This article is from the November/December 2010 issue of Dollars & Sense: Real World Economics, available at http://www.dollarsandsense.org
This article is from the November/December 2010 issue of Dollars & Sense magazine.
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The Will to PowerA review of Power Hungry by Robert Bryce (New York: PublicAffairs, 2010) and Conquering Carbon by Felicia Jackson (London: New Holland Publishers, 2009).
As the 2007 Stern Review and many other studies make clear, few issues today are more pressing than greenhouse emissions and climate change. The Northern Hemisphere just suffered its hottest summer on record while BP decimated the Gulf of Mexico in pursuit of oil.
The two books under review here take very different approaches to this problem. One argues for natural gas and nuclear energy to support America’s appetite for power, the other for limiting energy consumption and carbon emissions using pollution permits.
Power Hungry is a frustrating book. Its tone constantly shifts from scholarly to glib. Bryce also loves guilt by association. T. Boone Pickens is vilified for financing the 2004 Swift Boat ads against John Kerry; as such, his plan for generating power through wind must be defective. Similar problems plague the main argument of the book. Bryce raises reasonable questions about renewable energy; then he presents his simple energy policy—“I’m in favor of air conditioning and cold beer.” Don’t get me wrong, I like AC and beer too. But this is not an energy policy.
When examining the environmental impact of production, economists typically follow Wassily Leontief, who modeled the economy as a set of interconnected parts (for more on this approach, see my book Fifty Major Economists). We need tires, windshields, etc. to make cars, as well as food and clothing for autoworkers. These goods require additional inputs, while all production yields pollution. Any changes in production will change input needs and pollution output, sometimes in unexpected ways. The hard work involves identifying these relationships.
Bryce is at his best when he follows this model. Raising questions about renewables may be the main contribution of his book. He argues that solar and wind power will neither increase U.S. energy independence nor make the environment cleaner. Wind turbines require parts produced from rare elements available mainly from China. Also, solar and wind are unreliable—sometimes the sun does not shine and sometimes the wind does not blow—and require backups. The best backup (easy and cheap to switch on and off) turns out to be the most polluting—coal. Biofuels are problematic too. Converting millions of acres of Indonesia into palm oil farms has destroyed tropical forests that convert carbon dioxide into oxygen and has led to the near extinction of several species.
Fearing the long-term consequences of mercury and lead contamination from burning coal, Bryce favors taxing coal emissions. But he opposes limiting carbon emissions because of conflicting scientific studies about the negative environmental consequences of carbon use and a debate that has become politicized.
This agnostic stance leaves Bryce supporting increased hydrocarbon use (beer and AC) and living with the consequences of global warming. Natural gas and nuclear power become the best solutions for meeting our energy demand.
The case for natural gas is simple. New gas supplies are being discovered all the time and burning gas creates little pollution. However, gas extraction requires lots of water, which must be disposed of safely, and drilling has contaminated water supplies with arsenic, barium, and cobalt.
By default, only nuclear power remains. Nuclear generators can produce electricity as cheaply as coal or oil. They also emit no carbon dioxide. Their main downside is, of course, waste management. Bryce contends that problems with handling nuclear waste have been solved, although a long-term solution will require money and support from Congress. This support includes deciding where to bury nuclear waste. Bryce vociferously complains about resistance from local communities and political leaders, such as Senate Majority Leader Harry Reid, who oppose waste disposal sites in their home states.
At this point we come up against the biggest problem with Bryce’s book. He supports power consumption at low cost because this is what Americans want. While this is true, Americans also want clean water and air, and they do not want nuclear waste buried in their backyard. Bryce would have written a much better book had he recognized these conflicting desires and tried to navigate through them.
Conquering Carbon provides a good antidote to Power Hungry. In contrast to the Nietzschean überman seeking more power, we encounter a Schopenhauerean will to live in the face of difficult obstacles. While Bryce takes disagreement among experts as an excuse to do nothing, Jackson sees doing nothing as a dangerous decision: “Cutting carbon emissions is about risk management.”
Conquering Carbon begins by summarizing the existing scientific evidence for climate change and its consequences. The lesson from this literature is that the costs are so great, and the probability of environmental damage is so high, that we must quickly and significantly reduce per capita energy demand and greenhouse gases. This will require increased use of renewable energy, increased efficiency, and research leading to technological breakthroughs. It will also require changing the behavior of people and firms. Jackson provides numerous examples of what is possible.
Solar energy may not be a universal solution, but it can have limited uses. Rizhao (population 3 million), in northern China, uses solar water heaters in 99% of city homes. They cost about the same as electric hot water heaters, save money over the lifetime of the heater, and reduce electricity use and carbon emissions.
We can better manage the intermittency of solar and wind power with a large network of multiple plants at geographically separated locations. A smart grid can increase power from other sources when wind and solar power production are predicted to be low.
We can regulate car and appliance efficiency, develop better and cheaper public transportation, ban incandescent light bulbs, and insist on greater home energy efficiency. Systems that change the temperature and turn off lights when a room is empty would help. So would greater use of electric cars, which will require a national recharging network. And the cheapest way to reduce climate change is reforestation.
Most important of all, according to Jackson, we must put a price on carbon emissions through permits auctioned off by governments, and then traded by firms on a carbon market. The cost of buying these permits will increase the price of goods using a lot of carbon and will change consumption patterns in ways that benefit the environment.
Following most economists, Jackson sees several key advantages to cap-and-trade. Unlike government regulations, cap-and-trade pushes firms to continuously reduce energy use, since unused permits can be sold. It also stimulates technological innovation, since advances reduce carbon use and lower production costs.
Jackson does have some reservations concerning cap-and-trade. Firms may move production to countries without cap-and-trade; and if the price of permits is too low (for example during recessions), there will be little incentive for firms to improve their energy use. Here she may be too pessimistic. We can deal with firms moving abroad by compensatory taxes on imports, and we can reduce the supply of permits whenever their price falls.
On the other hand, Jackson fails to make a case for cap-and-trade over taxing carbon emissions. A carbon tax would have the same economic effects as pollution permits, but would not let Wall Street speculate on the future of our planet. In addition, some people perceive cap-and-trade as giving firms the right to pollute, but view taxes as a penalty for polluting; this psychological phenomenon might have an impact on real-world behavior in ways that reduce carbon emissions.
The best argument for cap-and-trade over carbon taxes is that cap-and-trade is usually not perceived as a tax. This might make it easier to pass legislation, especially when some permits are given away by the government. Alas, in the face of stiff Republican opposition last summer, the Obama administration decided to give up on passing a cap-and-trade bill. This raises an important political point that both books ignore—how to implement policy changes in a world with power hungry people and wealthy vested interests in opposition. To avoid the consequences of climate change, it seems we will need to develop a political will to power.