to do now is create a profit motive for greenhouse gas reduction and apart from that, government should stay out of it. In the current federal budget there’s almost five billion dollars for energy conservation research—I wish there was zero in the current federal budget. Progress would be faster.
But on an issue that’s so crucial for human survival, are you sure that we can trust the markets to deliver a moral solution—a solution that’s efficient without being exploitative, or that won’t create more environmental problems than it solves?
I can’t tell you what the markets will deliver because that’s the nature of markets. I can tell you that government attempts to devise technology for consumer applications have consistently been fiascos. Go have a look at the Boeing wind turbine that was designed in the late 1970s. The Department of Energy spent two or three billion dollars subsidizing Boeing to construct a wind turbine for the first attempts at wind energy. The thing looks a piece of the space shuttle. It’s about—it was, nobody uses them now—about five times the size of the wind turbines that turned out to work. Huge amounts of money were spent on it, nothing was ever produced, none of them ever went into service. The wind turbines that are now being put into use to generate electricity around the world are all privately designed. Some of them by American companies like General Electric, some of them by a Brazilian company that’s turned out to be really good at designing wind turbines. People whose jobs are on the line if they fail and who make a profit if they succeed are really good at solving engineering problems. Civil servants whose pay is the same regardless of the outcome of their work, they’re not the ideal people for this kind of thing. And the history of energy R&D is just one of many areas where we’ve seen that the government’s really good at setting rule structures, but it’s not very good at applied engineering.