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December 1, 2008

The Devil and the Details
It's amazing what a little thing like a new President can do for certain policy debates. Suddenly, thought experiments on how to cut emissions by 95% in 20 years bubble up to the surface of the political blogosphere rather than collect unread on the edge. What's notable about Gar Lipow's lengthy prescription for a low-carbon economy is that it's long on emissions pricing and government regulation and short on conditional "first we need to invent a faster/cheaper/better xyz..." statements. Lipow focuses on the here and now. Note to Mr. Yglesias: Lipow's plan happens to involve huge cuts in emissions via energy efficiency in new and existing buildings.

In fact, one bit that caught my eye involves the introduction of per square foot emissions limits for buildings (as they now have in Britain) along with new entities called "efficiency utilities" that would pay for efficiency upgrades in order to bring an existing building in compliance with the limits. Owners/tenants would pay for these improvements via a monthly bill and, though they would be part of the building, the improvements' cost wouldn't require "recouping" by the owner in the form of rent hikes or higher a sales price. A particular unit would simply have a particular monthly cost for "efficiency" like it has a monthly cost for heating.

And like electric service, the "efficiency" bill can be stopped - if an apartment sits unrented, for example. Because both the utility as well as the bill itself could be subsidized in various ways it would, according to Lipow, remove a major stumbling block to making improvements in existing buildings. For the record, an efficiency utility could cover the costs associated with:
weather and duct sealing, roof, floor, window, duct, and pipe insulation... Leak repairs, faucet aerators, kick-pedal sink controls, and water-saving shower heads. Lighting, and large-scale water and electrical appliances... and replac[ing] existing space heaters and air conditioners with either solar equipment or ground source heat pumps.
Do that over a couple decades and you're looking at serious emissions savings.

It turns out that you really can just about solve our carbon problem with existing technology. Not that it's easy, but it is possible. That applies to alternative energy expansion, as well. There's been a lot of excitement recently about what's known as solar thermal (sometimes referred to as solar baseload) power. Solar thermal systems involve pointing a series of mirrors at a large tank of oil. The oil is superheated by the sun and is then used to make steam to generate electricity. The big knock on solar power generated with photovoltaic panels is that a passing cloud (not to mention the daily scourge known as nighttime) can cause dozens of megawatts of power to instantly disappear from the grid.

The "innovation" of solar thermal is that, unlike its photons, the sun's heat can be stored and used to make electricity during the evening (or in the case of a Spanish project in the works, all through the night). And it doesn't take some exotic and pricey space age polymer to store the heat. Try a block of concrete. Or you can use pig iron. The holdup on solar thermal isn't the systems themselves - it's building the grid to get the power where it needs to be. That's a very different problem than waiting for some technological holy grail.

The point is that for all the excitement over the just-over-the-horizon innovations, the boring unsexy stuff like regulatory structures and basic infrastructure improvements can do a lot of the heavy lifting. And Lipow is also right that, though emissions need to be regulated nationally, each industry should be able to come up with its own solution to the problem. Trying to play whack-a-mole with various industries will just result in the kind of calculated outrage we're seeing due to farmers' somewhat misplaced fear of an EPA-inflicted methane fee (aka "The Cow Tax"). If everyone has to contribute to the reductions, it becomes that much harder to resist doing your part.

Let me make one more point. Ezra Klein is concerned that once Congress gets involved, whatever we try to do with climate legislation will turn into a "corn-encrusted" subsidy regime. After all, Congress' answer to alternative energy was ethanol. As a result, "79 cents of every dollar the federal government invests in renewable energy goes towards corn ethanol, a heavily subsidized boondoggle that is little better than gasoline." The problem, says Klein, is that:
The incentives are too poorly aligned. We know that a certain segment of powerful senators and representatives will use their jurisdiction to force the leadership to buy their vote. And after they do it, the next most powerful group of legislators will do the same, as they need to get reelected to, and it's not as if there's a pristine bill to protect any longer. And then will come the next most powerful group. And so on. The public choice critique is actually quite convincing here.
But then in a post on health care, Klein talks up the potential of Max Baucus's health plan, which involves an Independent Health Coverage Council charged with actually making the hard decisions about what to cover and how much to pay for health care. As he puts it:
One of the Baucus plan's embedded assumptions is that Congress should not define too much. In this, it's taking a page from the successful passage of the Massachusetts reforms, which offloaded a series of thorny questions -- including the definition of "affordability" and the specific premium subsidies [onto a similar entity].
Meanwhile, Obama has already committed to a National Infrastructure Bank in which an expert panel determines how to spend infrastructure dollars rather than allow the easily corrupted federal earmark process to give us bridges, tunnels, roads and rail-lines to nowheresville.

It's entirely feasible to do the same thing with climate change legislation. Congress shouldn't be picking winners in technology or alternative energy - but they can create the entities or the conditions to allow winners to be picked. After all, they've done it before. Silicon Valley, created almost whole cloth by the Defense Department, may not be a perfect model, but certainly points to ways in which government financing can lead to the development of revolutionary technologies, products and services. Clearly, no Defense Department procurement officer simply ordered up the microprocessor, much less the Internet. But DoD dollars gave us both. The fact is that the public-private partnership that is the Valley has delivered decade after decade of innovations.

So it's true - Congress on its own might not be able to successfully craft something so complicated as a new low-carbon economy. The good news is, they don't have to.

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