What a clean-energy standard is, and why we’re talking about it

at 03:44 PM ET, 03/31/2011

Whether you think the energy plan President Obama announced yesterday is worth applauding depends on whether you think a clean-energy standard is worth supporting. For most people, that raises a second question: What’s a clean-energy standard?

Let’s start with a quick history of climate-change policy proposals: In the beginning, there was the carbon tax, which would work by putting a price on carbon. But that had no political support. Then there was cap-and-trade, which would work by making producers purchase permits for the carbon they emitted, and in so doing, would put a price on carbon. But though John McCain actually had a cap-and-trade proposal in 2008, Republicans eventually turned on cap-and-trade — Sarah Palin’s first post-election op-ed was dedicated to decrying “cap-and-tax” as “an enormous threat to our economy.” Then there was a renewable energy standard, where the government would simply tell energy utilities that they had to generate most of their power using renewables. But that was abandoned because “clean coal” isn’t renewable, but it is politically powerful.

That brings us to a clean-energy standard. It works like a renewable-energy standard — we tell utilities that they have to produce 80 percent of their energy from clean sources by 2035 — but includes non-renewables that are, in theory, clean. Like clean coal. But it’s a pale imitation of everything that came before it: worse for emissions, for the deficit, for our international strategy. Oh, and it’s less market-based than any of the others, too.

For one thing, a CES only covers electricity, which means it’s only catching about a third of emissions. For another, it targets “emissions intensity” rather than “total emissions.” If we say the economy can only emit X tons of carbon, that holds down the carbon we pump into the atmosphere. If we say that only 20 percent of our energy can come from dirty sources, well, one way to slip under the limit is to increase the amount of energy we produce. It’s the difference between trying to lose weight by cutting calories and trying to lose it by cutting the percentage of your calories that come from junk food.

In practice, that will probably still lower emissions in the United States, but as Michael Greenstone, an energy economist at MIT and director of the Hamilton Project, explains, America is not the only place we’re worried about. “The problem for the planet is its total emissions, not emissions intensity,” he says. “A CES effectively signs the United States up for agreeing that intensity targets are the way to go, not total emissions.” As he goes on to note, that’s a system China and India would much prefer: Under Copenhagen, they agreed to reduce emissions intensity rather than total emissions, as that’s a measure that allows their total emissions to continue rising.

Then there are the economic pieces. Both a carbon tax and cap-and-trade reduce the deficit — or, in some versions, provide a rebate to taxpayers. A CES doesn’t. Instead, we just give utilities free licenses to emit a certain amount of carbon. No wonder they like it better. But that’s a system that people who prefer markets should like less. When you price carbon economy-wide, you let the market decide what to do next. When you simply regulate carbon in the utility sector, there’s less room for a response. That’s not to say it’s bad, but it’s not transformative in the same way.

The upside of a CES is that it’s better than nothing. It’s a sign to the market that investing in clean energy will have pay-offs down the road, and the simple fact of its passage suggests that stronger energy legislation could pass later. “The positive case for a CES is that cap-and-trade is off the table for now,” continues Greenstone, “a carbon tax is off the table for now, EPA regulation in a command-and-control way might be on the table, and if that’s all we’ve got, a CES looks better, as it’s more flexible. And if the Senate then takes away EPA authority, having the CES means we at least have something.”

Some endorsement, huh? But it gets to the truth of the matter: The case for a CES is a political one, based on the constraints of what we can do, not the arguments for what we should do. And the reason we think we can do a CES is that a number of prominent Republican politicians — Richard Lugar, Haley Barbour, Lindsey Graham, etc. — have come out in support of it. But remember: A number of prominent Republican politicians came out in support of cap-and-trade, too. It was only once the idea got nearer to law that the conservative movement flipped into opposition.

This could happen to a CES as well. The reason Democratic politicians who know perfectly well that a CES is fifth-best policy are pushing it is because Republican politicians who know perfectly well that a carbon tax or cap-and-trade system are desirable policy have refused to stand up to the right wing of their party. They are profiles in cowardice, and there is no guarantee that they won’t prove so again.

 
Read what others are saying

    Most Read: Business

    DJIA
    0.26%
    NASDAQ
    0.23%
     Last Update: 4:15 PM 05/04/2015(NASDAQ&DJIA)

    World Markets from      

     

    Other Market Data from      

     

    Key Rates from