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What Lomborg Gets Right
Haven't had to a chance to pick up Bjorn Lomborg's new book but have recently seen two interesting reviews. Over at Salon, our friend Eban Goodstein attacks Lomborg for "cherry picking" both the science and the economics to bolster his...
Haven't had to a chance to pick up Bjorn Lomborg's new book but have recently seen two interesting reviews. But the one thing both seem to agree on is that Lomborg places too much emphasis on the need for public investment and not enough on the spur that carbon regulation and pricing will give to private investment. Goodstein argues that while he supports public investment, "to foster the kind of technology revolution that can stabilize global warming pollution, significant government support will be necessary, but far from sufficient." You would think based upon this sentence that most efforts to address climate change were focused around public investment in clean energy technologies and that regulation and private investment were at best an afterthought. But nothing could be further from the case. In fact, virtually every major effort to address global warming is centrally focused upon increasing the cost of carbon, either through caps or taxes and all of those approaches assume that private investment, not public investment, will then be the primary driver of clean energy innovation and adoption. Anderson, for his part, argues that, "rather than spending the government tax money on federal research (which is best reserved for cases of market failure, which is clearly not the case in this greentech boom), use it to reduce taxes elsewhere. That is, of course, the Silicon Valley Way." I don't know what world Chris is living in, but if our present predicament is not a text book case of market failure, I don't know what is. Excepting hydropower, renewables presently comprise less than 2% of the US electricity market. And energy R&D has declined precipitously over the last two decades. Moreover, while Silicon Valley boosters like to imagine that it all started in Bill Hewlett's garage, the reality is that the federal government, primarily the Department of Defense, largely created Silicon Valley out of whole cloth. The field of computer science didn't exist before the federal government began pumping money into it in the 50's and 60's. The Defense Department guaranteed the market for microchips in the 60's and again in the 1980's. Fortunes have been made and lost (mostly made) and America's economy, and indeed American life, transformed. But we should never forget how and why it all started. Private investment into greentech is indeed important, but it tends to follow public investment and even at that, tends not to flow toward the long term bets and breakthrough research that will be necessary to create clean energy technologies that are both scalable and cost competitive at a global level. Nor will private investment address the critical new infrastructure that will be needed to bring clean energy technology to scale. These are things that only public investment can accomplish and they are unfortunately largely absent from the current policy framework that environmentalists and their allies are pursuing. It is arguably the one thing that Lomborg unequivocally got right. 4 COMMENTS: Chris, The failure of "the market" to offer cost competitive clean energy alternatives is a market failure. Were there no market failure, there would be no need for a carbon tax. The question at hand is not whether there has not been a market failure, as noted above that is quite evident, but rather, what is the best way to correct that failure. You argue that a carbon tax is the best way to address the failure, we argue that public investment in R&D and adoption is. The problem with relying solely on a carbon tax is that in order to increase the cost of dirty energy sources, particularly coal in places like China, enough such that clean energy technologies are cost competitive, you have to price carbon at levels that are both politically unfeasible and economically potentially ruinous. So price carbon as high as you dare in the developed world, but it is naive to think that China, India, or much of the rest of the developing world are going to accept any carbon price that significantly increases their energy costs. So at the end of the day, the only long term solution is to dramatically bring down the real (not subsidized) costs of clean energy technologies. And that will require a level of long term research, development, and procurement funding that only the public sector can provide. That is why the information technology revolution is such a powerful model for energy technology innovation and why it is unfortunate that so many in the Valley have chosen to airbrush away the critical and central role that public investment played in creating the Valley and all that has come since. thanks for commenting. ted The problem with public funding is that you have politicians picking winners based on political considerations rather than viability. I also take exception with your definition of market failure, but that is a discussion that won't be resolved in blog comment sound bites. This dialogue goes to the heart of the matter: can the private sector (in the lead or as the majority investor) generate the right amount of investment capital in the right time frame to create the technological breakthroughs to meet the global demand for both plentiful and clean energy. If one answers "no, only the government has the means to invest on the scale necessary to enable change on a global scale", then mobilizing public support for that investment presents some incredible challenges. One of those challenges is the myth of Silicon Valley (analogous to the myth of miracle drugs emanating from private US drug firms due to our wonderful private health care system). One wonders if the kind of public investment necessary could gain traction in the U.S., or if it will require a Europe to take the lead, where large-scale public investment is seen as strategic and necessary (see French trains, health care systems and Airbus.) Post a comment |
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Failure to invest in non-profitable business isn't a market failure. Pollution is a market failure. Over-production of carbon emissions is a market failure, not investing in non-profitable sectors is a market success.
By increasing the cost of carbon and fossil fuel use you enable the market to do what it does best - find opportunities to make money through innovation.
Posted by: Chris at September 14, 2007 9:53 PM