Browse
Engage
Research
How we do we live in a world we don’t understand? That question has been on my mind lately because I'm again under the sway of Nassim Nicholas Taleb, author of "The Black Swan."
Taleb did a podcast recently with the free-market (or, if you prefer, the Smith-Hayekian) economist Russell Roberts, available here at EconTalk and highly recommended.
They didn't discuss climate policy but their conversation got me wondering what Taleb would say about the threat of climate change, particularly since I've been thinking about how to respond to a thoughtful commentary on climate and energy by Jesse Jenkins of The Breakthrough Institute, who blogs as Watthead. Jesse and I serve on the blogger board for The Energy Collective, a website that attracts people who are interested in the nitty-gritty of energy and climate policy. It's a good place to keep up with people like Joe Romm and Robert Stavins.
In his post, Jesse argues in his post that a cap-and-trade policy or carbon tax designed to "put a price on carbon" -- that is, to raise the cost of burning fossil fuels -- won’t do nearly enough by itself to reduce greenhouse gas emissions and respond meaningfully to the threat of climate change. That's because any policy that drives prices high
enough to discourage people from burning coal and oil will, by definition, be politically unpopular. Jesse writes:
"The ultimate effectiveness of a strategy premised centrally on an effort to make dirty energy more expensive will always be limited by this fundamental reality of the political economy of energy -- which we at the Breakthrough Institute have dubbed 'Global Warming's Gordian Knot.' If the price of carbon must rise too high to drive emissions reductions, various cost containment mechanisms or public backlash will kick in -- either of which effectively abrogates the emissions cap. Yet if we constrain the price of carbon, it will have very little impact on emissions absent a steady supply of low-cost emissions reductions opportunities.
Instead of trying to make dirty energy expensive, Jesse argues, we need to make clean energy cheap. This requires what he calls "a coordinated, well-funded and effective strategy to accelerate clean energy innovation and drive major improvements in the price and performance of clean energy technologies." Yep, that means lots of government spending, perhaps $50 billion a year.
What does this have to do with Taleb? I'm wary of trying to summarize his worldview but Taleb essentially argues that we know a lot less than we think we know. "My major hobby," he writes on his website, "is teasing people who take themselves & the quality of their knowledge too seriously & those who don't have the courage to sometimes say: I don’t know…." In essence, Taleb says we are not very good at understanding the past or present -- his first book was called Fooled by Randomness -- and that we are downright horrible at predicting the future. (Although he sort of predicted the global financial meltdown.)
I don’t know what Taleb thinks about climate policy or, for that matter, climate science, but I suspect that he would not have much enthusiasm for a federal government effort to spend $50 billion a year to research and commercialize technology to make clean energy cheap. None of us know how to make clean energy cheap, and the government has a pretty poor track record of picking marketplace winners.
Here are several examples. In 1980, President Carter signed legislation to establish the U.S. Synthetic Fuels Corp., to find ways to create alternatives to petroleum and promote energy independence. It flopped, of course, and one reason why is that it got caught up in pork-barrel politics. "Fuel-cell projects under the SFC, for example, were allotted to each of the 50 states, regardless of economic viability," according to a book called "The Government Role in Civilian Technology," by the National Academies of Science and Engineering and the Institute of Medicine.
Not long ago, Congress gave us FutureGen, the "public-private partnership to design, build, and operate the world's first coal-fueled, near-zero emissions power plant, at an estimated net project cost of US $1.5 billion." Well, good luck with that. An environmentalist pal of mine likes to refer to FutureGen as NeverGen.
More recently, we had the biofuels mandate in the 2007 energy bill, which was a boon to Midwest farmers and the corn ethanol industry, at least until oil prices dropped last year and big ethanol refiners went bankrupt. The politics of biofuels are incredibly complicated -- the mandate was opposed by environmental groups like Friends of the Earth and by oil-state Republicans -- but figuring out which biofuels make economic and environmental sense and which do not is no job for Washington.
Only markets will do that.
Now let me be clear. I am not arguing that venture capitalists or energy startups or academics or big oil companies are any smarter or more capable than U.S. Senators or DOE researchers. What I am saying is more voices (i.e., the market) are better than a few (politicians and civil servants). The way to make clean energy cheap is to create a market that promotes as much tinkering and experimentation by as many people are possible (crowdsourcing, if you like) and not by giving the government $50 billion a year to spend. Nobody knows today how to make clean energy cheap. Together we may be able to figure it out.
Best as I can tell, the best way to unleash that experimentation is with cap-and-trade or a carbon tax, by making dirty energy expensive. Ideally, by making it very expensive. This is logical and just. So long as we allow the fossil fuel industry to dump global warming pollutants into the air at no cost, that’s what the industry will do, and future generations will pay a terrible price. Better to pay more for electricity and gasoline today, right?
The question remains, how can environmentalists and their political allies persuade people to pay more for fossil fuel energy in the short run? Americans haven’t been very good lately at making sacrifices today for the sake of future generations. But with the right leadership, that can change.
One way to begin is to get our metaphors right, as Steven Chu, the new energy secretary, has argued.
Some people have said the clean energy revolution will require anational effort like the Manhattan Project or the Apollo project to send a man to the moon. Wrong -- those were government-funded efforts, involving small numbers of people, aimed at a very specific goals.
Here we have a much broader goal -- cheap clean energy -- but no clear path to get there. Will it be wind, solar, wave or geothermal power, or clean coal, or nuclear power, or all of the above? What we need -- and all credit to Chu for this metaphor -- is something more like the mobilization of the U.S. economy during World War II, which involved everything from Victory Gardens (local food!) to energy conservation ("Don’t Travel -- Unless Your Trip Helps Win the War").
Put simple, the best way to untie the Breakthrough Institute's Gordian Knot is with politics. We need to persuade people that it's worth paying more for dirty energy today to save the planet for our kids and grandkids.
Is climate change just another bad prediction?
Taleb repeatedly say we should acknowledge the limitations of knowledge. I guess the reason he doesn't enter the debate is that if he agrees that climate change is happening, he fails in his objective of being an emprical skeptic.
I might suggest that he might raise concerns about the assumed nature of the distribtuion of climate patterns, as weel as the inherent data limitation to discover this distribtution.
It seems a conundrum that many people agree that economists are bad a predicting the future, but expect climate scientists to make accurate predictions using similar techniques.
Carbon tax and equal, per capita, full rebate
as advocated by Jim Hansen and others, would be the way to go. This is less "command and control", in other words more market-based, than the alternative cap and trade which stands to be more pork-barrel prone.
The solutions are likely to be many and varied, and locally applied. The last thing we need is more centralized energy production, monopolistic behavior by utilities and oil companies is what got us where we are-- a system that artificially supports their continued monopolies.
I agree we need common-sense recognitions that, for example, the desert is a good place to harvest sun energy (like the coastal plain is a good place to harvest wind-- as Secretary Chu pointed out this week). Local energy production near where it will be consumed, will need to be part of the solution. Ergo, conservation as another "energy source" to be tapped.
The need is to motivate all the population to take the threat of global warming, and the imminent need for sustainable changes, very seriously.
I am tired of selfish behavior that abuses the environment and offloads the consequences to others or future residents of this small planet.
Get the beaucrats out of the renewable energy business.
The Cap and Trade system will pose a 650 billion dollar a year tax on carbon-producing industries. The government plans to give some of this money back to taxpayers to offset the higher energy prices they'd be facing as a result of the carbon tax. How stupid is that?
I really don't think the government should be involved in the renewable energy industry at all. Right now the government makes more money from oil imports than the oil companies do (taxes). And look where that lead us - right into oil wars and federal energy policies that show oil-favoritism.
As Mr. Gunther points out, the governments forays into renewable energy has been anything but smart. They backed ethanol and a host of other initiatives, while stopping nuclear plants from being built in this country. We can't get Senator Boxer in California to agree that the desert is a good place to harvest sun energy.
The private sector is THE BEST place to work out the future of renewable energy. The only problem is the Government has been backing oil for so long (good tax revenue) that it's hard for renewable energy to play on the tilted playing field.
So my recommendation is to remove all special taxes on energy and let everyone duke it out for themselves.
The private sector CAN work, it just hasn't had good chance. Look at health care. Walgreens is offering FREE basic healthcare for poor people in the hope they will buy their prescriptions from WALGREENS. Don't even think the Federal Government could figure out a simple solution like that, much less execute it with anyone less than a beaurocratic cluster-bunk.
You Can't Kill a Black Swan with a Silver Bullet
I too read The Black Swan not too long ago and am still trying to digest it in the context of sustainability. My take (so far) is that we can't predict much, but we can maybe see trends and we can try to avoid bad consequences, but that there is no silver bullet. The Taleb approach I think (I wish he would write on climate change!) would be that of resilience and innovation via lots of people trying lots of things to be more efficient in our use of resources. The winners will shake out and there will be many big and small winners - different ones for different localities and economies and cultures. The more, the better. That way, the losers won't hurt us so bad. Where something can scale up, it will. But the least likely thing to work would be a bunch of politicians deciding on the best technology and pouring lots of money down a rat hole. That is guaranteed to produce unintended consequences producing big fat black swans.
I think one of the problems we face is that we don't necessarily have one mutual goal (winning WWII or going to the Moon). We have a fuzzy vision of sustainability that is impossible to define specifically; it is directional and open to revision as we learn more and change. Grabbing onto a simple goal - cheap clean energy - is a direct road to black swan-dom. Sustainability is a big balancing effort that requires adaptability based on lots and lots of experiments (some of which will fail) to find better ways of doing everything.
Georjean Adams, EHS Strategies, Inc.