Uniform national environmental standards are often a bad idea

From my NYTimes headlines email:

OP-ED COLUMNIST
Bailout (and Buildup)
By THOMAS L. FRIEDMAN
We can’t afford a financial bailout that also isn’t a green buildup — a buildup of a new clean energy industry that strengthens America.

Here is the part that riles me:

But how do we do that without any policy to affect the price signal for gasoline and carbon?

Here are some ideas: First, Washington could impose a national renewable energy standard that would require every utility in the country to produce 20 percent of its power from clean, non-CO2-emitting, energy sources — wind, solar, hydro, nuclear, biomass — by 2025. About half the states already have these in place, but they are all different. It would create a huge domestic pull for renewable energy if we had a uniform national mandate.

Most every environmental economics textbooks explain why uniform national standards are inefficient. Since benefits and costs are regionally different, it makes sense to adopt non-uniform standards -- if standard adopting is a must.

Comments

[Freddie Mac]

I suspect it is implied that there would be a renewable credit mkt. That is the case for the renewable portfolio standards that I am aware of. Probably part of the details that are skipped in an article with tight word limits.

[Scott]

It may be inefficient, but it would be better than what we are doing now, which is basically irreversibly damaging the planet. Now that's what I call inefficient.

I would prefer a carbon tax or cap that is paid back 100% to citizens at a flat per capita rate. The Cap and Dividend idea: http://www.capanddividend.org/.

[dan cole]

Uniform standards are not always a bad idea. If the standards serve merely as a floor, establishing a minimally acceptable level of environmental quality at which the benefits exceed the costs across all regions, then there is nothing wrong with them, especially if different regions are then allowed to adopt more stringent standards based on benefit-cost balancing.

[joshua corning]

Most every environmental economics textbooks explain why uniform national standards are inefficient.

Ya cuz the problem is with the uniformity of the standards not the central planning of those standards and not the central authority.

Give me a break.

[Pradeep]

With something that affects every aspect of our life, such as GHG emissions, it might be easier to adopt a national "agreement" (note that this is need not be a standard/mandate), rather than wait for individual states to come up with their own solutions. How are CO2 emissions going to be traded among states if they have different standards (ex: different caps on emissions)? This will inevitably lead to the drain of investments from states having tight CO2 caps to those having less strict CO2 caps.

I prefer having a cap-and-trade regime put in place and allow markets to decide what technology a utility/company must use to decrease its GHG emissions, rather than mandating x% renewable energy for utilities by y years.

[Carlos Ferreira]

A standard is different from a tax; it's not so economic efficient, as it does not respect the equi-marginal principle (that at equilibrium, the cost of reducing emissions by 1 unit is equal to all participants). It also provides less dynamic efficiency, so when utilities reduce their emissions up to the standard, they improve no further.

The best solution is probably to implement the cap™ scheme. But I have reserves about cap&dividend: what it means is that utilities will still miss that dynamic efficiency incentive for further improvement, because they're not getting anything out of it. They're just incurring administrative costs to receive and pass on the money - not good, really. They want something they make money out of it they improve, that produces capital potentially used for further improvement.