Thursday, July 9, 2009

The American Clean Energy and Security Act

...also known as the energy bill, also known as Waxman-Markey, also known as cap-and-trade, also known as the massive energy tax that will double your electricity bill and murder your pets. Is it really as awesome and/or terrible as they say?


The bill, which was passed by the House a few weeks ago and is now set to go before the Senate, mainly creates a cap-and-trade system around carbon emissions, and also sets targets for large electricity producers to transition their generation capacity to renewable sources. In a cap and trade system, the government enforces a strict cap on emissions, and then allows businesses which go over the cap to trade permits for excess emissions in an open market. It's a better solution, in my opinion, than just enforcing a cap on emissions.

In economic terms, greenhouse gas emissions are an "externality" - they affect participants in the market who aren't directly involved in the transaction. Free markets are usually pretty bad at handling externalities; the "tragedy of the commons" is a common example. A free market will tend to exploit a shared resource to the maximum degree possible. A cap and trade is a market-based solution to this. By introducing the costs of certain externalities to the market directly, you can come to a more efficient solution than you would through simple regulation.

You'd think conservatives would be thrilled about this, right? Yet somehow, instead of talk of how much better this is than straight-up regulation, all I hear is rhetoric about how the bill is a massive tax that will destroy the economy. First, it seems incredibly sloppy to label it a "tax" just because money will change hands from the private sector to the government when the allowances are auctioned. (It may be that there are other provisions of the bill which do impose taxes, but my understanding is that the auction will be the majority of what the government makes from the bill.)

Second, the bill isn't actually all that terrible - Kucinich even voted against it because it didn't go far enough, in his opinion. Eighty-five percent of the allowances are going to be simply given away to various industries initially; only the remaining 15% will actually be sold in the auction. As for the renewable electricity requirements, 20% of electricity will have to come from renewable sources, but not until 2020 - electric companies have ten years to ramp up to that level of production.

Peak Oil

People are remarkable resistant to the news that petroleum won't be this cheap for much longer (and we have no idea how much longer). The facts are, though, that there's a finite amount of oil in the ground, we've used up a good bit of it, and our consumption is increasing along an exponential curve. It's possible that prices will rise gradually, and we'll have time to slowly wean ourselves off of oil. It's also possible, on the other hand, that a few high-profile events will coincide (several major oilfields drying up at once?), and we'll have a sharp and long-lasting increase in the price of oil. As our country is now, such an event would be the death of us.

The hardest part of rolling out a new technology is the first part, since initial R&D can be really, really, expensive. What ACESA gives us is an incentive to get over that first bump before events force us to. But more importantly than that, it puts us in a really good position when peak oil finally hits worldwide. When it happens, there will be countries that were completely unprepared and that will flounder. I don't want to be living in one of those countries! I want to be living in a country where they had the foresight to put in the R&D money early, so that when the disaster hits, they can sell that technology and expertise to the rest of the world. That's not starry-eyed environmentalism - that's just good business sense. ACESA will cost us money now, but we can come out ahead in the long run by getting a head start on technology that everybody will, at some point, need.

Our environment

I would be sad if all the polar bears died. I might even shed a tear. But in my mind, the polar bears are not the important thing when it comes to the environment. The important thing is maintaining an environment which is friendly to human life. This is another thing that we're all too willing to forget; there is no guarantee that the Earth's biosphere will always be as hospitable as it is today. Now that we have the power to affect the climate on a global level, this is something we really need to actively keep an eye on.

The biosphere is a big, interconnected, and incredibly complex system. Despite the best efforts of ecologists, there aren't really clear answers to a lot of important questions. For instance: "If the amount of carbon dioxide in the atmosphere were to increase by this amount, with the associated changes in temperature, ocean acidity, etc, etc, how would it affect our staple food crops?" In the absence of such information, the best we can do is try to maintain the current state of the environment until our understanding improves.

That's why this bill is important. It's not a solution; it's a first step toward a stop-gap measure, but it's one that I believe is absolutely necessary, both for America and (more tenuously) the human race.


Frank Church said...

Waxman-Markey! I wonder what the Senate will do to it - the Senate is where progressive legislation goes to die.

Peak oil - ironically, I was reading about that right before this. It looks like oil prices are rising again, and in a recession when many people are taking pay cuts. I suppose if prices rise high enough, we'll have to use the tar sands of Alberta. (Well, they're already being mined anyway.)

Environment - what I'm worried about is the feedback loops. In fact, it looks like they are being initiated already in the Arctic ice cap, where the ice is now more seasonal than permanent, thinner rather than thicker. What effect will this have? I guess we'll find out.

I'm not sure a better bill could have passed the House - given the closeness of the vote, probably not. And one option that definitely could not pass the House is the other option I hear about, the carbon tax. (Why? We really hate new taxes.) The only presidential candidate to support that was Chris Dodd. The Economist also supports the carbon tax. Some European countries have imposed them.

This kind of leads me to mention the other blog post I've read on global warming and Waxman-Markey recently. Here it is. Since I'm pretty convinced we're not going to get a carbon tax passed by the House let alone the Senate, I'm reminded of that XKCD mouseover text recently: "All in all, the future will be okay! Except climate; we fucked that one up."

Æther said...

I seem to remember reading somewhere that whatever carbon regulation system some Europeans are using is a mess. I thought it was the cap-and-trade thing, but I'm not certain. Maybe it was a carbon tax. At any rate, a similar program worked in the U.S. with sulfur emissions already, so it will probably be fine.

What worries me about the bill is the requirement of the use of certain renewable sources. Most of the sources listed are not in fact effective at maintaining a stable electric grid, and the others are not going to exist in sufficient quantities to make up the difference. For example, wind generators trip almost weekly and require constant supervision to just keep one turbine running. If the grid is already operating at near capacity, which is becoming more and more the case, then the whole thing will go down on a windless day.

I only see our demand on the grid going up with plug in hybrids and electric cars that are coming to market. I nuclear generation isn't considered renewable, but at least it's stable and doesn't emit carbon. Why isn't that included?