Are you worried about climate change? Do you want aggressive public-policy action to stop it? From Tyler Cowen, here's the most important thing you need to understand:
The problem isn't just coming up with "something better." Think of today's fossil fuels as a stock in the ground. The problem is coming up with something "better than the lower and falling prices for the fossil fuel stock once some countries start going green." That's really tough, because it means competing against a lower fossil fuel price than what we see today. What will Africa choose?
This is the fundamental problem, and yet it seems to be mostly overlooked by climate-change activists, whose overwhelming focus seems to be on laws to restrict usage in the rich world. If you mention China and India, they point to Chinese talking points about greener energy while ignoring the incredible pace at which China is constructing dirty coal plants.
Here's the problem with focusing on rich-world conservation: All the oil and coal will still be in the ground. Once we restrict rich-world usage of oil and coal, what happens to those stocks? The price falls. And what happens after the price falls? People in the rest of the world start buying, and burning, more of it.
Now, this won't be one-for-one -- there are some stocks of fossil fuels that are not economical to exploit at lower prices. On the other hand, power usage in the developing world is, on average, dirtier and less efficient than it is in the rich world. You get more pollution, and less output, from burning a lump of coal or a gallon of petroleum products. So this is not an unalloyed gain.
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Now, maybe a conservation-focused policy will help jump-start green technology. But as Jim Manzi, one of my favorite writers, has pointed out, Europe has had really gnarly gas taxes for almost 40 years. This has led to smaller cars, but it has not 1) prevented people from buying and driving cars or 2) generated a viable alternative to the internal combustion engine. Likewise their appliances and other energy-consuming items: They are smaller, but they are neither absent nor notably different from American ones.
The best argument you can make for conservation is probably that it buys us some time. But how much time? The main constraint on oil right now is the speed at which it can be pumped out of the ground, not the demand.
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Our best shot is, as I have written before, making renewable technology so cheap and efficient that China and India won't even bother building coal plants. But there are some steep hurdles. One is price: Solar prices have been dropping rapidly, but they've been doing so in the context of a Chinese drive to gain market share with massive subsidies, so it's not clear to me whether this drop will continue.
Another problem is reliability: Solar and wind are more variable than coal or natural gas, so they require more backup power. One person installing solar panels doesn't need to think about this problem; when the solar panels are not funneling enough juice down the wires, you just tap the grid. As more and more people switch to solar panels, you start having to add extra panels in order to guarantee that you'll always have a certain amount of power. That means that solar and wind may follow a sort of U curve for cost -- cheap when they're a small part of the overall power mix, more expensive as they replace more reliable forms of power. Hydro doesn't have this problem, but until we figure out a way to exploit tidal energy, we're pretty much out of new sources of hydropower.
That means that we need one of a few things to really control greenhouse gases:
- Much, much, much cheaper solar and wind (so that it's cost-effective to install a lot more than you'll usually use);
- Cost-effective power storage (so that you can save some of that peak power for later);
- Cost-effective tidal power; or
- A way to efficiently sequester carbon from power plants, steel mills, cement plants and so forth.
How do we get these things? I support a revenue-neutral carbon tax, but this is probably not going to be the lead policy intervention. The most important thing is probably hog-wild spending on research, followed by subsidies for renewables. The aforementioned carbon tax may help these processes along, but by itself, it will not come anywhere near being enough.
But it's worth noting that research and development might not be enough, either. All of this supposes that there is a technological solution to the problem, and it merely awaits sufficient effort to discover it. I certainly hope that this is true! But as with the problem of antibiotic resistance, I desperately fear that there isn't a technological solution that will allow us to live 21st-century lives on 18th-century levels of fossil-fuel consumption. Because one thing I'm pretty sure of is that there is no political solution that will persuade the world to ditch fossil fuels anyway.
This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.
To be clear, I believe that China is serious about cleaning up its environment. But I read its actions as focused on particulate emissions in big cities, and I so far see zero willingness to enact any rules that will slow the pace of economic growth -- as restricting fossil-fuel usage inarguably would.
Except for the clothes dryers, which in my experience are worse than useless: They leave the clothes dry but so wrinkled that it's actually worse than just draping the clothes over your bathtub to dry. Europeans inexplicably insist that this is not the case, while also telling you that they mostly hang their clothes up to dry on racks and offering Olympic-caliber ironing tips.
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