20 September 2010

A Breakthrough in US Climate Policy?

Climate policy in the United States is moving beyond the serial failures of cap-and-trade focused on putting a high price on carbon.  A hint of where climate policy imay be going can be found in an interview with Reed Hundt, former FCC Director under Bill Clinton:
Reed Hundt is known for being the first chairman of the Federal Communications Commission to lead a spectrum auction, setting the stage for the modern U.S. wireless industry. Hundt is now in his second act as a green policy advocate, and tells me in an interview this week that he, along with John Podesta’s Center for American Progress and Al Gore’s Alliance for Climate Protection, are beginning a project to draft an energy bill for the next Congress.
Hundt has this very interesting comment to make about the focus of the next energy bill:
The bill will focus on jobs and also on “lowering the cost of clean.” Instead of raising the price of carbon initially, we’re going to lower the cost of clean energy, and then in the not-too-distant future, there will be a more welcoming attitude for clean energy, and then we can put a price on carbon. It’s a two-step process: one — jobs and lowering the cost of clean energy, and two — putting a price on carbon.

The government can lower the cost of clean energy by focusing on long-term finance and take advantage of the very cheap borrowing rates that exist today. Borrowing rates are so staggeringly low right now in the government sector. The Treasury is selling debt at 2.5 percent on a 10 year note; it’s just incredible. We’re also talking about scaling out of the breakthrough technologies that the Department of Energy has funded. The DOE is coming to the end of the stimulus package, and the next step is to scale out those breakthroughs. As you scale them out, you lower the unit cost.
Are we seeing a paradigm shift in US climate policy?  Let's hope so.


  1. This sounds like more wishful thinking from the Al Gore crowd. A couple of years ago they were busily pushing the idea that we could replace all our carbon-based electricity generation with renewable energy within 10 years. The only new tool they appear to have is low interest rates. While that will help, I still don't see green energy being cost effective at this point. And any competent economist will tell you that adding cost to energy generation will hurt the economy and cost jobs. So where will the jobs come from?

  2. Smart . . . lower the cost of clean energy.

    Which kinda makes current "clean" energy technology suspect. All those wind turbines and solar plants that exist only because they are subsidized . . . taking tax money from people and giving it by fiat to other people . . . all in pursuit of being "green".

    If you'd like to feel even better, I have some indulgences for sale.

    Cash only deals.

  3. Am I understanding this proposal correctly? Does this entail the US government borrowing to finance 'green energy'? Because if that's the case, it looks like a non-starter. With the current focus on the national debt, and the likelihood of a GOP takeover of at least one house in November, I can't see this getting off the ground.

    By the way; I'm aware of a lot of green hype, but not of actual scientific breakthroughs in green energy production.

  4. Paradigm shift? More like bait and switch to me. No mention of global warming, but they'll switch to talking about mercury - no one wants mercury, right? This, brought to you by John Podesta and CAP - the same people who brought you Joe Romm, no? They're going to 'lower the cost of clean?' In other words, taxpayer subsidies. And of course, in spite of lowering the cost of clean, carbon pricing will still be needed - later, when the suckers are beaten down.

    So now they're not going into the bank with guns - they've decided to cut into the vault from a tunnel instead. Paradigm shift? Hardly. Either way, they want to rob the bank.

  5. Getting the government to pick up part of the cost is cost shifting (to the taxpayer), not cost reduction.

  6. Good thing about this- the realization that you set a goal (what will we use for energy) and then set a process.
    Bad thing about this- their apparent goal. Jobs wise this is a no-brainer. If you need a million blades for windmills, which are only profitable with mass production (and then only barely even at best siting), you must build in China to keep costs as low as possible.
    If you need 10,000 small gen3, gen4 nuclear plants, which are individually profitable, you can build them in Ohio.

  7. John Podesta, Al Gore, like Mark B. says, it's just bait and switch.

  8. The British government has a clever little trick of postponing tax increases for a year following the budget. It separates cause and effect in the voter's mind. Nothing painful to worry about - for now.

  9. We're going to lower the cost by getting govt to pay for it. Because govt dollars are free! Wheeeeee!

    Then we're going to invent machines which harvest manna from heaven. Powered by green energy of course.

    All of this will be finished by the time the president commands the seas to move to the level he deems appropriate.

  10. Clearly none of you realize that the US spends $10 billion per year on subsidies for fossil fuels, and only a third of that on subsidies for renewable energy. ($72.5 billion vs $29 billion between 2002 and 2008: http://www.grist.org/article/2009-09-22-fossil-fuel-subsidies-dwarf-clean-energy-subsidies-obama-wants)

    Why is it that I don't hear any of you calling for removal of fossil fuel subsidies to at least even the playing field to start off with?

  11. -11-kenkxie

    Be careful with indiscriminate "any of yous" ;-)


  12. #11

    Interesting. So renewables get only a third of the government subsidies.

    Pity they only produce a tenth of the energy that fossil fuels produce for the country.


    Even worse when you consider that most of that "renewable" production is from hydro.

  13. These are rough Wiki figures but renewables represent 7% of US energy while fossil fuel represents 62% so on a weighted basis renewables receive 350% more in subsidies than fossil fuel.

  14. bernie said... 4

    "And the role for nuclear is?"

    Reed Hundt testified before congress in April 2010. He included nuclear in his definition of 'clean energy'.

    I'm sure Joe Romm and his pals at the Center for American Progress are less then happy about that.

  15. Until that effort goes to help get nuke power built, they are wasting our money and their time.

  16. nanodots,
    The only way you can make the assertion that fossil fuels get more subsidies per unit of energy produced is by so ill-defining 'subsidy' as to make the term meaningless.

  17. It's also fair to ask what these subsidies are. My understanding, as this Bloomberg article notes is that "[t]he largest of the subsidies for fossil fuels in the report was a tax credit oil and natural gas companies can claim for paying royalties to other governments...Also included in calculation of subsidies are the U.S. Strategic Petroleum Reserve"

    So, the companies get a tax break for taxes paid to foreign governments (which most other governments do for all companies) and also get to sell fuel to the government. This seems like less of a subsidy than paying $X thousands to end customers to buy your solar panels or electric car.

    And that's even ignoring the massive differences in scale.

  18. nanodots said... 14

    "These are rough Wiki figures but renewables represent 7% of US energy while fossil fuel represents 62%"

    Those numbers would be about right for electricity production. Once you add in transportation and heating fuels renewables is down to 1 or 2%.

  19. Oh dear.

    Just because the cost of cpaital is low at present, it doesn't mean that government capital spending or "R&D" using borrowing money (that tax payers will have to repay) will beat the cost of that capital.

    The theme is still the same. A political and policy formulation industry (yes, that includes you Roger)that just wants to centrally plan, regulate and direct.

    You want to know what fuels the Tea Party movement. Look no further than this post.

  20. @ kenkxie - 11,

    The reason is because there is virtually no "renewable energy". The is a massive price to pay for EACH WATT PRODUCED.

    Look up table ES5:

    Also, given the clear error in your figures ($10bn is way out) I suspect that you are regurgitating some green activist numbers that are erroneous.

  21. -20-Gekko

    I have never given an award for over-the-top hyperbole in my blog comments, but this one has me considering it;-)

    "You want to know what fuels the Tea Party movement. Look no further than this post."