In Pursuit of Plan B

April 26, 2010 | Yael Borofsky,

Out of the scramble over the thrice-delayed Kerry/Graham/Lieberman (KGL or "keggles") climate bill have emerged various alternatives, with grassroots greens arguing for cap and dividend and high tech leaders including Bill Gates calling for an explicit technology innovation agenda.

Earlier this month, Bill McKibben advocated in The New Republic for the Cantwell-Collins CLEAR Act, claiming it would solve the political problem of raising energy costs because it would rebate some of the pollution allowances to consumers -- "three-quarters will come out ahead," McKibben claims, "with only real energy hogs hurting .

But Michael Levi of the Council on Foreign Relations is having none of it:

Here's the problem: the three out of ten people who will fail to come out ahead are not simply "real energy hogs". They are people who happen to live in states that currently generate electricity from coal, or that depend heavily on energy-intensive manufacturing for their economic base...

But then Levi goes on to offer hesitant support for KGL:

I'm personally not so pessimistic about Kerry-Lieberman-Graham. There are actually some things about the "linked fee" that I like, and a few other bits that I'm warming to.

Differences aside, both Levi and McKibben seem to assume that pricing carbon is the most important factor in spurring energy technology innovation, despite abundant evidence to the contrary. Europe's carbon price reached $40/ ton and the continent went on a coal-buying spree. China has no carbon price and is racing ahead. And never in human history have we moved from one energy technology to another by rationing or making the older technology more expensive.

Levi claims environmental regulations result in tech innovation but cites no cases. (Correction: Levin cites a paper by Newell et al. showing that energy efficiency regulations can induce innovation and increase energy efficiency.) McKibben makes the even more astonishing claim that coal and oil taxes in Europe resulted in "dense and livable cities, great train systems, and half the energy use per person." He cites no evidence for this claim and I could find none. Europe's cities are dense and livable because they were built and developed over centuries before there were cars, and European train systems were the result of direct state investment, not carbon pricing.

Both men should know that the long history of energy tech innovation has been driven by direct state investments -- in dams, nuclear plants, solar, wind, gas turbines -- not pollution regulations. Cap and trade worked in the case of acid rain because smokestack scrubbers and low-sulfur coal already existed and were cheap.

Unfortunately, CLEAR's authors were under the spell of the carbon pricing voodoo and thus starved the bill of funding for technology.

Is Bill Gates proof that the high tech business community is breaking from the carbon pricing pack? It's too early to say, but the "American Energy Innovation Council," led by Gates and other high-tech executives, came out in support of an innovation agenda that speaks the language of a rejuvenated commitment to energy R&D, even if they offer few specifics about funding levels for it.

Let's hope the Gates energy innovation plan is as big and audacious as Microsoft -- otherwise we could be in for yet another long scramble for yet another unworkable carbon pricing scheme.