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Friday, June 18, 2010

feeding the troll

I'd just like to offer a quick response to Charles Krauthammer, who is pictured above winning the award for world's biggest asshole (I assume):

Obama is dreamer in chief: He wants to take us to this green future "even if we're unsure exactly what that looks like. Even if we don't yet precisely know how we're going to get there." Here's the offer: Tax carbon, spend trillions and put government in control of the energy economy -- and he will take you he knows not where, by way of a road he knows not which.

That's why Tuesday's speech was received with such consternation. It was so untethered from reality. The gulf is gushing, and the president is talking mystery roads to unknown destinations. That passes for vision, and vision is Obama's thing. It sure beats cleaning up beaches.

First of all, Krauthammer is trying to suggest that by looking at the bigger picture Obama is not doing everything possible to stop the leak and clean up the mess. He knows that's not true, but he's a political hack who sees a good opportunity to score cheap points. So perhaps we should just ignore him. But I just have to respond to his larger point because it's so wrongheaded...

The reason Obama says we don't know exactly what our energy future will look like is because neither he nor the Federal Gov't will be the one creating it. The solutions will come from the private sector, once it's in their interest to do so. By taxing carbon and putting some of the money into subsidies for a variety of clean energies, and offsetting the rest with tax cuts elsewhere (Al Gore proposed a revenue neutral replacement of the payroll tax with a carbon tax) we can make it in everyone's interest to find better energy sources because it will be cheaper to do so. It's the opposite of putting "government in control of the energy economy."

Ironically in order to gain support of Republicans the Energy bill currently being worked on in the Senate is moving away from these market based solutions toward top down government regulation, as David Leonhardt explains:

Unfortunately, the great economic strength of market systems like cap and trade also happens to be their political weakness. They set prices and allow people to react. In the process, market systems acknowledge that reducing pollution may actually cost a little bit of money.

Politicians don’t like to admit this, because voters don’t like it. Accepting higher costs is especially hard when the economy is weak. So Congressional Democrats have been repackaging their energy bills to make them look less and less market-oriented. SenatorJohn McCain, who supported a permit system for carbon as the Republican presidential nominee, no longer does. Senator Lindsey Graham, the South Carolina Republican, has reversed his position as well.

What does Mr. Graham now favor? A series of command-and-control regulations. He has introduced a bill with Senator Richard Lugar, an Indiana Republican, that would mandate specific standards for cars, trucks, homes and offices. It would also give the energy secretary the power to award loans to companies he thought could do a good job of setting up programs to retrofit buildings. State officials would do the same for factories. The bill, in short, puts more faith in government than the market.

This approach can certainly reduce the carbon emissions causing climate change. Fuel economy rules have cut per-mile gasoline use by 40 percent since 1975. As a result, vehicles have made more progress on energy efficiency than office buildings, houses and apartments. That’s one reason a cap-and-trade system for power plants — which provide energy to offices and homes — has such potential to reduce carbon emissions.

The Lugar-Graham bill focuses on offices and homes, too, and would make a difference. But it wouldn’t make as much of a difference, and it also has other drawbacks.

In a market system, businesses and consumers have a clear incentive to reduce their carbon use, and they can choose the cheapest way to do so. Some would decide to retrofit current buildings and homes to make them more energy-efficient. Some would buy new, more efficient machinery or appliances. Some would switch to alternative energy and, in the process, create a much bigger market for it.

“Instead of leaving it up to the government to identify the solution and tell people what to do, you are leaving that decision to the people who know best,” says Nathaniel Keohane of the Environmental Defense Fund. “A bureaucrat would never have enough information to do as good a job.”

Under a command-and-control system, businesses and consumers have to focus not just on carbon use but also on the details of the government’s rules: the intricacies of vehicle and building standards, the types of appliances that qualify for subsidies, the fine print of the Energy Department’s loan applications. Each bit of compliance brings costs.

It’s just that those costs are hidden in a thicket of bureaucracy. The fuel economy rules, for example, have raised the price of minivans, pickup trucks and S.U.V.’s by limiting how many can be sold. But the price increase has not been obvious, as it would be with a gas tax. We can pretend prices are no higher than they otherwise would have been.

In some ways, it is not fair to pick on Mr. Lugar, Mr. Graham and the other senators, both Democratic and Republican, who support the command-and-control approach. It is far better than nothing. The ideal energy policy, in fact, would include some ironclad rules and regulations, because people do not always respond rationally to prices. Consultants at McKinsey & Company argue that many families and businesses could already save money by taking simple energy-saving steps, yet they don’t do so. Building standards could overcome their inertia.

But relying only on rules, regulations, standards, loan programs and research financing seems inadequate to the task we’re facing. The last 12 months have been the warmest 12-month period on record, NASA says. Nine of the 10 warmest calendar years occurred in the last decade.

The market is the most powerful tool available for dealing with the costs and risks of a hotter planet. Given how loudly politicians like to proclaim their belief in the market, it sure would be nice if they could figure out a way to make it part of the solution.

But Krauthammer helpfully tells us that all these efforts towards a green energy future are "untethered from reality." When our great grandchildren wonder why the hell we didn't do anything to avoid environmental catastrophe they can go back and read Krauthammer's columns.

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