Can’t Change Energy Policy Without Revenue

I think this is a great example of the shortsightedness of alternatives to carbon pricing:

Two senators unveiled legislation Monday to double U.S. nuclear energy output in 20 years and foster clean energy options with “mini-Manhattan Projects” named for the original U.S. atomic bomb push.

Sen. Jim Webb (D-Va.) and Sen. Lamar Alexander (R-Tenn.), noting they cannot support the cap-and-trade climate bill now churning through the Senate, said their plan could cost $20 billion over 10 years. It would include $100 billion for carbon-free electricity loan guarantees, expected to chiefly benefit the U.S. nuclear industry.

It would also offer $750 million per year for 10 years to fund carbon-capture-and-storage technology—sometimes known as “clean coal”—as well as biofuels made from non-food crops, advanced batteries for electric cars and trucks, solar power, and recycling of used nuclear fuel.

Completely leaving aside the merits of these projects, this costs money. Where are you going to get the money from? Well, one potential source of revenue would be to tax greenhouse gas emissions or else to impose a cap on them and auction permits. Of course you could get the revenue some other way—tax people’s income, or their consumption in general. But a tax on climate pollution would be at least as economically efficient as any alternative, and would increase the environmental efficacy of any of these ideas. I wrote this back in a review of Nordhaus & Shellenberger’s Break Through and I think it still holds up today:

But whatever the shortcomings of their rhetoric, environmentalists have a very good reason to push for some limits, however much of a downer that message might be. Global warming is caused by carbon emissions and can be contained only by reducing them. Nordhaus and Shellenberger’s preferred alternative — huge investment in alternative energy — doesn’t really stand up to scrutiny. For one thing, without mandatory curbs on emissions, it might not work. For another thing, emissions caps would effectively provide a subsidy to less polluting alternatives, one that would be harder for lobbyists to manipulate and that wouldn’t require lawmakers to pick winners among various possible technologies. Finally, even as a matter of crass politics, Nordhaus and Shellenberger neglect a basic point: the hard part about gaining support for a new initiative isn’t convincing people of its value but finding the money to pay for it. The conventional solutions to global warming posed by the “politics of limits” — taxing carbon emissions, or issuing tradeable emissions to carbon-producing firms — conveniently raises revenue that could be used to pay for the very projects the authors wish to see.

If you think that human industrial activity isn’t causing climate change, that is a good reason to oppose limiting climate pollution. But we’ve seen this kind of proliferation of false alternatives to the mainstream carbon pricing agenda from within a group of people who claim to recognize the basic shape of the problem. But whatever it is that you think the “real” answer is—even if it’s artificial trees or more nuclear subsidies or a crash carbon sequestration research problem—you still come around to the fact that the best way to pay this stuff is to make the emitters of greenhouse gas pollution subsidize your preferred version of the clean energy agenda. Someone, after all, will have to pay the bill.