Energy Follow-Up

Following his lecture to the Dems about energy, Professor Stephen Bird sent this NYT article to highlight the status quo of the problems and potential solutions. It emphasizes three key points for reducing carbon emissions:

1. Acknowledge the costs
2. Let the market work, and
3. Keep the solution simple

Check it out: 

Economix
Earth's Climate Needs the Help of Incentives
By DAVID LEONHARDT

Washington

The politicians who deny that global warming is a problem used to be the
biggest obstacle to a solution. They're not anymore. They have lost the
argument.

When former Vice President Al Gore came back to Capitol Hill to testify
last week, a few of the global-warming holdouts in Congress confronted him
with their usual tactics. They took the actual uncertainties over climate
change - how fast seas and temperatures will rise, how serious the effects
will be - and tried to make them sound like uncertainty over whether human
beings were making the planet hotter. But the skeptics didn't get very far.
In the last few months, this debate has shifted incredibly quickly.

As Representative Ed Whitfield, a Kentucky Republican (lifetime rating from
the American Conservative Union: 90 out of 100), told Mr. Gore, "I think
everyone recognizes - as you have said and the scientific community agrees
- that there is global warming caused by human activity." On Monday, Gallup
released a new poll conducted before the hearings. In it, 86 percent of
respondents said they favored new action to deal with environmental
problems.

No wonder, then, that the political debate now revolves around what that
action should be. In the current Congress, there are six bills to deal with
climate change, and more are on the way. Senator John McCain, a Republican
presidential candidate, helped write one bill, and Senators Hillary Rodham
Clinton and Barack Obama, the leading Democratic hopefuls, are co-sponsors
of it.

This attention certainly qualifies as progress. But it is also creating the
newest big obstacle to a climate solution, an obstacle that's far less
obvious than the efforts to deny scientific reality. The would-be reformers
may be saying all the right things; every last one of them may even be
pursuing the solution she or he honestly believes to be the best one.

But the truth is that some of the ideas now on the table would do very
little to change the situation. And a feckless new law would be worse than
nothing at all right now.

The discussion about climate change can be mind-numbingly complex, filled
as it often is with economic and scientific jargon. But I think there are
three broad principles that help sort out the substantive attempts at
change from the others.

The place to start - the first thing that distinguishes the most serious
reformers - is an acknowledgment that a cooler planet will cost money. It's
extremely tempting to focus instead on the dazzling economic opportunities
that come with alternative energies. President Bush did so during this
year's State of the Union address when he said, "The way forward is through
technology."

Likewise, Mrs. Clinton, when laying out her solution to climate and energy
problems last year, asked: "How will we get there? Two words: innovation
and efficiency." She then recited a list of nifty technologies - wind
power, solar cells, cellulosic ethanol, hybrid plug-ins, clean coal, clean
diesel - that Mr. Bush also likes.

Some of these probably will become major energy sources in the decades
ahead. But in most places they're not yet nearly as cheap as oil, coal or
the other fossil fuels that make the planet hotter by emitting carbon.
Government subsidies cannot make up the gap, and, more to the point, nobody
can accurately predict which alternative energies are the most promising
and most deserving of subsidy. So a hodgepodge of new
research-and-development tax credits just isn't the answer.

The only reliable way to reduce carbon emissions is to make them more
expensive. When you hear somebody talk first about doing this and only then
about the wonderful innovations that will follow - and they will follow -
you know that person is serious.

This is essence of the second principle: the market created this problem,
and the market is going to have to solve it. The issue, says David H.
Festa, director for the oceans program at the advocacy group Environmental
Defense is 'how do we make sure people are given the right economic signals
to do what we need them to do.' "

Later today, Mr. Festa is going to release a fascinating study about the
fishing business that on its face has nothing to do with global warming,
and yet has everything to do with a solution. At dozens of the nation's
fisheries, the fish population is in danger because fishermen have no
incentive not to take everything out of the water that they can. But 10
fisheries, stretching from the halibut fishery off Alaska to the surf clam
industry in New England, have tried a different route.

They have capped their annual catch and then granted fishermen the right to
a certain share of that catch. The fishermen can buy and sell these rights
among themselves, creating a market that rewards the most efficient
companies. The fishermen also have a stake in the long-term health of the
fishery, as it will dictate the value of their fishing rights when they
retire.

The new study is important because it shows that the benefits aren't just
hypothetical. At the 10 fisheries, there are fewer fatal accidents than
elsewhere and the fish populations are healthier. The fact that halibut has
returned to restaurant menus in the last decade is a direct result of these
cap-and-trade programs.

All of the climate bills in Congress revolve around a similar idea. The
government would cap greenhouse-gas emissions and issue tradable permits,
each giving power plants the right to pump out a set amount. The plants
that did the best job of reducing their emissions could then profit by
selling unused permits to inefficient plants. A similar system put in place
during George H. W. Bush's presidency reduced acid rain much more quickly
than economists had predicted.

The successes of the acid rain and fishing programs point to the third
principle: the solution should be clear and straightforward. It should
cover the entire economy, and it shouldn't have escape hatches that
undermine the market mechanisms. Mrs. Clinton, whatever her rhetorical
weaknesses, has signed onto a bill that passes this test.

But at least two of the current Senate bills fail it. The one proposed by
Dianne Feinstein, a California Democrat, covers only the electricity
business, among other problems. The one being prepared by Jeff Bingaman, a
New Mexico Democrat, sets a maximum price on the carbon permits, which
undermines their whole point. It's like asking people to invest in the
stock market and then forbidding them from making more than a 5 percent
return.

These three principles - acknowledge the costs; let the market work; and
keep the solution simple - won't cover everything. But they will go a long
way toward reducing carbon emissions here, in the country that produces
more of them than any other, and then letting us turn to another big
problem: persuading China and India to follow suit.