Cap and Trade: Hey, let’s increase innovation by weakening the market.
Michael Gerson wrote an op-ed piece in the Washington Post called Cap and Traitors. He agrees with the science behind man-made global warming and he supports the cap and trade bill the House just passed. However, he also agrees with me that it’s impossible for the government to regulate carbon emissions enough to make any difference in the climate.
Critics argue that carbon restrictions, even if fully implemented, would reduce global temperatures only by minor amounts, which is true. We are not going to regulate our way out of global climate disruption. The only eventual solution is technological — the ability to produce affordable, clean power on a large scale.
So why does he support government carbon regulations? Why, market incentives, of course.
But conservatives seem strangely intent on ignoring the power of markets to encourage such innovation. Right now, the emission of carbon is essentially cost-free. Putting a price on carbon would make the development of cleaner energy technologies more profitable. New technologies could be employed, not only by America, but also by China, India and the rest of the developing, polluting world. And it is an added (but not minor) benefit that American resources would no longer be transferred to Saudi princes, Russian autocrats and Venezuelan dictators.
Ahh… Innovation. Profits. The power of markets. Now he’s speaking the language of conservatives. But this sounds a lot like infecting a scientist with a deadly virus and saying “Now cure it.” Surely we can think of a better way to create market incentives than artificially infecting the market and saying “Now fix it.” I’ll throw out one idea just for kicks: a $10 billion reward for the first entity (company, individual, school, etc.) that creates a practical clean energy source capable of competing with oil without requiring subsidies or additional taxes to oil. I know I’ve been railing a lot against excessive government spending, but this would be far cheaper than cap and trade.
However, I doubt that’s even necessary. That assumes market incentives are already lacking, which they are not. What company wouldn’t stand to earn billions from a clean energy technology that could easily compete with oil? There are plenty of initiatives already under way without the government’s “help”. Certainly, there would be more if companies had more capital to spend on research and development.
The problem is that Mr. Gerson would create long-term profit incentives by hampering the economy’s ability to react to long-term incentives. Companies are a lot more reluctant to take long-term risks when they’re worried about their very survival in the short term. Cap and trade would only add to such short-term worries. I talked about this a few days ago here.
The irony is that by destroying economic behavior, we may never know what innovations we miss out on, and that includes energy technology. The first thing that companies cut in bad economies is research and development. If a silver bullet, such as controlled nuclear fusion, is to come along, it won’t come from a third-world country, nor will it come from us if we impoverish ourselves.
I keep reading about impressive science advances such as battery and capacitor technology that can store energy from wind turbines and solar panels, the ITER fusion project in France, ocean wave turbines, solar panels that can be painted on surfaces, and processes that can turn trash into ethanol, among others. I can’t help but wonder how efforts to develop and implement these technologies will be slowed down or even killed by our “market incentives”.
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