Market News

 January 07, 2019
"Innovation": the latest GOP smokescreen on climate-change policy

 The politics of climate change are shifting against the GOP. New polling shows that majorities of Republicans accept that climate change is a problem and support steps to address it. It is mainly the stubborn core of far-right conservatives, mostly older white men, that still rejects reality altogether.

It's a crucial juncture for the party. There are two ways it could go.

The first is a good-faith search for conservative-friendly climate solutions. A handful of Republicans are taking this route, supporting a bill called the Energy Innovation and Carbon Dividend Act, introduced in the House in November and (in a slightly different form) the Senate earlier this month. It would implement a $15 carbon tax, rising at $10 a year, with all the revenue returned as per-capita dividends, aiming to reduce US carbon emissions 40 percent within 10 years and 90 percent by 2050. It's a credible, ambitious climate effort. It's got two Republican co-sponsors in the House and one in the Senate.

(It is distinct from the similar though somewhat less ambitious proposal from the Climate Leadership Council, which is backed by several retired Republicans and the Americans for Carbon Dividends PAC.)

The problem is that most GOP funders and elected officials remain devoted to the cause of protecting fossil fuels, and protecting fossil fuels is, by definition, incommensurate with serious action on climate change.

So most of the party's prominent figures have opted for the second route: bullshitting.

In some cases, it's just an incoherent pastiche. For a particularly pungent example, check out this op-ed from Holman Jenkins Jr., the longtime Wall Street Journal editorialist. Jenkins is to climate change what the WSJ's Stephen Moore is to economics: loudly, pugnaciously, and consistently wrong.

In his latest piece, Jenkins attempts simultaneously to cling to a bunch of the denialist myths he's peddled for years and to chide climate activists for their lack of "maturity" in not supporting nuclear power or a carbon tax --- solutions to a problem he does not believe warrants attention. (Large swaths of the left support the former and there is near-universal support on the left for the latter, but never mind that.) The sole intellectual organizing principle seems to be that the left, or at least the left of Jenkins's stale imagination, must be bad and wrong.

But in other cases, there is some rhyme and reason to the bullshitting. One recent rhetorical gambit from Republicans is a retreat from "climate change is a hoax" to "we don't know how much humans contribute," which, as I wrote recently, is just another way of denying the science. (There is much uncertain in climate science, but human contribution is not part of it. We are definitely causing global warming.)

And when science denial becomes sufficiently untenable, the final line of defense, now as ever, is economic: Anything government does to counter climate change will just mess up the economy and cost taxpayers money. Sen. Marco Rubio (R-FL) told CNN he believes the climate is changing, but "I'm also not going to destroy our economy."

However, with clean energy technologies so visibly booming, coal so visibly dying, and climate change in the headlines, a purely negative message is not enough. GOP "moderates," the ones who still want to appear on Meet the Press, need some kind of positive message.

It won't be a carbon tax, at least not for the bulk of the party, at least not any time soon. As right-wing lobbyist and ideological enforcer Grover Norquist says, the vast bulk of elected Republicans are against it.

So what can the positive message be, then?

The answer, it seems, is "innovation."

What "innovation" means to the GOP

As The Hill recently noted, a growing number of Republicans have "settled on innovation as their primary position to counter progressive Democrats" on climate change. Innovation "has a critical role," Sen. Cory Gardner (R-CO) said.

Sen. Ben Sasse (R-NE) told Fox News Sunday in November, "What the US needs to do is participate in a long-term conversation about how you get to innovation, and it's going to need to be a conversation again that doesn't start with alarmism."

And most notably, Sen. John Barrasso (R-WY), current chair of the Senate Environment and Public Works Committee, wrote a New York Times op-ed called "Cut Carbon Through Innovation, Not Regulation."

The US has reduced emissions recently not through "punishing regulations, restrictive laws or carbon taxes," he writes, "but because of innovation and advanced technology, especially in the energy sector." He touts "investment, invention, and innovation."

There's no arguing: These are nice words. You'd be hard pressed to find an analyst in any field of economic policy who is against invention and innovation. Indeed, I have trouble recalling a single articulation of the anti-innovation position (though I'm open to correction).

But in the remainder of the op-ed, Barrasso --- who has a lifetime score of 8 percent from the League of Conservation Voters --- reveals what he means, and as climate policy, it is ... unimpressive.

Rather than taxes, regulation, or legislation, Barrasso is eager to offer subsidies to the nuclear industry. He also wants to subsidize various uses for carbon dioxide captured from fossil fuel combustion --- like enhanced oil recovery, which uses CO2 to force more oil out of the ground. (Needless to say, Barrasso is not among the co-sponsors on any carbon tax bill.)

That's it. There's not so much as a mention of whether these particular subsidies to large energy incumbents might produce the emission reductions needed, or any emission reductions at all. And Barrasso frames them as an alternative to policies that cost taxpayers money --- as though subsidies are free.

It isn't a climate policy. Like Paul Ryan's infamous child-poverty initiative, it is an attempt to repackage familiar conservative policies --- in this case, sporadic subsidies to favored industries, along with a promise of deregulation --- under a fresh label.

Taking innovation seriously

The Washington Post's indispensable Catherine Rampell points out one key bit of incoherence in this position: "Taxing carbon is exactly how you get faster innovation. That's kinda the point."

And that's true --- but we should go further.

The fact is, we have driven innovation in a number of clean-energy technologies, including solar panels. We know how to do it. And it involves more than carbon taxes (and random subsidies).

As carbon policy expert Hal Harvey (head of Energy Innovation and co-author of a recent book on effective climate policies) told me in our recent conversation, the form of policy help a technology needs depends on where it is on the learning curve.

For early-stage technologies --- tech still in basic research or prototyping, like algae fuels or advanced nuclear --- good old-fashioned R&D spending helps, both for government research and to induce private-sector research.

For technologies trying to bridge the "valley of death" between prototype and market viability, or trying to expand a small but growing market segment, performance standards and other regulations that help.

And for mature technologies with developed supply chains, price-based instruments like carbon taxes help. They induce sales volume, and --- this is key --- scale is the single biggest driver of innovation. Nothing improves engineering, economizes supply chains, and drives down prices like economies of scale.

In other words, innovation does not happen by magic or pure entrepreneurial pluck. It is induced by market-shaping policies.

Conservative fanfic to the contrary, no technology has ever developed in a "free market." Trace any innovation back far enough and you find a shaping role for government policy and assistance --- not at every stage the dominant driver, but never absent, never "neutral." Government has always played an active supporting role in technology development, "picking winners and losers." (Two book recommendations on this: State of Innovation by Fred Block and The Entrepreneurial State by Mariana Mazzucato.)

This is just as true for the innovations that have helped the US reduce emissions (fracking, energy efficiency, and renewable energy) as for any other. The innovations Barrasso now touts did not spring forth from the ether --- they trace back to smarter government policy than the kind he advocates.

"What these folks don't seem to understand is that most successful US innovations have required significant federal R&D funding, as well as policies that create market opportunities to get technologies deployed," Lindsey Walter of the policy shop Third Way says. "We need policy to do both. And I don't hear these newfound advocates for innovation calling for either."

In very broad strokes, Republicans are correct that innovation is central to climate policy. Seen from a certain angle, the climate challenge is simply the challenge of scaling up and substituting clean technologies for dirtier ones.

We know how to accelerate technology development and innovation. But it has nothing to do with the strategy Republicans like Barrasso favor, which is to protect incumbent industries from any standards that might in any way constrict them, taxes that might in any way cost them, or laws that might in any way disturb them --- and instead subsidize their efforts to remain viable.

Taking innovation seriously means instituting a rising carbon tax. It means tripling or quadrupling the US energy-research budget and substantially increasing (ideally performance-based) grants, tax credits, prizes, and other financial incentives. And it means implementing and gradually tightening performance standards, on both energy efficiency and pollution.

Taxing, spending, and regulating: These are all things a true climate-innovation agenda requires. And they are all things the Republican Party, in its current configuration, is incapable of supporting.

That's why they're bullshitting.