The Attack on Climate Policy Begins

laptop The Attack on Climate Policy BeginsAs expected, the counter offensive to climate change policy is well underway. The coal industry is gearing up its lobbying effort and even Sarah Palin is calling cap and trade “cap and tax”. Her view is that regulating greenhouse gasses will cost rather than create jobs. There will be much more of this, and the 24-7 news media and the blogosphere will attempt to turn this into a conflict that can attract attention and sell advertising.

However, the fact remains that the green economy is creating jobs. Just as America has transformed itself from an industrial economy to a higher-end information- and service-oriented economy, we are now at the start of another transformation—to a green economy. In June the Pew Foundation released a study on this transformation, which concluded that:

The number of jobs in America’s emerging clean energy economy grew nearly two and a half times faster than overall jobs between 1998 and 2007…Pew developed a clear, data-driven definition of the clean energy economy and conducted the first-ever hard count across all 50 states of the actual jobs, companies and venture capital investments that supply the growing market demand for environmentally friendly products and services.

This does not mean that the debate will be settled by these new facts, but hopefully this information will have some influence on matters. Senator John Kerry’s response to Governor Palin’s op-ed referred to the job creating capacity of a green energy economy. While it is never a good idea to predict the future, I think that a new era of climate policy is about to begin. The public understands the reality of the issue and has begun to appreciate the vulnerability of our economy to the current energy supply system.

As I have argued before, if handled carefully, climate and energy policy can help modernize our economy’s technological base and ultimately increase our standard of living. Our goal should be to ensure that the percentage of our Gross Domestic Product (G.D.P.) devoted to energy expenditure is as low as possible. According to the United States Energy Information Agency of the Department of Energy, there has been a fair amount of volatility in this indicator over the past forty years.  The first year that the federal government reported our expenditures on energy as a percent of G.D.P. was in 1970. That year we spent eight percent of the G.D.P. on energy. This grew to 11.6 percent in 1979 and peaked at 13.7 percent in 1981. In 1999 it dropped to an all time low of six percent, due to a fast growing economy and low fuel prices. However, in the 21st century, this percentage has tended to grow. It jumped to seven percent in 2000 and to 8.8 percent in 2006, the last year for which we have government data.

With our shrinking economy and increased fuel prices the amount of our nation’s wealth devoted to energy may be growing once again. The question we need to address in the long run, is how do we reduce the price and also the unpredictability of energy costs? Fossil fuels are subject to a wide variety of unpredictable cost factors—ranging from increased use of automobiles in China to Middle East politics. In the long run, however, the cost of fossil fuels is bound to grow. While the Earth retains huge quantities of fossil fuels, we are not making any more of the stuff. Each day that we burn fossil fuels less of them remain. Fossil fuels will continue to get more difficult and more expensive to extract, and the environmental impact of extraction will not let up. While fuel extraction can be made more cost-effective and environmentally friendly through the use of technology, the fundamentals remain: fossil fuels will become more expensive over the next century. In contrast, look at the cost of computing. According to Moore’s Law, a truism first popularized by Gordon Moore, one of the founders of Intel, the processing power of microchips doubles every 18 months and the cost of computing drops every year. Anyone who buys a laptop knows that they keep getting more powerful and less expensive. Solar technology has the potential for the same type of cost reductions over time. The basic fuel of solar power, the sun, will always cost the same to tap into—zero. Solar cells and batteries will only get less expensive as a mass market develops and as technology improves.

What is most impressive about the way Congress is approaching climate change policy is that they are linking it to the use of energy. The Waxman-Markey energy and climate bill recently passed by the House of Representatives not only sets a regulatory cap on carbon emissions, it also encourages energy efficiency and renewable energy to ensure that we can actually achieve these caps without shutting down the economy. While the start up of the green energy economy will require investment, the pay-off potential is enormous. In the case of the emerging climate policy, the anti-tax mantra of the Republican right is in reality an anti-investment policy. It is unfortunate that they are “rounding up the usual suspects,” but I continue to hope that the approach taken by Waxman-Markey emerges as the national consensus.