So, the energy policy class I’m in requires several regular blog-like short papers.
If I gave you a magic wand that allowed you to pick two energy related policies that will be implemented as designed (the magic part!) and will move the U.S. toward a sustainable future, what would you choose and why?
I would choose 1) a mandatory carbon emissions cap-and-trade program, and 2) a national program of smart growth paired with mass transit investments.
First, a comprehensive, immediate, and stable carbon regulation and trading regime is the most clear-cut, crucial piece of energy policy for an environmentally sustainable future. Such a cap-and-trade program would cover all industries, apply to downstream emissions rather than upstream fuels, and would not include a safety valve, grandfathering, or initially free permits. Practical and administrative concerns might limit the trading system at first to commercial and industrial levels, but would eventually extend to consumers piggybacking on residential electric meters and odometer readings and emissions profiles from cars. A tax on carbon might achieve similar ends to a cap and trade system, but the tax could be easily set too high or too low, might be politically difficult to change, would do less to encourage green innovation, and might unfairly penalize older dirtier power plants whose stockholders are still counting on years of future returns. A vigorous carbon regulation program comes closest to sending real and efficient price signals to all corners of the market and best approximates economists’ Holy Grail: true marginal social cost pricing.
Many Americans are now beginning to see connections environmental degradation, geopolitical costs in the Middle East, and global climate change, and strong carbon regulation is the only policy that would clearly solve both three problems. Technology forcing can be bluntly effective, but inefficient and risky. For example, ethanol might reduce fossil fuel consumption, but might cause equal or greater environmental damage depending on how the biofuel is produced. High gasoline taxes might also reduce dependence on foreign oil, but might induce substitution from dirtier coal. Technology-forcing requires the government to predict scientific progress, while a cap-and-trade sets a pigouvian price and lets the market sort it out. Governmental market corrections are most efficient when linked directly to the source of market failure. Turning the wheels of a car or heating the temperature of a living room isn’t inherently bad; it’s the resultant atmospheric emissions that we are concerned with, and it’s what we should regulate. If we regulate carbon pollution, we get freedom from Middle Eastern oil along with it; the inverse isn’t true. Carbon regulation guarantees both environmental protection and freedom from Middle Eastern oil.
Second, a national urban development policy pairing smart growth with heavy investment in mass transit is a long-term solution to the energy dependence of the transportation sector. If history is any guide, technology will enable huge efficiency gains in how we heat and light buildings, manufacture goods, and grow food. But the technological prospects for emissions reductions in transportation, besides electric cars, appear limited. Skyrocketing demand for auto travel have historically offset any environmental benefits from technological efficiency gains from the CAFE program, and our growing and specialized economy will always depends on goods and passenger movement. More compact development lessens the energy impact of transportation in two synergistic ways: first, people are more likely to choose carbon-free or low-carbon modes like walking, bicycling, bus, and rail, and second, people simply travel less.
A national smart growth policy to do this must be paired with large, new investments in bus and rail systems in urban and suburban areas. Public transportation is effective energy and environmental policy for a number of reasons.
• Transit’s energy consumption and emissions on a per-passenger-mile basis is already lower than that of automobiles, and this potential efficiency is highly dependent on how many other passengers are onboard in addition to propulsion technology, adding extra leverage for efficiency beyond technology. By better organizing our land uses to maximize use of public transit, we can tap into energy gains beyond even the rosiest technology projections – passengers on an average full subway train today are moving at the equivalent of over 500 miles to the gallon.
• Realizing what economists call “network economies of density,” rail networks can become more efficient in the face of large increases in travel demand, whereas automobile networks suffer from congestion.
• Public transportation is an alternative to the non-energy-related environmental costs of the automobile system: water pollution from impervious surfaces, noise, habitat disruption, passenger safety, and urban sprawl.
Transit-supportive land use policies allowing density and a mix of uses are a necessary but insufficient precondition to transit-oriented development. When paired together, a national program of coherent urban development and expanded mass transit service would essentially design out both exponential growth in demand for travel and the seemingly inextricable energy challenges that arise from meeting that demand, and would endow us with a sustainable way to meet what future demand is left.