“Over the 2000–10 period, the U.S.-based oil and natural gas industry invested $71 billion in technologies that reduce greenhouse gas emissions, far more than the federal government ($43 billion) and almost as much as the rest of private industry combined ($74 billion).”
“The United States has failed to create a comprehensive energy policy that provides robust and consistent support for innovation,” the familiar complaint goes.
Although the Recovery and Reinvestment Act of 2009 stimulated public investments in energy innovation, many of these programs and incentives have since expired or concluded, leaving the energy innovation ecosystem underfunded and skewed towards supporting deployment incentives over technology R&D, demonstration, and manufacturing.
Such comes from Breaking Down Federal Investments in Clean Energy (March 2013), published in Energy Innovation Tracker, a website devoted to providing data on U.S. energy-innovation spending. Authors Megan Nicholson and Matthew Stepp bemoan the state of innovation funding in the U.S., defined as federal spending on greenhouse gas (GHG) emission reductions.
Funded by The Nathan Cummings Foundation, this project’s taxonomy of “innovation investments” aims wrong and misses even that target.
My forty years in this field has taught me that:
- There are many players in this innovation game–some more active than even the Federal Government;
- Government GHG investment in the name of “market failure” is prone to “government failure.” And it is more prone to crony
capitalismand stellar failures like Solyndra;- Innovation means many things to many people, and innovation can often result from attempts to deal with something unrelated to the area the innovation actually occurs in. Restated, many self-interested, non-governmental investments unintentionally reduce GHG emission ‘as if lead by an invisible hand’;
- Having a centrally controlled innovation plan is more likely than not to impede, rather than spur, innovation.
According to the Tracker:
America needs “cheap, new, clean energy technologies”
America’s needs to “to drastically cut carbon emissions as quickly as possible.”
Clean energy technologies are “wind, solar, biomass, etc.”
While these may be goals for some, others would suggest that more affordable and reliable energy, or higher productivity for wealth creation to lift the poor out of poverty, or any number of other goals, are just as important. As the Nathan Cummings Foundation is committed to democratic values and social justice, including fairness, diversity, and community, they should recognize the fallacy of division inherent in asserting that a diverse population with diverse values “need” certain technologies that focus on a limited set of characteristics and then label those and only those as ‘innovative.’ How accepting of diversity is that?
Private Sector Dwarfs Feds’ Investment
Over the 2000–10 period, the U.S.-based oil and natural gas industry invested $71 billion in technologies that reduce greenhouse gas emissions, far more than the federal government ($43 billion) and almost as much as the rest of private industry combined($74 billion). [disclaimer; I wrote that study]
The point is that private sector investments are at least as crucial to innovation as are government investments. They are arguably much more efficient because they are far more consumer-driven.
It should be noted that not all of those investments, for any of the investor types, were necessarily primarily aimed at reducing greenhouse gas emissions.
They may have been made for other reasons, and greenhouse gas emission reductions were an ancillary outcome. The point is, evaluating the ‘energy innovation ecosystem’ based on the ex-ante ‘comprehensiveness’ of a program, ignores the basic nature of innovation.
Innovation = Improvement Not Intervention
As I wrote back in April, 2012, California, the poster child for government intervention and “comprehensive energy policy,” shows just how unnecessary and counterproductive such central plans can be.
California’s “comprehensive energy policy” forces utility customers to pay more for certain renewable energy as a mandated portion of the overall electricity mix, as well as fund ‘innovation’ research, development and demonstration projects. However, most of the required renewable energy is made up of wind and solar, intermittent technologies that forces inefficient operation of the grid.
This increases net emissions as balancing plants are forced into inefficient operation. Further, and of special note to Nathan Cummings Foundation, such intervention under AB32, under the guise of ‘comprehensive planning,’ is perhaps one of the most regressive program ever conceived.
Instead of Regulation ….
As I wrote in the LA Sentinel back in July, 2008, while most California families will find it difficult to absorb thousands of dollars in increased energy costs due to California’s climate law, minority and disadvantaged communities will bear the brunt of the hardship because the poorest households spend a much larger percentage of their income on energy costs.
Perversely, AB32’s drive —California’s version of ‘comprehensive and innovative’ — to reduce greenhouse gasses is also likely to slow relocation or upgrades to existing facilities that pollute areas populated by the minority and disadvantaged community.
Nationally, technology improvement has already occurred without cap-and-trade, without costly renewable standards, and, frankly, without many proposed government interventions, including a “comprehensive energy strategy focused innovation ecosphere.”
We’re doing just fine with spontaneous order–as has already been demonstrated in the 17% improvement in the national greenhouse gas intensity of our economy just over the past 10 years. In 2008, goods and services produced in the U.S. accounted for 30% of all of the world’s production as measured by gross domestic product. In the same year, the U.S. share of global greenhouse gas emissions was about 19%. We emit more because we do more, but we do it more efficiently.
Conclusion
We don’t need a comprehensive energy policy to drive innovation. We have a comprehensive policy that’s resulting in plenty of innovation. That policy is called the free market, and although it’s under attack, it still results in innovation that is second to none.
This today in the NYT: “It wasn’t so much a policy shift that brought [U.S.] carbon emissions down [nearly 13% since 2007]. It was irresistible market forces.”
– James Hamilton (UC-San Diego), quoted in Eduardo Porter, “A Model for Reducing Emissions,” New York Times, March 20, 2013.
Rob, the piece in the NY Times rates a rebuttal of sorts.
Correctly noting that private investments (plus the recession) led the emissions decrease, the author jumps illogically to a carbon tax. “Putting a price on emissions of CO2 that reflects the burden they impose on the environment and the threat excessive amounts pose to…” is only half-correct and practically impossible.
First, putting a price on carbon should be net of benefits and burdens, not just burdens (at least the author did not call for a cost of control based scheme.) Second, attempting to calculate benefits and burdens with some sort of damage function (for burdens) is rife with disparate value judgements (a-scientific) as well as huge uncertainties. Such a scheme would more likely be wrong than right, and consequently send THE WRONG price signal, and thus do more harm than good.
Sometimes it is best to leave things alone to their natural…and well-trending…outcome
We have a “Problem of the Commons” when it comes to CO2 emissions.
Right now, it is in everybody’s economic interest to burn fossil fuels and emit CO2 into the atmosphere. Fossil fuels will likely be cheaper than renewable fuels for a long-time into the future (unless they are regulated or taxed.) While CO2 is good for the environment at its current concentrations, the problem is that high CO2 concentrations are very bad for the planet (on average) when concentrations reach above 1000 ppm. (We can debate the net negatives vs. positives between 400 ppm and 1000 ppm, but above 1000 ppm, there’s virtually only negatives…and really bad negative.) The problem is that CO2 is (a) a greenhouse gas, (b) an acid gas, and (c) a toxic gas (at concentrations above 1000 ppm its starts having human health effects.) There are plenty of fossil fuels under the ground for us to release enough CO2 to reach concentrations above 1000 ppm. (Note that combusting the fossil fuels and sequestrating the CO2 underground is fine provided that the CO2 is stored securely.)
Global CO2 concentrations (which is what matters) have not been decreasing; they are increasing each year by roughly 2 ppm per year. I don’t want my great-grandchildren and their children living on a planet in which they are having trouble breathing or getting headaches because of the high concentration of CO2 in the atmosphere.
It seems to me that the proper libertarian response to this “Problem of the Common” is to address the problem head-on with a tax or a cap-and-trade system directly on CO2 emissions. (Note that my argument here has nothing to do with our current budget deficit.) Once there is a global tax or cap on CO2 emissions, then we can make an argument for reducing gov’t spending (waste) on expensive energy.
It seems to me that arguing for “let the market do whatever” is a recipe for creating a planet in which our future generations are living on a warmer world with lower pH oceans, high sea levels, and suffering health effects from high CO2 concentrations.
Libertarianism doesn’t mean “do nothing about problems, and hope they go away on their own.” Libertarianism means we should chose the option that allows individuals the most freedom. There is nothing anti-libertarian about taxing pollution because pollution is an attack on the liberty of those who suffer the consequences without any of the benefits.
By promoting an attitude of “do nothing,” this website is in my opinion actually hurting the libertarian (i.e. freedom) cause because most of the authors who write on the website seem to think that there is no such things as CO2 pollution. This is damaging the libertarian cause because large segments of the population are knowledgeable on the health effects of CO2 emissions and they realized that “do nothing” is not an option for a “Problem of the Commons.”
Assuming, for the sake of argument, that it is desirable to reduce carbon emissions, a carbon tax merely adds costs on top of the investments which would be required to actually achieve the emissions reductions. Of course, from the politicians perspective, it also adds revenue, which could be redistributed to favored groups.
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