Jim Manzi: Four Ideas For A New Energy Policy

  • Date: 05/06/14
  • Jim Manzi, National Review

The focus of government action under my proposed approach is to help create greater capabilities, not to direct resources.

In 2009, Congress came close to enacting an economy-wide plan to ration carbon via a cap-and-trade system for the stated purpose of reducing climate change. It would have been a very bad deal for America, with costs that were at least ten times greater than expected economic benefits. Fortunately, good sense prevailed, and the Waxman-Markey proposal was defeated, though it was a close-run thing.

The Obama administration hasn’t given up on the dream, and is now proposing a more narrowly targeted version of the same basic carbon-rationing concept. On Monday, the EPA proposed new regulations to force a reduction in CO2 emissions from coal-fired power plants by 30 percent from 2005 levels. Because this applies only to a single economic sector, and therefore does not allow markets to seek out the lowest-cost opportunities for emissions reductions anywhere they could be found in the economy, we should expect the cost/benefit ratio to be even worse than under Waxman-Markey.

The U.S. Chamber of Commerce commissioned a study to estimate the costs of a policy similar to the current proposal. (Even fairly rabid partisans agree that the study did not put a thumb on the scale.) Sure enough, the study estimated that the current proposal would impose costs of $143 per ton of CO2 avoided, versus $82 under the Waxman-Markey plan (which remember had costs at least 10 times greater than benefits). In other words, this plan has economics about 75 percent worse than a plan that was an awful deal for American citizens. Without regard to party or ideology, I believe that the evidence is clear that this current EPA proposal should be opposed as contrary to the public interest.

There is no technical tweak to this approach that will make it work. The liberal consensus strategy is broken, and it cannot be fixed. We need to rethink this problem from the beginning.

In the summer of 2007, I wrote a cover article for National Review in which I argued that we should avoid myopia in focusing on climate change as a unique existential threat. Instead, we should treat it as one of many manageable risks that we face, and focus our approach on technology and increasing our general capacity for addressing multiple challenges. In very short form, the strategy I proposed was: technology, not taxes.

Suppose I told you that I believed that America could within a decade develop a new green-energy technology that could lead us to have the fastest rate of reduction in CO2 emissions of any major country in the world, and permanently reduce absolute emissions such that we never again emitted what we did in the 2005 baseline year? And further, instead of this requiring us to trade-off emissions reductions against the costs of lower economic growth, that this technology wouldincrease economic growth, and add jobs, because of greater productivity? And it was able to radically reduce our reliance on overseas sources of energy so much that North America could be practically self-sufficient for energy? And it was a proprietary American technology that would provide competitive advantage to our manufacturing industries, and would itself become a significant source of exports?

This sounds like a fairy tale. But in fact, this is precisely what has happened in the seven years since I wrote that article. America has created a technology-driven energy revolution, in a manner that has been orthogonal to the whole policy debate in Washington. It is the classic entrepreneurial response to the question “Do you want A or B?”  Invent C.

It was not done through some Ayn Randish Private Sector Good, Government Bad morality tale. But the story of how this happened (which I reviewed in National Affairs this spring) should make clear that the role of the government in this area should be very different than what the Obama administration and its allies believe.

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