Well, duh.
From the DOE/Lawrence Berkeley National Laboratory
New research suggests cap and trade programs do not provide sufficient incentives for innovation
Cap and trade programs to reduce emissions do not inherently provide incentives to induce the private sector to develop innovative technologies to address climate change, according to a new study in the journal Proceedings of the National Academy of Sciences.
In fact, said author Margaret Taylor, a researcher at Lawrence Berkeley National Laboratory (Berkeley Lab) who conducted the study while an assistant professor at the University of California, Berkeley’s Goldman School of Public Policy, the success of some cap and trade programs in achieving predetermined pollution reduction targets at low cost seems to have reduced incentives for research and development that could help develop more appropriate pollution control targets. Taylor is a scientist in the Environmental Energy Technologies Division of Berkeley Lab.
“Policymakers rarely see with perfect foresight what the appropriate emissions targets are to protect the public health and environment—the history is that these targets usually need to get stricter,” said Taylor. “Yet policymakers also seldom set targets they don’t have evidence that industry can meet. This is where R&D that can lead to the development of innovative technologies over the longer term is essential.”
In the study, Taylor explored the relationship between innovation and cap and trade programs (CTPs). She used empirical data from the world’s two most successful CTPs, the U.S. national market for sulfur dioxide (SO2) control and the northeast and mid-Atlantic states’ market for nitrogen oxide (NOx) control. (Respectively, Title IV of the 1990 Clean Air Act and the Ozone Transport Commission/NOx Budget Program.)
Taylor’s research shows that before trading began for these CTPs, analysts overestimated how difficult it would be for emissions sources to achieve targets, in a pattern frequently observed in environmental health, safety, and energy efficiency regulation, including all of the world’s CTPs. This was seen in overestimates of the value of allowances, which are permits to release a certain volume of emissions under a CTP. If an entity can reduce emissions cheaply, they can either sell these allowances for whatever price they can get on the market or they can bank these allowances to meet later emissions restrictions.
The cap-and-trade programs Taylor studied exhibited lower-than-expected allowance prices, in part because program participants adopted an unexpected range of approaches for reducing emissions sources in the lead-up to trading. A large bank of allowances grew in response, particularly in the SO2 program, signaling that allowance prices would remain relaxed for many years.
But this low-price message did not cause the policy targets in the CTPs to change, despite evidence that it would not only be cheaper than expected to meet these targets, but it would also be more important to public health to tighten the targets, based on scientific advances. The lower-than-expected price signal did cause emissions sources to reassess their clean technology investments, however, and led to significant cancellations, Taylor reported.
Meanwhile, the low price also signaled to innovators working to develop clean technologies – which are often distinct from the emissions sources that hold allowances – that potential returns to their research and development programs, which generally have uncertain and longer-term payoffs, would be lower than expected.
This effect also helps explain the study’s finding that patenting activity, the dominant indicator of commercially-oriented research and development, peaked before these CTPs were passed and then dropped once allowance markets began operating, reaching low levels not seen since national SO2 and NOx regulation began in 1970.
“There are usually relatively cheap and easy things to do at the start of any new environmental policy program,” said Taylor, who specializes in policy analysis, environmental and energy policy, and innovation. “But if doing these things has the tradeoff of dampening the incentives for longer-term innovation, there can be a real problem, particularly when dramatic levels of technological change are needed, such as in the case of stabilizing the global climate.”
Lawrence Berkeley National Laboratory addresses the world’s most urgent scientific challenges by advancing sustainable energy, protecting human health, creating new materials, and revealing the origin and fate of the universe. Founded in 1931, Berkeley Lab’s scientific expertise has been recognized with 13 Nobel prizes. The University of California manages Berkeley Lab for the U.S. Department of Energy’s Office of Science. For more, visit www.lbl.gov.
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Well, d’uh! What incentive, when one can just skim of a huge profit and retire? Who would want to actually INVENT something?
So the message
[Lost your train of thought? ~dbs, mod.]
it did it’s main job, it made Al gore a shed load of money.
So the message is:
1. Don’t underestimate the ability of free enterprise to innovate and to comply with policy requirements at low cost, even if they complain bitterly ahead of compliance.
2. Innovating to reduce carbon emissions will not be as expensive as many people expect and therefore will have minimal impact on the economy.
So now we have evidence that all that handwringing you guys were doing is not “worse than we thought”. No surprises there for me.
“…particularly when dramatic levels of technological change are needed, such as in the case of stabilizing the global climate.”
The woman clearly suffers from delusional thought patterns.
Is this a Duh! moment? Did they not understand that penalizing a company might get their reluctant obedience, but will never gain their enthusiastic support?
And what is the scientific evidence that there is a need for a CO2 ‘Cap and Trade’ boondoggle?
It seems to be a nice little earner for bankers and politicians who run the scheme. But the costs get passed onto the consumers who are then in ‘energy poverty’ – all very Malthusian after all the people in energy poverty have a very low QALYS score; so probably it is better for everyone if they succumbed and ceased being a drain on the politicians’ budgets.
What a waste of time and money. These carbon schemes will soon be forgotten.
lack of incentives = lack of tax dollars to dump down a blackhole with no tangible benefit to society.
Support thorium nuclear instead at least it has the benefit of producing a usable energy source.
I just ran across this comment which explains a lot of the mindset of these supermarket predators.
I wonder how he is going to like wading through thigh deep snow to the wood pile (If he is lucky enough to have wood) when the climate takes a down turn in temperatures. Try cutting wood without a chainsaw to get a real appreciation for civilization. BTDT
Considering that Cap and Trade was a brainstorm designed by one very specific company in order to profit that company handsomely, it is no wonder that it doesn’t help things in the generic sense.
Cap and Trade was a brainchild of Enron. Enron was going to capitalize on the “green” movement and the greenies bit hook, line and sinker. Trouble is, Enron evaporated but the Cap and Trade nonsense lived on. Enron just wasn’t there to shepherd the market they way they had planned to and so it went away. Most of the greenies either didn’t know about Enron’s plans or didn’t want to admit to being in cahoots with Enron. So … here we are.
I would say this article from 10 years ago is as pertinent now as it was then:
http://cei.org/op-eds-and-articles/enron-sought-global-warming-regulation-not-free-markets
I’ve always said that ANY Cap and Trade program was simply a money making scam. If a Substance (like sulfur dioxide, mercury, whatever) is hazardous, then there should be a set price on it’s release. None of this trading of ‘indulgences’. When you have to pay for each ton released, then you have a continuing incentive to improve efficiency.
The important thing then becomes having those who determine the price do so in respect to the true level of danger and the technological reality of how hard it is to reduce release levels. Otherwise you end up with something like the current EPA’s obsessive rulings on CO2 and Mercury.
15 March: Tennessean: TN House passes resolution condemning Agenda 21
The state House of Representatives voted 72-23 in favor of House Joint Resolution 587, which denounces the non-binding Agenda 21 plan adopted by a United Nations environmental conference two decades ago…
Little known even in environmental and planning circles until recently, Agenda 21 has grabbed the attention of conservative groups, who say the document calls on national and local governments to pursue environmental goals by limiting property rights and freedom..
Two other states, Georgia and New Hampshire, have considered anti-Agenda 21 measures this year…
http://www.tennessean.com/article/20120315/NEWS/303150098/TN-House-passes-resolution-condemning-Agenda-21
By the time a Cap & Trade program for a particular pollutant gets enacted, the technology has already advanced making further research and development high cost. CFC’s didn’t get regulated until DuPont had HFA’s and other substitutes. The Montreal Protocol was after the fact. Technology will advance ahead of implementation, because the lag in implementation is in the rule making process.
Those in love with governmental regulation fail again and again as it is usually cheaper to implement “best practice” rather than governmental cattle prodding tactics induced behavior changes. Rules by governmental agencies make most processes less fluid and more static. Our tax code is a living example of rules which are no longer relevant (corn subsidy), and riddled with unintended consequences (more costly food for developing nations).
Taxing the carbon cycle is equally futile and misaligned not only because there is fundamental deficits in understanding what is “natural”, but lacks a basic understanding what is possible and impact full. Rushing to regulate when fundamental understanding is lacking, encourages disastrous outcomes and social messes.
Governments of all sizes try to equate the agreed upon rules cops on the beat enforce with regulating vast industries, weather and climate. This simplistic concept speaks to how little the people in government, especially the people who do the implementation of poorly understood and thought out regulations, end up making the rules as they go. The rule-making process is usually short on facts, loaded with optimistic projections, constrained by a deadline, and almost always has the wrong participants; i.e., missing the contrary perspective.
Our current EPA agenda with the Endangerment Finding is a quintessential rule-making agency of mediocre regulators adept at political infighting.
Our current Department of Energy funding of solar and wind alternative projects is a representative of the urgency to gore the oil/coal ox. The agenda is no longer to make the USA energy secure, rather, reaching for the Holy Grail of energy sustainability, as if there were such a thing. Funny how costs are not factored into the equation. Artificial subsidies instead of research and innovation.
Predicable outcomes all the way around, almost all government agencies are off the rails. One simple solution, made all laws with non-renewable sunset provisions. If a deadline is staring you in your face, you will have to make new laws and regulations contemporary and not try to bend one agency to do new tasks (NASA to be a climate agency vs NOAA), which inevitably creates duplication and…. government waste. Surprise!
This is most interesting but in effect quite predictable. The private sector is only interested in maximizing return to investors. This goes for producing industry and for innovation industry. The only way one can achieve the type of results desired is through more costly means with few if any escape or delay clauses. That is somewhat draconian and may not be politically acceptable.
“Policymakers rarely see with perfect foresight…”
Rarely?!
/snark
All of this crap based on the false assumption that CO2 is causing catastrophic global warming!
Well, I had made a post here stating my opinion of Cap and Trade, but it didn’t come up or even say it’s awaiting moderation, so I assume it wondered off and got lost. Oh well.
Basically I said that my opinion was that C&T is a scam, and that if a substance was really a danger to the environment then the proper response was a set price (per ton or whatever). This encourages continuous research into mitigation technology, and provides an incentive for all produces to use the most economical response available. And it allows the accepted level of production to be modified over time by adjusting the price.
People, we should be kind to the climate alarmists. Someday they may become a valuable source for replacement protein. Those Traeger BBQ’s can make almost anything taste like juicy chicken.
[Moderator’s Suggestion: Change your screen name to Jonathon Swift and be sure to add a /sarc tag. -REP]
I disagree. All of this crap is based on the assumption that there is a FORTUNE to be made by both private industry and politicians if the public can be convinced that CO2 is causing catastrophic global warming.
Keep in mind that one of the primary sources of wealth for members of Congress has been insider trading. They work on regulatory bills and trade the stocks of companies who will be impacted by their regulation and they make a fortune (see a book called “Throw Them All Out”). If you regulate energy, your regulations impact the entire economy. You have a much wider array of ways to make money hand over fist through regulations. For example, you are working on a regulation you know will have a major negative impact on airlines, so just before news about the regulation is released, you sell a bunch of airline stock short. The stock goes down after release of the information and you make money on your short sale. Now you cover the short at a profit and go long because you are about to announce an amendment to the legislation that will ease the burden on the airlines and their stock will rise. You make the trade, make the announcement, and profit handsomely again as the stocks in airlines now rise.
Not only that, but now you have some huge deep-pocket campaign donors standing to make a fortune on these regulations as well. So they are supporting the legislation AND dumping tons of cash into your campaign fund (which you are allowed to keep when you retire from Congress).
This is about profit, folks, this isn’t about “the planet”.
So the DOE wonders why the Enron strategy has not worked to produce a “market based solution” to what? A fanciful belief that 97% of the scientists polled are right about the earth warming in the last 100 years is due to an assumed after the poll correlation to CO2. The DOE and the EPA do the bidding of Mr. Green. Mr. Green’s interests are not the interests of the general public.
“Policymakers rarely see with perfect foresight what the appropriate emissions targets are to protect the public health and environment—the history is that these targets usually need to get stricter,” said Taylor.
Appropriate for what? What history? Why stricter? Is the mere existence of the control a problem?
Cap ‘n’ trade proponents have always failed to look at other incentives to reduce the carbon emissions, such as the high oil price.
They also fail to appreciate that there is no close substitute for high carbon energy. If there is no close substitute then carbon credits become an additional cost.
They also fail to appreciate how easy it is to switch some jobs (especially manufacturing) to low cost areas. If additional costs are imposed in some areas (California, Australia, EU), then some jobs will be switched to areas where no costs exist (China).
Are you suggesting that Mr. Swift would have approved of climate Lilliputians being roasted on kabob sticks as a means of carbon reduction ?
left hand doesn’t know what the right hand is doing?
18 March: Jakarta Globe: Grace Chua: Straits Times: WWF, Singapore Disagree Over Carbon Emissions Count
Your carbon emissions are still too high but, hey, Singapore is doing a great job when it comes to energy efficiency and others can learn from you.
That seems to be the “yes, but…” response from the World Wide Fund for Nature (WWF), in the wake of a rebuttal by Singapore’s National Climate Change Secretariat (NCCS) to scathing remarks about the Republic’s greening efforts.
Earlier this month, media reports said that the WWF’s Living Planet Report (2010) had named Singapore as having the highest per capita carbon footprint in the Asia-Pacific region…
Last week, the NCCS — which comes under the Prime Minister’s Office — responded sharply, saying the comment “seriously misrepresents the situation.”
The key bone of contention is the methodology. The WWF counts emissions from goods that a country imports as attributed to that country.
But in the United Nations’ methodology, adopted by Singapore, those emissions are attributed to the country producing those goods…
National University of Singapore geography associate professor Victor Savage, who studies sustainable development, agreed with the NCCS’ point about “per capita” distortions.
He said using per capita emissions ratings lets large carbon emitters like China, Germany and Australia off the hook. They may not have high per capita emissions, but they are large overall emitters…
In February, a University of British Columbia study ranked the Republic bottom of 150 countries in its “ecological deficits,” meaning it used far more of the earth’s resources than it could supply.
In response to that study, the Ministry of the Environment and Water Resources said Singapore should be compared with other city-states, not larger nations with more natural resources.
The Asian Green City Index by technology firm Siemens last year rated Singapore tops in its management of waste and water resources, and gave it high marks in sanitation and environmental governance.
http://www.thejakartaglobe.com/international/wwf-singapore-disagree-over-carbon-emissions-count/505564