Green Herring

Obama tries to hide the costs of his global warming solution.

The Apollo Alliance, a coalition of environmentalists and labor unions, wants the federal government to spend $500 billion over 10 years to "build America's 21st century clean energy economy" and thereby "create more than five million high quality green-collar jobs." Barack Obama says he can accomplish the same goal for only $150 billion, which gives you a sense of how reliable these projections are.

More fundamentally, both the Apollo Alliance and Obama, who has liberally borrowed from its ideas, mistakenly treat the manpower required to reduce greenhouse gas emissions as a measure of success, when it should be viewed as a cost to be minimized. Obama's "green jobs" rhetoric is part of his strategy to conceal the enormous expense associated with his plan to "transform our entire economy" and "build a new economy that is powered by clean and secure energy."

Obama wants to "implement an economy-wide cap-and-trade program to reduce greenhouse gas emissions 80 percent by 2050." That is even more ambitious than the goal of a cap-and-trade bill that the Department of Energy estimates would cost between $444 billion and $1.3 trillion in reduced economic growth over two decades.

Depending on how bad the effects of global warming are expected to be and how effective Obama's plan is at ameliorating them, such a sacrifice could be justified. But Obama has not made that case. Instead he has said, in essence: Sacrifice? What sacrifice?

The basic problem addressed by a cap-and-trade system, which uses tradable permits to charge companies for the greenhouse gases they generate, is that people contribute to climate change without bearing the cost of their behavior. Like a carbon tax, which achieves the same result more explicitly, a cap-and-trade system works only if it makes energy use (and the emissions associated with it) more expensive.

What are we to make, then, of Obama's promise to cushion the blow of rising gasoline prices and home heating bills by providing "emergency energy rebates"? That is exactly the opposite of what the government should do if it wants to encourage energy conservation and make alternative energy sources more competitive. "Under my plan of a cap-and-trade system," Obama admitted during an unusually candid interview with the San Francisco Chronicle in January, "electricity rates would necessarily skyrocket."

If Obama's cap-and-trade plan works as advertised, it will create incentives for businesses to achieve greenhouse gas reductions as efficiently as possible. He nevertheless cannot resist centrally planning the response—for example, by arbitrarily requiring that 25 percent of the nation's electricity come from renewable resources by 2025, instead of letting the market decide what mix of conservation and alternative energy makes the most sense.

A recent RAND Corporation study concludes that, without "dramatic progress in renewable energy technology," reaching this "25X'25" goal will mean "significantly increasing consumer costs." And the study did not consider "the transition and adjustment costs associated with initiating such a significant shift from fossil fuels to renewable energy technologies."

Those costs involve not just the loss of jobs in carbon-intense parts of the economy but the loss of jobs that would be created if the resources used to mitigate global warming were available for other purposes. Obama and other "clean energy" boosters do not take those losses into account, acting as if every "green job" is a net gain to the economy.

The Apollo Alliance goes so far as to brag that "renewable energy creates more jobs than coal," as if this were a selling point, as opposed to a sign of lower efficiency. It enthusiastically likens the creation of a "clean energy economy" to "the World War II industrial mobilization."

The analogy is more telling than the alliance realizes: Like a war, the effort to dramatically reduce greenhouse gas emissions may be justified to prevent a more costly outcome. But the economic activity it generates has to be weighed against the destruction it causes, something the president-elect so far has shown no inclination to do.

© Copyright 2008 by Creators Syndicate Inc.

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • BobDobalina||

    Apparently, Mr. Harvard Law School never had to take a single class where the word "scarcity" came up in discussion.

    Meanwhile, let's all watch a video of "Booty Shakin' Ho's for Obama"!!

    http://www.bet.com/

  • Guy Montag||

    Just got the awsome news this AM at 0200.

    Important questions:

    So, do I get to stop making the mortgage payments right now or must I wait for the coronation?

    Will the "combat zone" tax break for soldiers still be in place when I leave the country early next year?

    Do I get another check from the government if I don't pay income taxes after I leave thee country?

    Does my English girlfriend get to stay here without having to go back to England to renew her visa? Can she stop paying her mortgage too, or is that just for Americans.

    In other news, the Great Depression of the 21st Century ended around 2300 last night when Sen. McCain gave his concession speech.

    None of the abov would be a concern if Bob Barr had won, you know.

  • ||

    Where was this article (and others critical of BHO's ideas) prior to Election Day?

  • MJ||

    "But the economic activity it generates has to be weighed against the destruction it causes, something the president-elect so far has shown no inclination to do."

    Of course not, when you are promising pie in the sky, pointing ou what you need to do to get to the sky is not a good marketing strategy.

  • Turtles||

    What's the eco damage from digging holes, then filling them up again?

  • Guy Montag||

    What's the eco damage from digging holes, then filling them up again?

    We can't disturb the Wetlands!

  • ||

    good! we are hiding the costs of environmental unsustainability (soil erosion, especially species loss, climate change) and are now, apparently, trying to hide the costs of reversing these self-destructive tendencies?

    what are to true costs for shifting from unsustainable living to sustainable living? oh - god - the costs of not being able to have 5th mortgage on every asset one possesses.. it will all bankrupt us?

    no oh brother... costs per so do not count. let's compare them to other costs to have a benchmark. Let's compare these save-our-habitat costs to bailing out rich bankers or to supporting rich farmers or the oil and livestock industries? let's compare them to the costs of preventing a dirty bomb that would not kill more than 3,000 people in a worst case (preventive wars that cost $10-$15 billion per month and apart from killing young american do not aid security)...

    no.. these " environmental costs" that would apparently bankrupt future generations while enabling them to "breath" are strangely very very low compared to other luxury expenses that we, especially the GOP, indulge in?

    NB: Green jobs really work because they are local and relate to all walks of life. Installing and running solar panels cannot be outsourced to China. You need local electricians, construction workers, local financing and project management (blue and white color). In fact - Germany would have had negative growth had it not been for "green jobs" recently. For sure this is better than buying oil from the middle-east and then pouring billions per months on top to do nation-building etc. Green jobs are hence much much better than Detroit has ever been (detroit is a just an engine for burning our hard-earned cash or better for making terrorists richer and richer).

  • Kaiser||

    As a firm disbeliever in Global cooling warming climate change (man made that is) I find any initiatives like this taken in the name of said problem to be ludicrous. For one thing, as far as I know anyways (and I am by no means an expert) there is no standard equation for figuring carbon emissions. I know for a fact that there is no regulations for say a carbon credit company. Meaning you can make your own equation and charge people accordingly. I think people forget too often that we exhale CO2 ALL DAY LONG. Anyways my hope is that Obama will appoint some more centrist cabinet members and become more pragmatic in office. Hopefully he will see that even if his plan is to be an ideologue in the current state of the economy it just isn't feasible. (disclosure: I don't really believe the economy is all that bad either, but a majority of country believes we are in The Great Depression 2.0 which is just as bad as it being so imho)

  • ||

    Where was this article (and others critical of BHO's ideas) prior to Election Day?>>

    That is a good question. I have a few more.

    Why were libertarians polled on Reason split 65-35 in favor of Obama over McCain, instead of 65-35 in favor of writing in Ron Paul instead of Bob Barr? Or vice versa?

    Why wasn't Obama absolutely shredded on Reason for picking someone who has been in the Senate longer than Obama has been an adult? And voted for *Bush's* war. And about as pro war (drug that is) as one could get?

    Plenty of criticisms of McCain- the bailout, pandering to the auto industry, bomb Iran. But I have to go with the the winner, and now what is becoming clearly an anti-libertarian mandate.

    Nice job Reason. In 2016 we'll be celebrating sixeteen years of ridiculous government interference, and still polling at 3% of the vote. Nice

  • Neu Mejican||

    Kaiser,

    as far as I know anyways (and I am by no means an expert) there is no standard equation for figuring carbon emissions. I know for a fact that there is no regulations for say a carbon credit company. Meaning you can make your own equation and charge people accordingly.

    Surely you don't think this is the complicated part of all this. Standardization of these would be very straight forward.

    Here's a reasonable approach.
    http://www.carbontax.org/introduction/#what

    I will highlight this sentence for you.

    The carbon content of every form of fossil fuel, from anthracite to lignite coal, from residual oil to natural gas, is precisely known. So is the amount of CO2 released into the atmosphere when the fuel is burned. A carbon tax thus presents few if any problems of documentation or measurement.

    Now Obama talks about cap-n-trade instead, but the emissions calculation is not complicated by what you are going to use it for.

  • Chrispy||

    ... these " environmental costs" that would apparently bankrupt future generations while enabling them to "breath" are strangely very very low compared to other luxury expenses that we, especially the GOP, indulge in?
    I didn't hear BHO speak out against the recent bailouts. He voted in favor of the farm bill too.

    You need local electricians, construction workers, local financing and project management (blue and white color)
    And all those workers could be doing something that society values. Instead, they'll be wasting taxpayers' money on something we obviously don't want.

    For sure this is better than buying oil from the middle-east
    The best insurance policy against middle-eastern terrorists is to remain dependent on foreign oil. OPEC has no incentive to bomb its best customer.

  • Neu Mejican||

    OPEC has no incentive to bomb its best customer

    In case you didn't notice, non-state actors in the region are working against the interest of these states.

    In case you didn't notice.

    they'll be wasting taxpayers' money on something we obviously don't want.

    How is it obvious?
    Polls show strong support for coordinated action to address environmental issues.

  • ||

    Polls show strong support for coordinated action to address environmental issues.

    Well, the polls that pretend such action will impose no costs do. Fluffy bunnies for everyone always polls well. Fluffy bunnies that you will be taxed for, not so much.

  • economist||

    Jacob, be quiet! The new regime doesn't like what you're saying...

  • economist||

    R C Dean,
    I love fluffy bunnies. I love the excellent that can be made from their meat.

  • ||

    When the costs to heat and light everyone's home triple, they will begin to understand the economics involved. I'm already paying 400.00 a month to heat my house in the winter. When it goes to 1200.00 I'll just have to give it back to the bank. But I'll be happy about the green jobs created. Change we can believe in!

  • ||

    I'm already paying 400.00 a month to heat my house in the winter.

    Wow, do you live in a large house in Alaska heating with electricity? (That may sound sarcastic, but I'm genuinely curious as to what your circumstances are that make your heating bill so high).

  • Rationalitate||

    ...not to mention that some of his policies (subsidizing ethanol, clean coal, and small-scale urban wind generators) simply aren't environmentally friendly, and will only result in further entrenched polluting special interest groups. Only this time, it's worse, because they're subsidized under the guise of both creating jobs AND helping the environment, even though in the longrun they'll do neither (and in the shortrun, won't even help the environment).

  • ||

    $400 a month is a typical winter heating bill here in Montana too, where we already have a foot of snow on the ground. It doesn't seem to matter much if the house is heated with electricity or propane.

    On the bright side winter is only 6 months long, and there isn't a house within 500 miles of me that has air conditioning.

  • Chrispy||

    How is it obvious?
    Polls show strong support for coordinated action to address environmental issues.

    It's obvious, because if people wanted "green" energy at a higher price, we'd already have it. Businesses cannot make a profit on solar, wind, etc, without huge government subsidies, which proves that people aren't willing to pay for it (which is what I mean by "don't want").

    In case you didn't notice, non-state actors in the region are working against the interest of these states.
    Currently, the governments of those states have a strong incentive to prevent terrorist attacks against the US. If their economies are no longer dependent on american money, that incentive is eliminated.

  • stuartl||

    The carbon content of every form of fossil fuel, from anthracite to lignite coal, from residual oil to natural gas, is precisely known. So is the amount of CO2 released into the atmosphere when the fuel is burned.

    So you are saying that it is impossible to create a device that reduces the amount of CO2 released into the atomosphere when fuel is burned? There shouldn't be an economic reward for improving catalytic converters?

  • stuartl||

    To be a little less snarky, my point is that the goal is to reduce emissions, not to reduce fuel usage. Which makes kaiser's objection about complexity reasonable.

  • ||

    Nuclear power! NOW!

  • ||

    I live in Michigan. That is a typical price for heating your house here. My understanding is that Obama is happy with higher gasoline prices too. So when people are forced into electric cars, how will we recharge them? No coal generation, no nuclear, only wind and solar. We are going to need hundreds of thousands of windmills at a cost of trillions of dollars to replace what we already have. To solve a problem that doen't exist we are going to bankrupt the country.

  • ||

    Stuart, co2 is the natural byproduct of combustion. The only way to make less co2 is to combust less or to make more co which is a deadly poison.

  • Sam Grove||

    Neither mercantilists nor progressives understand economic fundamentals. Unfortunately these memes have been dominant throughout history, the progressive meme being a more recent phenomenon.

    The goal is not to create more work (jobs) but to create more wealth. Creating jobs by fiat is merely a form of redistribution and necessarily is a mis-allocation of resources.

  • stuartl||

    The only way to make less co2 is to combust less or to make more co which is a deadly poison.

    Yes, but you miss my point. The goal is not to release CO2 into the atmosphere. A cheap and effective CO2 sequestration widget should be encouraged.

  • DannyK||

    Every green-collar job is attached to a green-collar voter. That's how you make change that can't be easily reversed, because it has a constituency.

    By the way, coal is not a cheap fuel--it's got a very expensive negative externality which is unwillingly paid by others. Since Bush & the Republicans have totally avoided the issue, they've left it wide open for Obama & Co to grab the low-hanging fruit. Big mistake.

  • Guy Montag||

    Yes, but you miss my point. The goal is not to release CO2 into the atmosphere. A cheap and effective CO2 sequestration widget should be encouraged.

    We already have plant life. Why "invent" something else?

  • ||

    Couple quick comments.

    1. We don't have to know for certainty that climate change is occurring to take action. We do know that there are risks involved with climate change, and so "reasonable" actions can/should be taken to mitigate those risks. Of course different people can argue what is reasonable, but taking no action seems to be foolhardy.

    2. Aside from Climate change there are other quantifiable costs associated with our fossil fuel use. Chief of which in the billions of extra dollars spent because of higher rates of respiratory problems etc. These costs (externalities) are currently not being factored into the costs of fossil fuels resulting in an over use of fossil fuels.

    3. We should not pretend that a dollar shipped overseas for foreign oil, is as good as a dollar that stays here. Our oil dollars, and the price of oil are directly correlated to repression, and terrorism funding in the Middle East. Iran etc can't fund all the trouble it wants when oil is cheaper.

    4. Fossil Fuels are finite. Whether peak oil comes now, or in 5 or 10 years (or even 20) we need to be moving now towards a sustainable future based on renewable energy. It's going to take a while to transform our economy, we should start now. When the global economy starts picking up again in a year or two, and oil shoots back up to $150-200 a barrel, we will be glad we did.

    5. Renewable energy costs continue to come down. If we keep investing in Solar and will quite likely be cheaper than coal between 2015-2025. I think a combination of the Grand Solar Plan
    http://www.sciam.com/article.cfm?id=a-solar-grand-plan
    and Pickens Plan will produce a balanced renewable energy portfolio.

    Are there costs to all this sure. It's always costly in the short run to invest in the future. That doesn't mean it's not worth doing, and long run our country will be better off for it.

  • ||

    Ray Kurzweil (kurzweilAI.net) if I understand him right, thinks that nanotechnology applied
    to solar energy will rapidly- 10 years- make
    carbon schemes unnecessary.

  • stuartl||

    Guy, your 1972 Charger would look kind of silly with an oak tree hanging off the back. But I guess the good news is that it will create jobs for gardeners.

  • ||

    Kroneborge and walters, both of you admit that the technology does not exist now. Yet you are supporting a hugely expensive tax and regulation scheme to get us away from something that works quite well. Why not wait until the technology matures and is cost competative. You are advocating impoverishing our country while China continues to build a coal fired power plant a week.

  • ||

    No, I did not say the technology doesn't exist. I said it's going to get cheaper in the future, and will eventually be competitive even if you don't factor in externalities.

    That doesn't mean we can pretend that we aren't incurring hidden costs today that aren't being reflected at the gas pump, or electric bill, but are still being paid in others ways. Whether in higher healthcare costs from asthma, or IUD's killing our soldiers. Not to mention the higher risks each year associated with climate change.

    You wonder if instead of wasting 700 billion in Iraq we had invested it here in renewables, and getting off of oil. How far along we would be?

  • ||

    Oh, and since when does investing in technology impoverish our country? Even without taking into account externalities renewables generate more jobs than fossil fuels, and most of them are jobs that can't be outsourced.

    Let's put all those in the construction industry back to work building a national tranmission system and installing wind turbines/solar farms. And convert all those auto plants that are getting shut down to turbine manufactoring.

    Fossil fuels are only acctactive if you don't use full cost accounting, and only look at stuff in the short term. Long term requires a transition to renewables.

  • Guy Montag||

    Guy, your 1972 Charger would look kind of silly with an oak tree hanging off the back. But I guess the good news is that it will create jobs for gardeners.

    Just because the environment loves me more than it loves you is no reason to get all catty ;)

  • Neu Mejican||

    R C Dean | November 5, 2008, 10:56am | #
    Polls show strong support for coordinated action to address environmental issues.

    Well, the polls that pretend such action will impose no costs do. Fluffy bunnies for everyone always polls well. Fluffy bunnies that you will be taxed for, not so much.


    Well, I guess if we get to make up our generalities this post makes sense. Environmental issue poll well with or without costs being included in the question.

    Example: http://www.harrisinteractive.com/harris_poll/index.asp?PID=607

    Three in four U.S. adults (74%) agree that "protecting the environment is so important that requirements and standards cannot be too high, and continuing environmental improvements must be made regardless of cost."

  • Neu Mejican||

    stuartl,

    A carbon sequestering program would not really create much of a problem. You tax based on the carbon in the fuel, and credit based on the sequestered carbon. A simple process/measure on both ends.

    No?

  • Neu Mejican||

    It's obvious, because if people wanted "green" energy at a higher price, we'd already have it.

    If you can't see the logical flaw in this argument I am not sure I can help you.

    But let's start by asking a question or two.

    How does history constrain our choices?

    How do supply and demand interact?

  • stuartl||

    A simple process/measure on both ends.

    No?


    No is correct. I would not bet on the government creating accurate rules in the face of lobbyists who have billions to win or lose. Don't forget this is the plan "to transform our entire economy."

  • Neu Mejican||

    Businesses cannot make a profit on solar, wind, etc, without huge government subsidies, which proves that people aren't willing to pay for it (which is what I mean by "don't want").

    Which sector of the current energy economy is free of subsidies again?

    Hmmmmmm....
    I wonder if others have thought about these issues in any detail...

    http://www.rmi.org/images/PDFs/Energy/E06-08_GettingOffOil_World2007.pdf

    The smart environmental choices are almost always economically beneficial.

  • Neu Mejican||

    stuartl,

    So you are saying the politics of this is complex, it seems.

    Certainly the technical issues are not complex.

  • ||

    Also, if you auction off the permits you are letting the market work out most of the details. You could then use the money to reduce income taxes etc (or maybe even pay down the debt).

    Hmm, taxing work less, and taxing polluting the environment more, that's almost too crazy to work.

  • stuartl||

    The combination of financial, political, and technical issues is complex. You are already making it complex by operating on both the production and emissions side. But assuming that the economy is going to be transformed, I greatly prefer cost allocated at the (sadly more complex to measure) emission side of the equation, since that is where the damage is being done.

    Since humans exhale CO2, this means the government should tax us for breathing.

  • Colonel_Angus||

    Economic freedom is fucking dead.

    YES WE CAN! YES WE CAN! YES WE CAN! YES WE CAN!

  • economist||

    "Each job it creates is a job that can't be outsourced"
    Okay, maybe we need to go over the make-work fallacy again.
    Like I said...

  • economist||

    YES WE CAN use lube. But why the hell would you want that?

  • ||

    Also, if you auction off the permits you are letting the market work out most of the details. You could then use the money to reduce income taxes etc (or maybe even pay down the debt).

    Most of the details...except the part where the government in their great wisdom gets to decide how many permits the country needs to have for the year.

  • ||

    The population and the economy grows every year so accordingly energy use does also. The number of permits declines each year at a rate determined by the government. Do you free market types se a problem here?

  • ||

    Econ 101 says markets fail when externalities are present thus resulting in an inefficent amount of those goods or services being consumed. It is therefore reasonable to attempt to correct some of those imbalances. Just like we do with monopolies etc.

    The market is very efficient in many cases, but it is not perfect.

  • قبلة الوداع||

    thank u

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online

  • Video Game Nation: How gaming is making America freer – and more fun.
  • Matt Welch: How the left turned against free speech.
  • Nothing Left to Cut? Congress can’t live within their means.
  • And much more.

SUBSCRIBE

advertisement