Shellenberger: 'This is the end of cap-and-trade for a long time'
Michael Shellenberger, co-founder of the Breakthrough Institute and one half of the heterodox environmental duo of Nordhaus and Shellenberger, has been predicting the political failure of cap-and-trade for some time now. In the past day or so, he's been proved right. Shellenberger has long believed that the political realities of the issue demand, at least in the short term, a focus on innovation rather than regulation and pricing. I spoke to him this afternoon about what went wrong, and what comes next.
Ezra Klein: It looks like a carbon-pricing bill is pretty much dead. What happened?
Michael Shellenberger: I think the attacks from the greens on the White House and the White House’s response all miss the point. There was no amount of speechifying or arm twisting Obama could have done that would’ve changed that vote significantly. And vice versa, the green groups hired some of the best advertisers and lobbyists and spent $100 million. They didn’t do a bad job. They had arguably the best mobilization environmental groups have ever done in the history of the environmental movement. It was the proposal itself that was impossible for this Congress, and any Congress in recent memory, to pass.
EK: Is there any near-term hope for the politics to change? Any reason to think that a future Congress will view this differently?
MS: I think that this is the end of cap-and-trade for a long time. It’s the fourth time it’s failed since 2003. We did a vote count in 2008, where we interviewed green lobbyists about their vote count. We got to about 35. When [Harry] Reid said they couldn’t get to 60, he was putting the best face on it. So I don’t think cap-and-trade is coming back for the next decade.
EK: So then, what next?
MS: I think that some time needs to pass for Democrats and liberals and greens to assess what happened and start coming to terms with the political, economic and technological realities that are the driving force behind the serial political failures of cap-and-trade. Our view is you need a price on carbon, but that it’s going to start very low. No one will impose or sustain a high price on carbon as long as the gap between fossil fuels and clean energy remains so wide. So we need to be moving to a framework where at the center is technological innovation to close the gap between fossil fuels and clean energy. That might need to be funded with a small tax on carbon. But the center is the technological innovation.
EK: And to distinguish that from cap-and-trade, the idea here isn’t really that you’re pricing carbon, but that you’re funding research into alternatives.
MS: In the early years, that’s its primary purpose. If the price is set up right and it rises at a predictable rate, that does send a forward price signal which could start to affect investment decisions. But we’re suggesting, at least at the start, a much lower carbon price that would have a much lower cost to the economy. A cost of $5 a ton is $30 billion a year. That’s far below estimates of cap-and-trade. What conservatives and Republicans might find appealing is that this would be focused on technology innovation. If you have a broad portfolio able to invest in everything from solar to nuclear, you should be able to appeal to some of them.
EK: And why put any faith in this? Why should we believe it’ll work?
MS: This isn’t something we think can succeed right away. Cap-and-trade had 15 years behind it. This has many fewer people behind it, and has had much less time in the argument. But there was no certainty cap-and-trade could reduce emissions. Every proposal before Congress had a thousand loopholes and offsets and safety valves that undermined the cap. Our view is that a technology-centered framework doesn’t guarantee anything, but it does get us closer to actually achieving the technology innovation required to make low-carbon technologies much cheaper.
And that’s not just renewables, but also things like second-generation nuclear reactors. We’re not going to do anything of consequence on reducing emissions without closing the price and technology gap between clean energy and fossil fuels, and we’re not going to make serious headway on technology innovation unless we fund innovation directly, in the same way we did around personal computers, the Internet, pharmaceuticals and agriculture. The history of tech innovation in the U.S. is really a history of military procurement, R&D funding, science and engineering education, and demonstration projects.
EK: And how would this work, in practice? Won’t it just end up subsidizing a lot of waste?
MS: We get asked how this is any different than just spending on subsidies. Our view is that indefinite subsidies are not the right way to go. That’s why I think military procurement is the way to go. It would mean we rationalize the whole innovation framework around price reductions.
Defense spends $80 billion a year on R&D. Is some of it wasted? Of course. Thomas Watson said, “If you want success, increase your failure rate.” Venture capitalists are excited if one in 10 of their investments succeeds. There will be failure, and some amount of that failure is part of the innovation. But at the pace we’re going now, we’re not going to get the innovation we need. We’re missing a demanding customer, which is what the Pentagon has been. You can point to waste there, but also amazing innovations in communications and rocketry. We look at Google and Apple and think the federal government had nothing to do with them, but without federal investment in computers there would be no Apple and without DARPA there would be no Google.
July 23, 2010; 5:00 PM ET
Categories: Climate Change , Interviews
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