If anything, we are underestimating technological progress

Nothing like some good, old-fashioned back-and-forth to keep bloggers -- and blog readers? -- engaged. EDF is organizing a video/graphics competition to ask for help in explaining, "What is a carbon cap and how will it cure our oil addiction?" Joe Romm critiqued the competition, calling it "bizarre" to ask others to help us "explain something that isn’t true." I responded saying that MIT's climate model supports us, which prompted another response titled "EDF’s and MIT’s magical thinking on carbon caps and oil."

Phew, still here? Well, reading between the wizard pictures, Joe (can I call you Joe?) makes some good points. I just attended the latest MIT Global Change Forum. MIT modelers are the first ones to admit shortcomings in their own models. Chatham house rules prevent me from disclosing who has said what, but suffice it to say that, Joe, you made a good point about highlighting the biofuels assumptions in the MIT model. In the end, estimating "technological progress" in these academic models is one huge guessing game. Many of these assumptions rely on expert opinions. That's a good start, but clearly imperfect. (How many experts predicted mobile phones 20 years ago? How many predicted that the Segway would revolutionize transport?)

Still, if anything, many of these assumptions about technologies are conservative estimates. The simple reason is that no-one can predict as of yet undiscovered technologies. If they could, they wouldn't be in the prediction business, but would be busy filing patents. Let entrepreneurs loose, and they find solutions to the darndest things. Cherry Chocolate Diet Dr. Pepper anyone?

Government clearly needs to set the rules to guide markets in the right direction (internalize externalities in wonk-speak), but markets fund innovation. That's where cap-and-trade comes in: government and science set the target; markets race to find the best way to achieve it. That's a pretty good division of labor in my book.

And it's worked for both environmental policies and for prizes for a long time. The British Parliament passed an Act way back in 1714 to to pay the princely sum of ₤20,000 for a method that could determine longitude within 30 nautical miles on the high sea. No-one predicted that the solution would have been a better chronometer that would also help jump-start the watch industry. The moral applies equally well to letting markets rather than government drive technological innovation nowadays -- and to offering several thousand bucks to come up with a good image for climate policy. MIT modelers may not know the best way to solve the problem, but neither does the US Department of Energy. Let's get the market involved.

So, will a cap cure our oil addiction? It won't do so immediately. Nothing will. But it will help us make large strides towards that goal in the long run. Should we have additional measures? Sure. California looks pretty good right now with its energy efficiency program that has helped keep electricity consumption flat since the 1970s, while the rest of the US has gulped up more and more energy. Green or greener transit and infrastructure investments can't hurt. And many other measures can help our necessary transition to a green collar economy.

Yet none of this will be enough without a clear set of rules to guide market-driven innovation and reward the most creative solutions with the big prize. In the real world, it'll be a piece of the $5 trillion a year energy sector. In this case, it's $10,000 for a smart way to explain how cap and trade works.

Comments

[LVTfan]

Virtually every bit of technological progress eventually shows up in land values somewhere. Elevators made urban land far more valuable than it was before their invention; air conditioning made great swaths of the south more livable; fiberglass boats added to the desirability of waterfront land for single family homes; improvements in earthmoving equipment resulting from WWII technology made previously undevelopable land affordable to develop; newer bridge designs can cross longer and deeper bodies of water. The list is long.

Technological progress is not the only contributor to land value: population increases and public investment in infrastructure and services also make some sites more valuable than others -- often far more valuable. (See http://lvtfan.typepad.com for how valuable!)

We currently permit the owners of sites to privatize the lion's share of the land value, which can be considerable.

We'd be far better off as a society if we collected that land rent, and used it to fund infrastructure and services and other government spending. The incentives to use well-located land, already well-served by infrastructure, would be very strong, and among the results would be to shorten commutes, reduce energy usage, reduce pollution, reduce the price of housing, reduce the share of our incomes we spend on housing and reduce or even reverse urban sprawl, resulting in smaller, denser cities and towns configured in a way that would make better public transportation realistic.

All this without "command and control" measures, or more programs. The private sector would be incentivized to do what we want it to do: provide the housing and commercial structures the market wants, where it wants them.

Land speculation would no longer be a way to make a living or add to one's fortune.

You might explore the environmental topics at http://www.wealthandwant.com/

[Larry]

I'm all for technological progress, but how much will permits have to cost if you're really going to get carbon output down by some date? A little realism, please.

[Ed]

I think that your point really only applies to 'new' land being brought into use. In many municipalities when a land is set to a public/business use from private, the land/house is purchased at current prices. The land is then rezoned & sold by the municipality at a higher price. The municipality pockets the difference and the higher taxes associated with the higher value of the property.

You refer to this as being without "command and control" measures, but this seems to me to sound a lot like public ownership of land with private individuals only leasing the land. Granted they may be able to lease it in perpetuity, but this sounds a lot like how China (in a holdover from Communism) manages their land.

[Skeptic]

"The British Parliament passed an Act way back in 1714 to to pay the princely sum of ₤20,000 for a method that could determine longitude within 30 nautical miles on the high sea. No-one predicted that the solution would have been a better chronometer that would also help jump-start the watch industry. "

And they got a solution in 1759, 45 years later. We want something deployed on a large scale by 2020 or at the very latest 2030.

"Still, if anything, many of these assumptions about technologies are conservative estimates. The simple reason is that no-one can predict as of yet undiscovered technologies."

Romm's analysis involved facts and logic. This rely relies on the tooth fairy. Methinks you're low on ammunition.

[hydra]

Yeah, and when the chronometer was invented the government tried to stiff the inventor on the prize. Maybe we need a bigger prize, and a less confiscatory government.

--------------------------

"California looks pretty good right now with its energy efficiency program that has helped keep electricity consumption flat since the 1970s, while the rest of the US has gulped up more and more energy."

And how is the California economy doing? Hasn't much of their "efficiency" come At the cost of growth? California is still growing, but not as fast as some other states.

--------------------------------------

"The land is then rezoned & sold by the municipality at a higher price. "

Some would call this stealing.

The original owner was invested for decades, but then the county realizes the newly created value. The new value comes from three sources 1) new opportunities and markets that develop over time, which would seem to be rightfully apportioned to the patient investor that previously held the land. 2) Some value ecomes from investment and labor on the part of the developer. 3) some comes from the power of the county to rezone land, ostensibly for the kinds of public benefits mentioned: shorter commutes, less infrastructure expense, less sprawl. But as public benefits, these should be distributed to ALL the county citizens, including those that are excluded from growth by the powers that create new zoning values for some at the expense of others.

Anyway, it isn;t always the case that the county takes the land and sells it at a higher price. In my county the last operating farm was rezoned as housing in order to cause the taxes to go up enough to put it out of business. The county bought the land at its new (and realistic) value, and then used the land for a park. Some places do have a sense of ethics.

On the other hand, the same county denied a homeowner in a large lot / farmette area the right to develop, citing lack of sewer. The county then took over his property - for a sewer plant - at farm prices. His neighbors subsequently developed fine large homes which were sold for immense profits, while he got kicked out of the neighborhood, with none of the gains his neighbor enjoyed.

The idea proposed by LVTfan is old and dead. We need to more carefully evaluate how we make society "far better off" by creating artificial winners and losers.

In addition, it might be time to re-evaluate many of the claims LVTfan makes for more efficiency. If more densly populated areas, well served by infrastructure are really more efficient, why do they cost more, have higher taxes, and crummy schools? Some geographic economists propose that more and smaller cities are more efficient than one large one.

It seems to me that we have a lot of theories and rhetoric about the benefits of preventing sprawl that aren;t necessarily so. We forget that the complexity associated with more densly populated areas comes at a high price. It might be that sprawl as we usually think of it needs to be redesigned, rather than eliminated. After all, there is more than one way to shorten commutes.

[hydra]

"Land speculation would no longer be a way to make a living or add to one's fortune."

And you don't think that is command and control?

[robertdfeinman]

Until recently most discoveries were made by those who were pursuing the investigation because of intellectual curiosity, or some form of altruism (Newton, Salk).

On the other hand most technology has been driven by commercial needs (steam engine, light bulb).

Whereas Newton could get by with little in the way of research funding, Salk couldn't. Governments have realized this, especially in the era after the Manhattan Project and have provided money for basic research through newly created agencies like the NSF and NIH.

With the rise of the GOP and the idea that the commercial market could solve all problems the level of government-supported basic research has declined in real terms. This has led to a lag in new discoveries, since the GOP premise was false. Commercial interests are not geared up towards funding basic research, the chances of success are too small and the time frame too long.

When there were some government sheltered monopolies (AT&T, IBM and RCA) they could afford to run labs that conducted basic research, but this era has ended as well and what remains are development facilities, not research labs.

Expecting the commercial market to do basic research because of something like cap and trade is unrealistic. We may get some new engineering developments but the basic research will not get adequate support. Things like new research on fusion or room-temperature superconductivity are non-existent outside of a few small university projects. Either technology could solve the energy crisis if as yet undiscovered phenomena were found.

What is needed is a new mindset which parallels that in the post Sputnik era where the government strongly supported science, both research and in educating new workers with things like the NDEA (National Defense Education Act) and the scholarships it provided for graduate education.

[Gernot Wagner]

Larry (November 02, 2008 at 10:46 AM), you asked for some realism on how much it would cost to decrease carbon significantly. Here's the main conclusion:

"A business-as-usual approach, continuing with today's policies, puts the U.S. economy on a path to reach $26 trillion in January 2030. With a cap on the greenhouse gas emissions that cause global warming, the economy will reach the same level two to seven months later."

That translates into pennies a day of additional household expenditures. The full analysis and report contain lots more detail.