I haven't read the Obama plan yet, but I think I already disagree with Ryan Avent's take on it:
I’m a lot less excited about the billions of dollars promised to research efforts on things like carbon capture and sequestration, or “the next generation of biofuels and fuel delivery infrastructure, accelerating commercial production of plug-in hybrid vehicles, promoting larger-scale renewable energy projects and low-emission coal plants, and making the electricity grid digital.” Not that those wouldn’t be great things. It’s just that 1) if we price carbon correctly, firms will have lots of incentives to do this stuff anyway, without billions in public money. And 2) there are large opportunity costs to spending money on projects for which the payoff is unsure–namely, we can’t spend that money on things NOW that we KNOW will pay off.
Look, it’s very nice to see that Obama mentions planning and mass transit. What he doesn’t do is attach anything remotely reminiscent of a dollar sign to those paragraphs. And that’s a mistake. Next year, federal funding for mass transit and Amtrak combined will total about $3 billion. A mere 2 percent of the $150 billion Obama is talking about spending on research would double the budgets for those programs; that is, small amounts can have big effects. Everything we know about cities with public transit suggests that such systems can substantially reduce per capita carbon outputs. Combining any program to increase the price of carbon with investment in public transit would result in an immediate and tangible reduction in carbon emissions. Of this we can be absolutely sure.
The reason I disagree was outlined in the one part of the much discussed Nordhaus/Shellenberger article that I think really nailed it:
Increasing energy use is the primary cause of global warming, but it is also a primary cause of rising prosperity, longer life spans, better medical treatment, and greater personal and political freedom. Environmentalists can rail against consumption and counsel sacrifice all they want, but neither poor countries like China nor rich countries like the United States are going to dramatically reduce their emissions if doing so slows economic growth. Given this, the challenge we face as a species is to roughly double global energy production by mid-century while simultaneously cutting greenhouse gas emissions in half worldwide (and about 80 percent in the United States), so that we can avoid the worst consequences of climate change.
. . . environmental lobbyists in Washington today are overwhelmingly focused on addressing global warming through two overlapping strategies. First, they want to establish a cap on greenhouse gases that decreases over time. Second, they want to make clean-energy sources cost-competitive by increasing the cost of dirty energy. While there is great debate about how to best implement these strategies--whether through traditional command-and-control regulatory mechanisms, market-based cap-and-trade approaches, or an outright tax on carbon emissions--there is little question that the solution is pollution regulation.
It is not. The challenge is simply too large. In 2007, human beings will consume roughly 15 terawatts of energy worldwide. That level of energy use will rise rapidly over the next 100 years due to population growth and increasing living standards, especially among the global poor. By the year 2100, humankind will need to produce and consume roughly 60 terawatts of energy if every human on earth is to reach the level of prosperity enjoyed today by the world's wealthiest one billion people. Even if economies were to become much more efficient, the total terawatts needed to bring all of humankind out of poverty would still need to roughly double by 2050 and triple by century's end.
Consider China. Today, the country is rumbling with rising prosperity, rising expectations, rising demands for freedom--all fueled by cheap, dirty coal energy. This year or next, China will surpass the United States as the world's largest producer of greenhouse gas emissions. And yet, the average Chinese still consumes less than 20 percent of the energy consumed by the average American, meaning that the Chinese contribution to global warming is going to grow tremendously. After all, neither the Chinese people nor the Chinese government will accept any solution that does not allow energy consumption comparable to our own.
The only way to double global energy consumption while cutting global warming emissions in half is by developing new sources of clean energy.
Cutting driving in America will undoubtedly reduce our oil and carbon consumption. But it will do nothing to reduce consumption elsewhere. If oil production has peaked, as a growing number of experts believe, then having Americans burn less oil in their cars will do nothing but transfer that oil to be burend in less efficient engines in China and India. This is fine poverty policy, but it will do nothing to reduce global warming.
A carbon tax needs to be part of a policy to produce alternatives to cheap Chinese coal and growing demands for automobile use in the developing world, not part of a strategy to see how virtuous we can become while ignoring what is happening in the developing world. I see Obama's plan for pouring billions into R&D as a way to accomplish that. Mind you, I'm not sure I like the plan. But as a general strategy, I think finding clean and cost effective technologies should be the priority over eking out efficiency gains from the technologies we already have. After all, if we have them, so does China--and china is nonetheless overtaking us as the world's leading emitter of greenhouse gasses.
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