And stay out of my damn yard!

Now I remember why I started this blog: To push back against public policy ideologies that are flatly contradicted by real world facts and/or which proponents will not quantify, test against alternatives, or accept accountability for results. Hence the subtitle to this blog: "The trouble with people is not that they don't know but that they know so much that ain't so."  So far, I haven't changed the world—or the proprietors of Environmental Economics. Here's a good example of what pragmatic, problem-solvers are up against.

Yesterday, Environmental Economics posted The case for cap-and-trade (or a carbon tax) in 2009. I posted the following comment, starting by quoting the only reference in the post to policies not involving attempts to achieve policy goals by manipulating price signals.

"[F]orcing electric utilities and other entities that buy energy to purchase a mix of energy without appropriate price signals is not a good idea."

Why not? We've done a lot of this in the last 35 years or so, including the requirement that utilities buy electricity from co-generation projects at "avoided cost." The amazing achievements of the Clean Air Act and State analogs all resulted from command and control regulations with nary a price signal. Surely, you're not proposing to replace tried and true methods with an untested method without at least a comparative discussion. Or are you?

One of the proprietors, John Whitehead, responded this morning.

Roger,

The forced demand will increase the price of renewable energy. The decreased demand for dirty nonrenewable energy will decrease its price. The prices are moving in the opposite direction of where they need to go to provide the appropriate signals to energy consumers about the full social costs of the energy sources. Consumers will want to buy less green energy and more dirty energy. I don't know how all that would play out since it is not exactly textbook theory but there are some definite inefficiencies in that scenario.

And a sarcastic answer to your question: Yes, i'm suggesting we have no discussion. I'm that sort of dick.

And that's why we started a blog (with open comments). To limit discussion!

"To limit discussion." And yet in the sidebar is this invitation, which I now assume is meant only to offer talking points to those who already agree with their ideology, not to engage skeptics.

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On the substance of Whitehead's response (in which he quotes himself in italics) I continue to find it astonishing that educated people will propose big changes in government policy affecting us all while admitting they "don't know how all that would play out" and that there are some "definite inefficiencies" in their proposals.

In contrast, when I engaged Robert Rapier on The Oil Drum on why his proposed gasoline tax of $2.00 per gallon was essential and sufficient to address the problems of too much petroleum consumption in the US, there was considerable responsive back and forth. I was not persuaded by the answers, but the willingness to engage is important. My public policy proposal (and yours) should be tested in a process that completely and accurately describes the problem to be addressed, considers all possible solutions (especially those that have been tested in the real world), identifies all significant costs, benefits, and collateral effects, and commits to quantified predictions for which we should be held accountable. But you may disagree with that.

Comments

[John Whitehead]

Roger misreads the post and, I think, doesn't understand sarcasm. The definite inefficiencies are due to the RPS which might drive the price of renewable energy up and nonrenewable energy down -- exactly the opposite directions that we wish them to go.

In response to the original comment [and, folks, sorry that I don't have time to respond in depth to every comment in a timely manner ... I'm not a paid blogger]: command and control regulations have been shown to be less cost-effective than economic incentive-based policies such as taxes and cap-and-trade. This is why most economists prefer using incentives instead of standards.

Cap-and-trade has been tested in the real world (e.g., see the EPA's Acid Rain Program). The research has been conducted ... and recently summarize here: Review of Environmental Economics and Policy, Winter 2009.

Note to readers: I rarely, if ever, say anything that has not been in the literature. I'm not that creative. Yet, I'm too lazy to provide references to the literature in my posts.

[Skeptic]

I note that John was criticizing defects in Renewable Portfolio Standards, not his own proposal. Here's my comment in his blog:

John:

I will review the linked report on the acid rain program. Thank you.

Meanwhile, here and here are links to staff reports to the South Coast Air Quality Management District board about the RECLAIM cap and trade system for SOx and NOx. That system broke down in late 2000 and had to be rescued by suspending participation by the largest sources. The largest sources were required to submit and, after approval, to implement emissions reductions projects. They did so, implementing projects that were essentially the same as were required by the command and control regime that RECLAIM replaced, and then were let back into the system. Here is EPA’s report. It does not say cap and trade cannot work (damning it with faint praise) but says making it work requires constant and perceptive attention and interventions by regulators.

In early 2008, before the current economic slowdown began in earnest, it appeared RECLAIM was approaching another crisis, and staff was directed to develop contingency plans. I attended one of the workshops last summer to observe. The Board was concerned that emissions credits were becoming less available, especially the valuable “infinite year” credits and was concerned that credits seem to be largely owned by “speculators.” In the room there was an evident coalition among members of the regulated community and the Board staff against the traders, who seemed quite disappointed that contingency plans were being discussed to prevent them from realizing profits as great as they apparently envisioned.

My take on whether RECLAIM “works” is that it’s like the financial system, which has recently melted down. Both are very likely to experience crises requiring major government interventions. One can say these systems are self-correcting and "work" only if one ignores the fact that periodic government bailouts are an indispensible part of the systems; it’s bailouts, not markets, that get them through crises.

To that I would add that press reports (one discussed here) indicate that the carbon trading system in Europe is not working—CO2 emissions are still rising. Other press reports (sorry no link) say many CO2-reducing projects outside Europe (but which qualify to meet obligations in Europe) are bogus.

I’m persuadable, but at the moment cap and trade looks to me like a faith-based program that is unlikely to realize its theoretical advantages in the real world.