Can These Two Democrats Inject Rationalism Into the Energy Debate?

Former Alaska Gov. Tony Knowles and former Rep. (now Professor) Brad Carson of Oklahoma are in Washington this week in their new roles as policy entrepreneurs. I was a little skeptical when someone from their hired PR firm asked me if I wanted to sit down and talk with two former politicians about yet another new energy policy project.

But Knowles and Carson are on to something interesting here. Backed by money from George Kaiser, the major philanthropist, they're trying to inject a vial of rationalism into the overheated political debate by "scoring" the various proposals -- more than 30 different ones at last count -- using metrics that are fairly well accepted by most credible researchers. They've got two main numbers: the amount of CO2 that would be reduced by 2030 given the implementation of certain proposals ... and the cost per person over that time period for the changes. Carson and Knowles's National Energy Policy Institute hopes to make a splash with (hot) hard facts.

Tony Knowles: I was fascinated with the thought that you could bring a rational and transparent perspective to something that is really complicated, and it really helped understand it better.
So we looked at a number of different institutions. We tried the Rand Corporation, MIT, Brookings Institute ... we kind of interviewed a number of them and ended up with Resources for the Future because they were number one, very interested in the subject. They have a long background particularly as an economic analysis of natural resources and energy issues.

So we sat down for them and really from scratch said, "What kind of study would it take to accomplish these goals that George [Kaiser] had laid out?" And it's been two years in the process, and this is the result, which is probably the longest executive summary every written. Usually executive summaries come in three or four pages, or something like that, but the reason why we put it this way is one, because we wanted to give the full story and we wanted to have enough substantive credibility. The master report is still in the final editing process, though we did the mastery report before we did the summary so this is the way the chronology should be.

So this is going to be up online probably within 30 days and then we're going to have it printed out and we'll roll it out this fall. And then we have all the technical papers so it's probably about a 400 or 500 page effort that's coming.

Ambinder: Is this the right approach given how polarized Congress is right now?

Knowles: I certainly think so, because what this does... We don't believe that all the angles reside on any one particular policy or any combination of policies here, but what we do is challenge people, recognizing that they're going to say, "Wait a second, you didn't consider this and that and what about this or modeling that and what about this policy." And we say, "Terrific, join the discussion."

But take these parameters as being a logical, rational way with which you should score and rank policies. Put your favorite policy into this process and you need to say what it's going to cost, we need to run it through a kind of modeling system. And I think we have the right modeling system here that has a lot of credibility, that is very sophisticated, that doesn't have any kind of agenda, and it's complicated, and it's good. So we challenge people, using a jigsaw puzzle approach, or a Lego approach: "OK, you build your own policy but you have to use certain common metrics, modeling, and costs, and we can see how effective it's going to be, and you need to set a target." And we recognize the targets we set there are somewhat arbitrary, but they're rational.

Brad Carson: It's backed up with very credible science.

Knowles: Oh yeah, well in 2030, to get 4 million barrels a day reduction of oil will give us more national security. People may say no, it should be 5 million or 3 million, pick a number. And the same with CO2 emissions. If you read Bill McKibben, we need to do more than 12.4 billion tons by 2030. Other people may say well, that should be 10 billion. But you have to have a credible target in how to get there.

So what we're doing is hoping to drive the debate in terms of, if you don't see a policy here or combination that you think works the best, you don't agree with that, then build your own. And that way we can take it above. We've both been around the block. There's always going to be politics involved in it, and there should be, but it can be politics, should it be with a capital P or with a small p? Lowercase, I guess we should say, because that's not what should drive the debate. Politics is the process by which you use a rational, transparent, logical methodology on how you get an answer.

Ambinder: So this is a long-term project ...

Knowles: Yes. One thing that we do not want to see happen is the smoke and mirrors or the policies that sound like they're doing something but actually don't do anything. That, to me, would be the biggest loss of all, if we do something that doesn't reduce our oil and doesn't reduce our CO2 emissions and costs a lot and is redundant. And that can happen so easily in all of this.

Ambinder: There are more than 40 votes for a side that doesn't want to do anything on this issue. The skepticism of the public on the basic science on this issue has risen. You're in this for the long haul, I assume? There seem to be more than 40 people in the Senate that simply wouldn't look at something that says "energy change."

Carson: Let me address your specific question. I'm now a professor at the University of Tulsa, where I teach energy policy and energy law. I think there's a couple of things we're trying to do here. You're quite right about the polarization of everything in Washington, but the only hope to break through that, and maybe you're slow boring through hard wood in this, is better information. And giving people data that can help sway their opinion on the margin, at least.

What we're trying to do is address something I saw in Congress that was a major problem, which is to say that energy is arguably the most fundamental issue confronting our country. But it touches on so many different disciplines: physics, because you can't really understand energy policy without knowing the basic physics of it; sociology; to building, to transportation, to international relations, to economics of both the micro and macro levels.

Very few people have the capacity to walk through all of those disciplines and be able to fully understand what's going on out there and translate some of the academic work that's being done, that's being published in some of the arcane journals, into policy journals. It's not getting through to Congress, I think. What we try to do is two things: on the climate change issue, you're right if you're looking purely at that. This report starts from the premise that global warming is real. That's not to say you can't have a good faith debate, as there is among scholars, about whether the costs to fix global warming outweigh the benefits of fixing it.

Ambinder: There hasn't been a standard metric about assessing costs, so it's hard to have that debate. And that's what you're trying to do here.

Carson: There are philosophical issues involved in that about choosing the right discount rate, the value, the future, and things like that which drive it. But its start with the premise that global warming is real and if you're a denier of that fact, then you're not going to find climate change mitigation policies to have particular appeal.

But we do something more than that, too, in addition, to try to quantify the costs and allow better debate on that. There is a second issue on that that many Republicans find appealing and that the American public, despite their skepticism of global warming, do find appealing: that there are national security reasons to be concerned about the oil market. I often ask this question when I speak to groups or to clubs, and when I do so there are lots of oil men in the audience (because I live in Oklahoma and I talk informally to the natural gas producers and oil producers). And I will always ask them this question: What determines the price of oil? I mean, it's a fundamental commodity, it has driven amazing changes in our quality of life over the last 150 years -- what determines the price of oil?

And very few people can give me an answer to that. But I would offer to you that that is one of the fundamental questions in the United States today, is what determines the price of oil. There is an answer to that question, I would say -- that OPEC determines the price of oil. And what we try to do in this report, and the mass report talks about it at greater length, is to say, when we talk about should we drill off shore or not, or should we drill on the north slope or should we cut back our consumption of oil, what is the objective of that policy? What are we trying to achieve here?

I think you could offer seven or eight different possible ends for energy policy. Climate change is one of them. Dealing with criteria pollutants is one of those related to that. In Europe, it's often about what they call "security of supply," making sure the Russians don't cut off the natural gas pipeline. If you're in Africa, you're worried about what they call energy poverty, that people are using wood and dung to fuel, these kind of things.

In the U.S. I think there are really two reasons we should pursue energy policy. One is climate change, and the second is this notion that the oil market is cartel-ized by people, some of whom are friendly, some of whom are not, some of whom are in a more ambivalent position to us. And how do you affect the power of the cartel? And there are really two ways to do it. One is to reduce their market share by either cutting your consumption or increasing your supply, and those two substitute for each other, on the margins, at least.

So what this policy tries to do is to say, look, we have policies here that will cut your oil consumption and there's a reason to do that, and here's exactly what they'll do. CAFE standards people talk about, or fee-bates or all these kind of things -- we'll cut oil consumption, and we quantify by how much. And similarly with climate change, we'll quantify how much carbon is going be reduced and we use that choosing metrics. We choose 4 million barrels and we think that makes a big dent on the power of OPEC. And we choose the climate change goals because those are already embodied in international agreements, trying to cut 20 percent by 2020 up to 80 percent by 2050.

So we talk about what policies work and what policies don't work if you accept those two goals. At the same time, probably for the first major efforts, we try to quantify the costs and we argue what the most coherent framework for determining cost is. You know the Harris Foundation will release a number that says, "Hey, it's going to cost this much." Kerry/Lieberman says it's going to cost this much. We argue for the welfare cost estimation that's made the best and then we quantify the cost of these policies in ways that scholars back up, run through the EIA/DOE models. So that's what we're trying to do. With the idea that better information is the only way in the gridlock, we're not being Pollyanna-ish in the idea that we think better information breaks through right off the bat.

Ambinder: What is your pitch to Republicans about the value of this data?

Knowles: The oil security issue is very appealing to many Republicans, you know. They've supported the policies to end the power of the cartel to improve national security. So many of these policies are non-tax policies that help do that.

On the other hand, the other thing we talk to them about is the fact that if you are opposed to taxes in general, then there are alternative ways to cut carbon emissions significantly in the economy without raising taxes at all, and that is through improving what is already a fairly popular idea among Republicans, which is making the renewable portfolio standard but increasing it and changing it in ways that give it more teeth and more bite on the utility sector. And that's what we call the clean energy portfolio standard, which is one of the major findings from the report.

To me, international agreements of what the U.S. wants to do ... until 2030 -- we want to reduce basically carbon emissions by 12 and a half billion tons, that's a goal. You can do that through an enhanced portfolio standard that helps nuclear, helps natural gas, helps renewables, too, and that you achieve a lot of what a cap-and-trade system would do without ever having to worry about a tax. And you might have some other ancillary benefits like forcing technologies, too.

So if you're for a renewable portfolio standard, like many Democrats are, renewable portfolio standard doesn't get you that much in terms of reducing carbon. And it actually helps bio-mass a lot, which is a controversial issue in and of itself. If you have this other type of portfolio standard, it would actually help things like solar a bit more, and it would have as big an impact on bio-mass and the controversies there and you could reduce carbon throughout the economy almost enough to meet international agreements. So that's I think a message we take to Republicans to say, "Hey, you know there are ways to achieve carbon reductions without taxation."

Carson: What do we think is going to drive the energy policy at a time when the public doesn't seem very interested in it and, as you talked about, the different political agendas ... In my own humble opinion it all comes down to a matter of priorities. And at a time when America is in a deep recession, even though there may be some faint signals that we're climbing out of it, the number one issue is the economy. And certainly Brad and myself, having been in political situations, know just common sense tells you that when a person's job is at stake, you have people with advanced degrees doing, people without work, that is the number one issue.

So it is hard to, in that atmosphere, to take another issue to the top. However, if you take a look at the issues of national security and climate change, there is the vast majority of Americans that will react to it with a sense of urgency. And so we feel that it is timely. It certainly has been on the national table. When President Obama said that we needed to have less dependence on foreign oil, that's a phrase that goes back to every president since Richard Nixon. People have been groping in the dark for a long time on how to do it, and that's why we think that it is a subject that needs to be addressed.

It's a bank shot on the economy and I think that has been made by any number of people. There is a strong case that this, in the long run, will be the enormous part of the foundation of the new economy.

Ambinder: In the short term, the more effective policies are going to cost some money?

Carson: And any policy maker wants to minimize the cost even over the long haul. And that's what we hope to do here, is to say, "You know, lets talk about what works on a per ton, per barrel basis," and so the policy makers want to minimize the cost across the board.

Ambinder: The estimate on the carbon tax is a lot, but cumulatively is not the end of the world.

Knowles: But I think that's one of the things that comes out of the report -- that these costs on a per household, per individual basis are not so significant that they should deter us from pursuing policies. I think there is a political issue with passing taxes and that's why interesting findings in the report talk about the non-tax ways to do it. But I do think it is important, and one of the data points that we want to take to policy makers is to say, "Hey, if you're interested in cap-and-trade and if you're interested in carbon tax, here's what the best estimate of the costs are. And there's a lot of white noise and a lot of mumbo jumbo but the real costs are these." And in fact, across a population of 320 million, its not that big of a price tag: its $40 to $50 a household, as I recall.

Ambinder: It does seem that some of the approaches that they're moving towards you can get fairly close to your targets. I haven't seen the data put like this before and it's pretty striking. The other thing I like about it is that the CBO estimates, for example, that the Kerry-Lieberman bill is going to save X -- I don't believe anything that really comes from Congress that says it's not going to cost anybody money. This isn't shying away from the fact that there are costs, but you're putting the costs into a context.

Knowles: Without putting a shine on these costs, these are what I would say -- high costs as opposed to low costs. For instance, the two things that count right now: cost to the public and the federal deficit. There is very little in here that affects the federal budget at all, so that is a good thing.

The second item dealing with cost to the public: the out-of-pocket costs are much lower than the welfare costs. So the out-of-pocket, so what it's actually going to cost you, the welfare cost considers the fact that if you're driving less, that means you have a loss of some kind of psychic income, so that's quantified. So if you take a look at out-of-pocket costs, it's even lower than that.

Say in terms of the federal dollars -- when people look at X number of billions of dollars people think, "Oh, that's going to add to the deficit ." There is very little in here that would add to that. For instance, of all these policies, the hybrid subsidy is about the only one there that I think is not revenue neutral.