In a recent interview with NPR's Robert Siegel, Breakthrough Senior Fellow Roger Pielke Jr. discusses why cap and trade policy collapsed under the weight of its political and practical limitations. He proposes a new path forward focused on making clean energy cheap, instead of continually trying to make fossils fuels more expensive.
SIEGEL: Professor Roger Pielke Jr. is not surprised to hear cap and trade consigned to the past tense. He has written about the inherent impossibility of cap and trade. It violates what Professor Pielke describes as an iron law...
Welcome to the program. And first, why don't you spell out the iron law?
Professor ROGER PIELKE Jr. (Environmental Studies, the University of Colorado): Yeah, I think the iron law of climate policy simply says that while people are willing to bear some cost for environmental objectives, that willingness has its limits. And cap and trade ran up against those limits time and again, and it's not surprising that it failed.
SIEGEL: But why was it possible then to use market mechanisms - at least to help reduce levels of lead in gasoline, CFC emissions that were depleting the ozone layer, sulfur dioxide emissions that contributed to acid rain - but not carbon emissions?
Prof. PIELKE: Yeah, this is a really important point. For each of those cases, there were on-the-shelf technologies or other substitutes that could be switched out to meet the cap. The problem with trying to put a cap on carbon dioxide emissions is there is no readily available technological substitutes at the scale needed. What that means is that in cap and trade, we're trying to create a price signal that causes economic discomfort that motivates innovation.
And when you create economic discomfort, people do respond, but it's usually at the ballot box, not in the laboratory.
SIEGEL: So if a system, such as cap and trade, runs right up against the country's interest in economic growth, economic growth will trump the interest in cap and trade, you're saying?
Prof. PIELKE: That's right, and this is one reason why the various forms of cap and trade legislation had around a thousand pages or more. Many of the provisions were efforts to get around the cap. There was no, in fact, no cap in cap and trade.
SIEGEL: If not cap and trade, then what? How do you go about having a policy that results in reduced carbon dioxide emissions?
Prof. PIELKE: Well, the logic of cap and trade was focused on making fossil fuels more expensive. And the idea was if you make fossil fuels more expensive, it will be easier for the alternatives to fossil fuels to compete with them. That approach has seen very limited success.
An alternative way to think about the problem is instead of making fossil fuels more expensive, we should be taking steps to make the alternatives cheaper. You achieve the same result, become more competitive, but you don't run up against the effects of people paying more for their energy...
SIEGEL: But wouldn't the kind of robust government role in energy research that you favor run up against some other laws of politics? That is, both the amount of public investment or perhaps the role of government picking winners and losers would arouse Republican objections to an overly aggressive federal government?
Prof. PIELKE: Well, it certainly could, and it depends on how these policies are put forward. The history of government picking technological winners is not stellar, to say the least. But if successful innovation occurs - and take a look at medical science as an example - when you invest in a broad portfolio of technologies and you set up competition, you focus on deployment - that is, what actually works in the real world - and you let winners propagate, and you cut your losses when you have losers.
We do know how to do innovation pretty well in the United States, and we've done it for many, many years. We just haven't applied that sort of knowledge to the energy area.
