Breakthrough: Invest in America

Breakthrough founders Michael Shellenberger & Ted Nordhaus have been engaged in a discussion at Cato Unbound on what to do about climate change. The lead essay, written by conservative libertarian Jim Manzi, argues that global warming, while real, is a problem of limited magnitude, deserving a proportional response, not overreaction. Coverage of the debate here.

by Michael Shellenberger & Ted Nordhaus

Four years ago we argued in "The Death of Environmentalism" that greens didn't need to win the debate over the relative seriousness of global warming in order to enact policies capable of dealing with it. At the time, that claim was viewed as paradoxical and even heretical. But further evidence has been provided in our debate at CATO Unbound. While Joe Romm, Jim Manzi, and Indur Golanky cannot agree on even the basic facts of climate change, by focusing on solutions we have been able to identify at least seven principles that we share in common with Manzi:

Energy and climate policy should be robust to uncertainty, not certainty.

We cannot price, or regulate, our way to a clean energy economy.

Government investment to mitigate global warming is needed.

Many small and large technological breakthroughs are needed to make clean energy cost-competitive with fossil fuels.

Government investment in R&D should aim to bring down the real, unsubsidized price of clean energy.

Making clean energy cheap will require, in Manzi's words, "complex coordination of many actors, responding to changing circumstances and trade-offs, and decades of effort."

Advancing the effort to make clean energy cheap will require ongoing technical analysis of specific projects so that public money is well spent.

Before moving to points of disagreement, it is worth pausing to consider that these principles may open up possibilities for bipartisan legislation on energy and climate if we can avoid old ideological quagmires.

We see the following as points of disagreement between our position and Manzi's:

Manzi opposes any carbon tax and any cap and trade policy, while we support a modest carbon or electricity tax to fund investment in technology, and/or cap and trade as long as it: a) dedicates 100 percent of the revenue raised from auctioning permits to developing and deploying clean energy technology; b) contains cost-containment measures to prevent the carbon price (and thus the price of energy) from rising so high as to either significantly slow economic growth or trigger a public backlash.
Manzi opposes while we support government investment in the deployment of promising clean energy technologies, from wind and solar to carbon capture and storage, as part of a coordinated strategy to make clean energy cheap.
We support an annual public investment in the range of $50 billion whereas Manzi supports annual investment in the range of $5 billion.

While the $45 billion difference between Manzi's position and ours is indeed large, it is also worth recognizing that it is a relatively small amount per capita: $150.

Why do we believe the government should make large investments in deploying clean energy technologies? There are several reasons. Technology breakthroughs in energy often come through deployment, not R&D in laboratories. We cited the Danish experience subsidizing the deployment of off-shore wind turbines. Moreover, we pointed out that the capital-intensive nature of the energy sector, where new power plants can cost up to $5 billion, requires larger investments than, say, pharmaceutical or computer R&D efforts. And we pointed to the need for new transmission lines, which alone would require a public investment of $60 billion if we are to tap America's wind assets and bring wind power up to roughly 20 percent of the power generation sector.

Rather than addressing these arguments, Manzi re-asserts an over-generalization: "political allocation of economic resources is almost never effective in overcoming long-term challenges." The statement turns a blind eye to the history of economic development in the United States. In our essay we explicitly challenged Manzi to explain how America could have become so wealthy had it not invested in the railroads, the highways, the electrical grid, the Internet, microchips, the computer sciences, and the biosciences. Manzi never answered because there is no answer.

It is nonsensical to speak of markets and governments operating separately. The state is what guarantees and protects private property. There is no possibility of extricating government from market activity, nor should we try, as government is crucial to regulating fair play in markets through laws and the courts. This is certainly the case with energy, which is crucial to national security and economic development and has thus always been heavily regulated. Attempts to deregulate the power sector often meet with disaster, as in California, where even "de-regulation" is really regulation by a different name.

The question is thus not whether but how the state should be involved. We think the public has a strong interest in making clean energy cheap and helping the U.S. become a global leader in the new clean energy industries, and that for this to happen we must make the muscular kinds of investments we made in the past in promising sectors from railroads and highways to computers and pharmaceuticals.

We applaud Manzi's call for on-going dialogue informed by a more technical analysis, and we thank the editors of Cato Unbound for creating a forum where these important issues can be freely debated.

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