The stay on the Clean Power Plan: A mountain out of a molehill

Much of the hyperbole over the Supreme Court’s stay of the EPA’s Clean Power Plan (CPP) is making a mountain out of a molehill. The CPP is very significant politically, legally, but its CO2 goals are trivial in the grand scheme of sustainable consumption patterns, technological capability, stated goals (not commitments) at Conference of Parties global climate talks.  The CPP targets are a piece of cake. And I say this as someone that is not a techno-optimist in the sense that technology alone will not solve all socioeconomic problems.

Contemporary discussions of energy resources and technologies are full of conflicting news, views, and opinions from extreme sides of arguments.  The discussions regarding the recent Supreme Court decision to stay the Clean Power Plan (CPP) fall right in line with this narrative.  While the recent 5-4 Supreme Court ruling centers on the legality of the CPP, the responses in the corporate and public arena largely focus on social and economic arguments. This is a good thing. Deciding on broad social goals should not hinge on legal technicalities because our social perspectives should shape and rewrite laws as needed. When the law is just plain morally wrong, we need to change it. We’ve done this several times via Constitutional Amendments when we abolished slavery and gave women the right to vote.

The hyperbolic discussion regarding the Supreme Court decision is an example of how trivial environmental and technology changes translate to gargantuan policy and legal arguments.  I briefly discuss arguments by the “right” and “left” and point out important aspects that caveat those arguments.

The anti low-carbon “right” (stereotypically conservatives, Republicans, and many pro-business groups such as the U.S. Chamber of Commerce) claim that taking proactive measures to reduce greenhouse gas (GHG) emissions will hurt jobs and the poor, kill the economy, and not be as effective as “the market” in reducing emissions but without extra prodding.  There is some truth in these statements. Internalizing GHG into energy costs will make fossil energy more expensive (e.g., does not make low-carbon energy cheaper), and expensive energy (mostly due to oil) has been associated with past recessions.

The pro low-carbon “left” (stereotypically liberals, Democrats, and environmental organizations) point out how renewable (low-carbon) electricity is now cost-competitive with coal and natural gas generation and that some countries, states, and regions already have functioning carbon policies and/or markets without economic downturn, much less ruin. Thus, the claim is that we have the technologies we need, and we can grow the economy while we transition to near 100% renewable and low-carbon energy.  There is some truth in these statements.  Today, utilities and cooperatives can obtain a contract for wind and solar power dirt cheap. Europe, California, New England, and British Columbia have carbon markets or taxes that have not destroyed their economies.

However, both sides of the low-carbon argument neglect important points that prevent us from having a holistic discussion.

The “right” avoids discussing that current market structures have caused the same feared effects they fear from GHG mitigation, such as loss of high-paying jobs for low/mid-skilled workers.  They also usually avoid the obvious point that markets are defined by people to achieve social goals, not the other way around. If the right argued for allocating half of the anticipated low-carbon investments to shore pensions and enhance education of displaced workers, then I could at least listen without cringing.

The “left” avoids mentioning the absurdity of economic assumptions in models that estimate long-term climate change costs and economic growth.  For example, the 2100 economic outcomes in the (latest) Fifth Assessment Report from the Intergovernmental Panel on Climate Change indicate that even if the world shifts to zero net GHG emissions or not, we’ll be somewhere between 3-8 multiples richer than we are today.  If there is no climate change mitigation, we’ll still be pretty much within the same multiples richer than we are today. Really? Human activity can emit from zero to over twice as much net CO2 per year in 2100, and we can’t tell the difference in the economic outcome within the noise of the models? This doesn’t pass my smell test, and the assumptions for increased technological change are not even dependent upon the descriptions of a low-carbon energy system that is being modeled.  See my recent Energies paper (Section 4.2 specifically) that describes how we need much better efforts in macroeconomic modeling of a transition to a low-carbon economy.  We know that economies depend upon energy and technology as an input, it’s time all macroeconomic models include energy as an input.

To be fair, creating markets and trade agreements to effectively and fairly guide global commerce is a large and evolving problem.  Also, modeling future outcomes (for almost anything, much less the economy) 80 years out is difficult to impossible.

But the Clean Power Plan is about electricity generation, in the United States, in 15 years.  Part of the economy. Part of the world. Not too far out.  The tools exist to address the minor targets of the CPP.

Sure we can expect some owners of electricity assets to lose money as those assets become economic and/or are retired before they earn a positive return on investment.  Maybe they are already whole, but will just lose profits they expected. That’s what happens when you change the energy system by law or by market (see this recent article in Bloomberg discussing Nevada’s NV Energy rate hike in response to distributed solar: Who Owns the Sun?).  But again, the targets of the Clean Power Plan are so small relative to our technology capability, and economic growth is so uncertain, if we meet the CPP targets it will probably not even be clear whether or not the CPP was even partially responsible.

This discussion reminds me of the parable of the God-fearing man that died during a flood. He had a vision for how God would save him and had faith that God would do so.  This vision caused the man to refuse help to ride away in a truck before the waters rose, in a boat when water came into his house, and in a helicopter when he was forced to flee to his roof.  After dying from the flood and going to Heaven, the man asked God why He did not save him. God replied “I tried. I sent you a truck, a boat, and a helicopter.”

Usually the right believes that the almighty Market alone will enable us to solve our environmental problems, including a reduction in CO2 emissions from power generation. Well, the Market (with help from intelligent human designers: policymakers, engineers, and scientists) hath provided photovoltaic panels, wind turbines, nuclear power, batteries, conservation technologies, and yes, even hydraulic fracturing to produce more natural gas.