I wonder if industrial policy skepticism explains the fixation on carbon taxes.
If you associate subsidies with wasted money spent trying to "pick winners," you're going to prefer an agnostic approach like a carbon tax.
It seems like industrial policy is back in fashion these days. Hamiltonian approaches get much more respect than a generation ago. Maybe it was the ideas in fashion in the 1990s, as much as anything else, that accounted for climate economists fixing on a carbon tax as the One True Policy.
I think the carbon tax is an attempt to get Republican buy-in on legislation. This is akin to how the Affordable Care Act (Obamacare) virtually copied a Heritage Foundation (Republican Think Tank) proposal. This kind of wonkish market based solution was big on the Right once-upon-a-time.
I'm not sure I understand your point here. Although Republican politicians are happy to ignore climate change, 76% of Republican voters believe it is real and a threat. My point was just that that since Clinton, there has been an attempt to take advantage of market based solutions to problems and that some of this appears (at least to me) to be an attempt to increase bipartisan support.
Winning voters over does not appear to be the problem. Convincing members of congress to go against the party has been a tremendous problem.
Similarly with the ACA, digging up some old Heritage proposal -for implementing universal coverage in a blue state- does not mean that it is actually a position that the bulk of Republicans actually want or support.
It would be like a Republican digging up some moderate Democratic proposal to restrict illegal immigration from the 90s, and throwing it in a bill that they were trying to pass, and claim that Democrats were required to support it, because some Democrat-adjacent group supported it at one time.
I most assuredly did not suggest that R's were required to support it. I didn't even express surprise that they didn't. All I did was suggest that this was part of the motivation for market based solutions.
If you think that not one person who created ACA or proposed a carbon tax, thought it might help to garner some votes then say so. You could be correct. Market based solutions were also popular because they are wonkish. Either way, please stop misrepresenting me.
If you remember the Aughts, it worked the opposite way. Prior to the 2008 election, Dems were pushing carbon taxes and Republican were pushing cap-and-trade because "no new taxes". (According to standard econ theory, the two are not very different in effects). After the Dems won in 2008, they more or less adopted McCain's cap and trade proposal - upon which the Republicans insisted that carbon taxes were the only way to go and cap and trade was a sin against the holy free market or something. After a bit of foot-dragging, even McCain went along and repudiated his own proposal like Peter repudiating Jesus. And so nothing got done.
I think at some point the Dems switched back to carbon taxes but nothing ever came of it, because obviously the Republicans aren't negotiating in good faith.
First: you say "the effect of subsidies is not partially canceled out by international price effects, the way the effect of carbon taxes is."
But why should foreigners care why we're using less oil? Oil will be cheaper for them no matter why we shift away, whether to avoid taxes or exploit subsidies.
Eg, if the USA magically converted all fuel and power to renewables tomorrow, wouldn't the plunge in oil prices from American disuse lead to more foreign oil use and somewhat higher foreign emissions, whether the magical conversion at home was achieved by subsidies or taxes?
That is:
1) carbon taxes make us use less oil, because for us oil is pricier, but
2) renewable subsidies also make us use less oil, because for us renewables are cheaper, so
3) both carbon taxes and renewable subsidies reduce our oil use, so
4) both carbon taxes and renewable subsidies should lower oil prices elsewhere, so
5) both carbon taxes and renewable subsidies suffer partial cancellation of their intended "changed relative domestic prices reduces emissions," because foreigners use more oil.
Is this wrong? If it's right, how isn't this the same problem for subsidies as taxes?
The answer might be "okay, technically subsidies do also induce a foreign rise in oil use following domestic disuse, but it's overwhelmed by the learning effect," but you don't say it that way in your post.
The second thing that confused me: you say subsidies encourage learning, but taxes don't.
But in theory, higher oil prices should also encourage more investment in non-oil power sources, and more R&D in energy efficiency.
What is it about renewable subsidies that generates an unusually high learning effect?
The answer might be "energy efficiency doesn't exhibit the same kind of massive scaling we're seeing in solar, batteries, etc." That's plausible, since solar etc represent new industries with lots of concentrated development, whereas efficiency probably involves a bunch of different steps in a bunch of different places. So "new efficiency knowhow" could easily be much harder to copy on and scale up than "new solar knowhow."
Alternatively, the answer could be that a fair chunk of carbon taxes' effect would simply be in reduced consumption, which doesn't generate learning.
Third, you suggest economists were blindsided by the scale of these learning effects. Is that because the economists were naive, and this always happens with a new power industry? Did this happen with coal and oil and nuclear?
Or are solar and wind and batteries unusually good at having scaling effects, in a way that previous energy technologies weren't?
It's true that solar and wind and batteries are all made of high-tech mass-manufactured objects, and solar in particular exploits circuitry technology nearly as much as computer chips do.
But should it have been obvious that windmills would have more learning payoffs than oil wells, for example? Or were there historical large learning effects to oil adoption that the climate economists just forgot to generalize from? Or is today's "green power learning" a fortunate surprise that only a real expert would have predicted early?
1. Subsidies reduce our fossil fuel demand less than taxes in the short term, but more in the medium term (due to learning curves).
2. You already answered the second question; carbon taxes do spur some investment in renewables, but they also spur optimization along other margins, like energy efficiency and production curbs, neither of which takes advantage of learning curves.
3. Economists weren't blindsided by the scale of the learning effects; they just didn't think about it. They made their models to include only one externality -- a greenhouse gas externality. They didn't think about the technology externality.
I enjoyed reading all of that, had similar thoughts but also I always thought carbon tax would be paired with well subsidies (you could try for redistribution too but idk if that's feasible politically). At that point idk are taxes + subsidies worse than subsidies only? Maybe efficiency gains help reduce the need globally for raw resources and that's actually better than a bit quicker learning curve?
Regarding carbon taxes the issue with this is that you're telling farmers and rural livers that in order to “save the environment” they need to be pushed into poverty. A huge ask of anyone. Noahs point of view is the opposite, make solar/wind so cheap that people are incentivised to switch. Utilities knock on rural doors offer to install, free of charge, solar/wind, oh and to boot your hydro will be free.
Secondly carbon taxes are a gift to populist politicians, just ask the Yellow Vests in France.
From personal experience, this is something European minimalists seem to not understand, or not vibe with—building more, more, more—because they're anti-consumerists. But I think it's more realistic to embrace and leverage consumerism rather than trying to use less energy, there's no exponential curve because there aren't any 'natural' financial incentives.
Your article specifically mentions carbon taxes. That implies that government sets a price at which they believe the social costs of carbon are internalised, not more than some politically acceptable level. Carbon pricing as part of an emissions trading scheme (ETS) is a very different proposition. It's one that the market sets in order to achieve a set cap on emissions. Carbon trading has been very successful in the EU in incentivising the switch away from coal and towards gas and renewables.
I agree that learning by doing has worked wonders for renewables. Wright's Law tends to apply best when manufacturing scales - PV modules, wind turbines, etc. It's going to be more difficult to decarbonise the industrial sector this way. It takes several years to build and develop new industrial units, reducing the opportunity for learning by doing. Sunk cost bias also means that there is little incentive for plant owners of relatively new steel blast furnaces to move to to switch to EAF or move towards 'green' hydrogen.
It's not a case of one being better than the other. There needs to be a combination of carbon trading and subsidies.
Was wondering what the level of subdidy is for renewables as opposed to hydrocarbons like coal, gas or heating oil? Would upu have some numbers per KWh or MwH or a link?
I love this article, and I bet you could actually build a formal mathematical model (and publish a paper?) that works something like this:
Could you switch to green energy when solar panels cost $10 per Watt, using a carbon tax? Well, you could of course. I mean there's no theoretical reason why you couldn't. But the problem is, you'd have to have, just like, a BULL WHIP of a carbon tax to do that. You'd make electricity three times as expensive. By contrast, you can subsidize it until solar panels move along the learning curve.
And there's a political problem, of course. But, I bet there's even an economic problem. What's the consumer surplus etc. associated with making electricity three times as expensive? I honestly bet it wouldn't be too hard to throw together a workable model that shows that it's actually more economically efficient - in addition to being politically viable! - to do it by subsidizing renewables to make it cheaper.
- This problem was best summarized by a recent university scholar in energy: "climate change will only be solved by renewables getting cheaper and making fossil fuels obsolete, this require lots of technology but also a global grid"
What's your opinion ? do you think we need a global grid to compensate intermittency (and hence still political cooperation) to have a significant share of renewables in our energy system ?
- dr geneviere gunther just posted this, did not read it yet
but it's contradicting the theory drop in renewables will be enough apparently : "It would be easy to assume that once renewable energy sources are cheaper than fossil fuels for those uses where they represent a viable substitute, the transition will be comprehensive and swift. But if easy, it is also wrong."
In the UK we are relying this winter on interconnectors with other European countries. There is a new 1.4GW connector to Norway who also have one to Germany. It seems though that there has been little rainfall in Norway (climate change?) so their hydro is constrained and their electricity is getting very pricey. Political pressure building to reduce exports. I hope the contracts hold. After all these interconnectors are very expensive to build!
I am hearing of a proposal for a connector to Morocco where it is more sunny than in the UK! Given geopolitical stability in a rational cooperative world this would be an excellent idea. But what if a bunch of Islamists cut the wire?
First off I love you’re can do attitude towards solving this issue and your focus on economic growth rather than the relentless negativity we hear elsewhere. but having said that I’m terribly disappointed that you simply never talk about Nuclear.
Sure they run over budget and behind schedule but surely we can apply the same can do attitude that we apply to other great issues. People also have an irrational fear of nuclear waste. I lost the twitter thread but dealing with it is far cheaper simpler than getting rid of solar panels. California is, again, is the canary in the cool mine.
To Quote
"California has been a pioneer in pushing for rooftop solar power, building up the largest solar market in the U.S. More than 20 years and 1.3 million rooftops later, the bill is coming due.
Beginning in 2006, the state, focused on how to incentivize people to take up solar power, showered subsidies on homeowners who installed photovoltaic panels but had no comprehensive plan to dispose of them....
-and-
Now, panels purchased under those programs are nearing the end of their typical 25-to-30-year life cycle….. Many are already winding up in landfills, where in some cases, they could potentially contaminate groundwater with toxic heavy metals such as lead, selenium and cadmium.
Solar panels will be dealt in the same way we (Europeans) deal with our plastic waste. Collect it, compact it, ship it to Eastern Europe who ships it to Turkey which as what point we wash our hands of it.
Again I live your can do attitude but am greatly disappointed at your lack of coverage for nuclear.
I thought that solar panels can still produce about 80% of their rated power after 25 years. Even if they degrade more than that, you would imagine that there is a market for 60% rating panels. They might need new electronics and new mounting frames, but they could be salvaged. I suppose the price of new panels sets a maximum price for used panels, but there is a secondary market for all sorts of stuff past its depreciation date. Look at the market for old cars, industrial machinery and the like.
(Maybe I've got the economics wrong, but the story telling value is great. How about a science fiction story set on a solar power ranch full of aged out solar panels maintained by half price, factory second robots and a bunch of neo-hippies out of a Stewart Brand catalog?)
I'll confess that I'm one of the economists who drank the carbon tax Kool-aid. The real point of the carbon tax was to incorporate the opportunity cost of greenhouse gas emissions in decision-making. The Nineties revisions of the Clean Air Act introduced the opportunity costs of sulfur dioxide emissions in polluters decision making by giving them a measurable cost for their output of SO2. The result was a spectacular reduction in these emissions and the acid rain they produced. Effectively, the role of pollution as an input in the production process became a cost firms had to reduce.
As you point out, subsidies for renewables function as demand reducers for carbon based sources of energy. Well done.
Increasingly I'm wondering to myself whether I ever truly believed in a carbon tax, or whether I simply liked defending unpopular opinions as a way of proving how clever I was.
While I 1000% agree that economists have focused wayy too much on carbon taxes and GHGs as the only externality, there are some important exceptions you don't reference. Philippe Aghion and Daron Acemoglu published a highly cited 2012 AER paper, The environment and directed technical change, which deals with learning curves to some extent (but also seem to radically underestimate their magnitude) through their concept of "directed technical change" - a very econ way of legitimizing industrial policy imo:
Aghion, in particular, has revisited these ideas in several important follow-up papers, such as this 2016 paper on Carbon Taxes, Path Dependency and Directed Technical Change:
The UK has a lot of wind and plans to install more. There is a guaranteed price called a "strike price" expressed in 2012 £s which is inflation linked so a good return is possible - someone sent me an ad promising 7.1% though no doubt the minimum investment would be very large.
The problem is that wind being intermittent and extremely variable you need a backup system which is inevitably expensive. In the UK that is gas and with the Ukraine war and everyone else switching to gas as it has fewer emissions than coal the price has risen very very high (https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5253323&span=3).
You can watch UK electricity in real time at http://www.gridwatch.templar.co.uk/. I just looked and our wind fleet is producing 2.64% with gas+nuclear producing 52+15 = 67%. Sadly our nuclear fleet is old and closing down - how long it can stagger on is unclear. In 2028 we have a new reactor staring up which will alone supply 7% of demand, but it has been endlessly delayed. We lost our "learning by doing" skills regarding nuclear when development was stopped in 1989 (3 years after Chernobyl).
UK policy has for years concerned itself only with reducing emissions, everything else has been forgotten. We are in a dire situation.
I wonder if industrial policy skepticism explains the fixation on carbon taxes.
If you associate subsidies with wasted money spent trying to "pick winners," you're going to prefer an agnostic approach like a carbon tax.
It seems like industrial policy is back in fashion these days. Hamiltonian approaches get much more respect than a generation ago. Maybe it was the ideas in fashion in the 1990s, as much as anything else, that accounted for climate economists fixing on a carbon tax as the One True Policy.
Yep, that sounds very right.
I think the carbon tax is an attempt to get Republican buy-in on legislation. This is akin to how the Affordable Care Act (Obamacare) virtually copied a Heritage Foundation (Republican Think Tank) proposal. This kind of wonkish market based solution was big on the Right once-upon-a-time.
The carbon tax is elegant in that it basically just corrects for externalities and then theoretically lets the magic of the market handle things.
But given that most conservatives...
A) don't accept that the negative externalities exists at all, or
B) won't accept the assessment of how damaging those externalities are.
...I don't see how anyone really thought it would win enough of us over.
Hell, I'm already a carbon tax fan, but I suspect B) would be a big deal for me when the rubber meets the road.
I'm not sure I understand your point here. Although Republican politicians are happy to ignore climate change, 76% of Republican voters believe it is real and a threat. My point was just that that since Clinton, there has been an attempt to take advantage of market based solutions to problems and that some of this appears (at least to me) to be an attempt to increase bipartisan support.
Winning voters over does not appear to be the problem. Convincing members of congress to go against the party has been a tremendous problem.
( https://www.pewresearch.org/fact-tank/2020/04/16/u-s-concern-about-climate-change-is-rising-but-mainly-among-democrats/ )
Similarly with the ACA, digging up some old Heritage proposal -for implementing universal coverage in a blue state- does not mean that it is actually a position that the bulk of Republicans actually want or support.
It would be like a Republican digging up some moderate Democratic proposal to restrict illegal immigration from the 90s, and throwing it in a bill that they were trying to pass, and claim that Democrats were required to support it, because some Democrat-adjacent group supported it at one time.
I most assuredly did not suggest that R's were required to support it. I didn't even express surprise that they didn't. All I did was suggest that this was part of the motivation for market based solutions.
If you think that not one person who created ACA or proposed a carbon tax, thought it might help to garner some votes then say so. You could be correct. Market based solutions were also popular because they are wonkish. Either way, please stop misrepresenting me.
"I think the carbon tax is an attempt to get Republican buy-in on legislation."
There is not some groundswell of support among Republicans for a carbon tax, that is being stymied by GOP leadership.
A carbon tax isn't a selling point for most Republicans.
At best it is a position that most conservatives -may- accept as a compromise, if a bunch of climate stuff is going to be forced thru anyways.
If you remember the Aughts, it worked the opposite way. Prior to the 2008 election, Dems were pushing carbon taxes and Republican were pushing cap-and-trade because "no new taxes". (According to standard econ theory, the two are not very different in effects). After the Dems won in 2008, they more or less adopted McCain's cap and trade proposal - upon which the Republicans insisted that carbon taxes were the only way to go and cap and trade was a sin against the holy free market or something. After a bit of foot-dragging, even McCain went along and repudiated his own proposal like Peter repudiating Jesus. And so nothing got done.
I think at some point the Dems switched back to carbon taxes but nothing ever came of it, because obviously the Republicans aren't negotiating in good faith.
Great post. Three points confused me, though.
First: you say "the effect of subsidies is not partially canceled out by international price effects, the way the effect of carbon taxes is."
But why should foreigners care why we're using less oil? Oil will be cheaper for them no matter why we shift away, whether to avoid taxes or exploit subsidies.
Eg, if the USA magically converted all fuel and power to renewables tomorrow, wouldn't the plunge in oil prices from American disuse lead to more foreign oil use and somewhat higher foreign emissions, whether the magical conversion at home was achieved by subsidies or taxes?
That is:
1) carbon taxes make us use less oil, because for us oil is pricier, but
2) renewable subsidies also make us use less oil, because for us renewables are cheaper, so
3) both carbon taxes and renewable subsidies reduce our oil use, so
4) both carbon taxes and renewable subsidies should lower oil prices elsewhere, so
5) both carbon taxes and renewable subsidies suffer partial cancellation of their intended "changed relative domestic prices reduces emissions," because foreigners use more oil.
Is this wrong? If it's right, how isn't this the same problem for subsidies as taxes?
The answer might be "okay, technically subsidies do also induce a foreign rise in oil use following domestic disuse, but it's overwhelmed by the learning effect," but you don't say it that way in your post.
The second thing that confused me: you say subsidies encourage learning, but taxes don't.
But in theory, higher oil prices should also encourage more investment in non-oil power sources, and more R&D in energy efficiency.
What is it about renewable subsidies that generates an unusually high learning effect?
The answer might be "energy efficiency doesn't exhibit the same kind of massive scaling we're seeing in solar, batteries, etc." That's plausible, since solar etc represent new industries with lots of concentrated development, whereas efficiency probably involves a bunch of different steps in a bunch of different places. So "new efficiency knowhow" could easily be much harder to copy on and scale up than "new solar knowhow."
Alternatively, the answer could be that a fair chunk of carbon taxes' effect would simply be in reduced consumption, which doesn't generate learning.
Third, you suggest economists were blindsided by the scale of these learning effects. Is that because the economists were naive, and this always happens with a new power industry? Did this happen with coal and oil and nuclear?
Or are solar and wind and batteries unusually good at having scaling effects, in a way that previous energy technologies weren't?
It's true that solar and wind and batteries are all made of high-tech mass-manufactured objects, and solar in particular exploits circuitry technology nearly as much as computer chips do.
But should it have been obvious that windmills would have more learning payoffs than oil wells, for example? Or were there historical large learning effects to oil adoption that the climate economists just forgot to generalize from? Or is today's "green power learning" a fortunate surprise that only a real expert would have predicted early?
1. Subsidies reduce our fossil fuel demand less than taxes in the short term, but more in the medium term (due to learning curves).
2. You already answered the second question; carbon taxes do spur some investment in renewables, but they also spur optimization along other margins, like energy efficiency and production curbs, neither of which takes advantage of learning curves.
3. Economists weren't blindsided by the scale of the learning effects; they just didn't think about it. They made their models to include only one externality -- a greenhouse gas externality. They didn't think about the technology externality.
I enjoyed reading all of that, had similar thoughts but also I always thought carbon tax would be paired with well subsidies (you could try for redistribution too but idk if that's feasible politically). At that point idk are taxes + subsidies worse than subsidies only? Maybe efficiency gains help reduce the need globally for raw resources and that's actually better than a bit quicker learning curve?
Regarding carbon taxes the issue with this is that you're telling farmers and rural livers that in order to “save the environment” they need to be pushed into poverty. A huge ask of anyone. Noahs point of view is the opposite, make solar/wind so cheap that people are incentivised to switch. Utilities knock on rural doors offer to install, free of charge, solar/wind, oh and to boot your hydro will be free.
Secondly carbon taxes are a gift to populist politicians, just ask the Yellow Vests in France.
From personal experience, this is something European minimalists seem to not understand, or not vibe with—building more, more, more—because they're anti-consumerists. But I think it's more realistic to embrace and leverage consumerism rather than trying to use less energy, there's no exponential curve because there aren't any 'natural' financial incentives.
“ Democrats got this one right, and economists were left in the dust.”
Excellent opening and somewhat surprising for an economist with a PHD. Good for you, call it like it is!
Your article specifically mentions carbon taxes. That implies that government sets a price at which they believe the social costs of carbon are internalised, not more than some politically acceptable level. Carbon pricing as part of an emissions trading scheme (ETS) is a very different proposition. It's one that the market sets in order to achieve a set cap on emissions. Carbon trading has been very successful in the EU in incentivising the switch away from coal and towards gas and renewables.
I agree that learning by doing has worked wonders for renewables. Wright's Law tends to apply best when manufacturing scales - PV modules, wind turbines, etc. It's going to be more difficult to decarbonise the industrial sector this way. It takes several years to build and develop new industrial units, reducing the opportunity for learning by doing. Sunk cost bias also means that there is little incentive for plant owners of relatively new steel blast furnaces to move to to switch to EAF or move towards 'green' hydrogen.
It's not a case of one being better than the other. There needs to be a combination of carbon trading and subsidies.
Was wondering what the level of subdidy is for renewables as opposed to hydrocarbons like coal, gas or heating oil? Would upu have some numbers per KWh or MwH or a link?
I haven't seen that direct comparison yet! I'll keep looking around.
I suppose for completeness of comparison the level of taxes would need to be compared also?
Of course.
I love this article, and I bet you could actually build a formal mathematical model (and publish a paper?) that works something like this:
Could you switch to green energy when solar panels cost $10 per Watt, using a carbon tax? Well, you could of course. I mean there's no theoretical reason why you couldn't. But the problem is, you'd have to have, just like, a BULL WHIP of a carbon tax to do that. You'd make electricity three times as expensive. By contrast, you can subsidize it until solar panels move along the learning curve.
And there's a political problem, of course. But, I bet there's even an economic problem. What's the consumer surplus etc. associated with making electricity three times as expensive? I honestly bet it wouldn't be too hard to throw together a workable model that shows that it's actually more economically efficient - in addition to being politically viable! - to do it by subsidizing renewables to make it cheaper.
Actually Ivan Werning offered to write this paper with me, and I kinda want to do it.
In the words of the ever wise Palpatine: DO IT
YesYesYes!
Do it but check this out before https://www.sciencedirect.com/science/article/abs/pii/S009506961730623X
Also you guys font know me but I'd be happy to be part of this if you do it, my email address is on my Google scholar profile if you want
Bravissimo!
thanks for this noah
several comments:
- the whole mechanisms of learning curves and how solar got cheap is described in this book https://www.howsolargotcheap.com/
- This problem was best summarized by a recent university scholar in energy: "climate change will only be solved by renewables getting cheaper and making fossil fuels obsolete, this require lots of technology but also a global grid"
What's your opinion ? do you think we need a global grid to compensate intermittency (and hence still political cooperation) to have a significant share of renewables in our energy system ?
- dr geneviere gunther just posted this, did not read it yet
but it's contradicting the theory drop in renewables will be enough apparently : "It would be easy to assume that once renewable energy sources are cheaper than fossil fuels for those uses where they represent a viable substitute, the transition will be comprehensive and swift. But if easy, it is also wrong."
https://twitter.com/DoctorVive/status/1556856813588561923?s=20&t=vSBQbx6_YAbld1DA5yHeOw
In my opinion, the renewables revolution is the only climate plan that I made me believe this problem could be solved but this still require work :)
A global grid seems unrealistic, but battery storage seems very realistic since it’s already been deployed in some places. See, for example: https://www.cbsnews.com/sanfrancisco/news/pg-e-shows-off-new-tesla-battery-project-in-moss-landing/
What remains is reducing cost and increasing scale.
In the UK we are relying this winter on interconnectors with other European countries. There is a new 1.4GW connector to Norway who also have one to Germany. It seems though that there has been little rainfall in Norway (climate change?) so their hydro is constrained and their electricity is getting very pricey. Political pressure building to reduce exports. I hope the contracts hold. After all these interconnectors are very expensive to build!
Large regional grids spanning Europe or North America sound a lot more plausible.
I am hearing of a proposal for a connector to Morocco where it is more sunny than in the UK! Given geopolitical stability in a rational cooperative world this would be an excellent idea. But what if a bunch of Islamists cut the wire?
To complete, I think economists just never succeeded in solving the coordination problem,
they were always relying on international agreements and carbon tax, things that never happened
the real originality was to succeed in making ren cheaper with learning curves with any kind of political agreement
First off I love you’re can do attitude towards solving this issue and your focus on economic growth rather than the relentless negativity we hear elsewhere. but having said that I’m terribly disappointed that you simply never talk about Nuclear.
Sure they run over budget and behind schedule but surely we can apply the same can do attitude that we apply to other great issues. People also have an irrational fear of nuclear waste. I lost the twitter thread but dealing with it is far cheaper simpler than getting rid of solar panels. California is, again, is the canary in the cool mine.
To Quote
"California has been a pioneer in pushing for rooftop solar power, building up the largest solar market in the U.S. More than 20 years and 1.3 million rooftops later, the bill is coming due.
Beginning in 2006, the state, focused on how to incentivize people to take up solar power, showered subsidies on homeowners who installed photovoltaic panels but had no comprehensive plan to dispose of them....
-and-
Now, panels purchased under those programs are nearing the end of their typical 25-to-30-year life cycle….. Many are already winding up in landfills, where in some cases, they could potentially contaminate groundwater with toxic heavy metals such as lead, selenium and cadmium.
Link: shorturl.at/DHP06
Solar panels will be dealt in the same way we (Europeans) deal with our plastic waste. Collect it, compact it, ship it to Eastern Europe who ships it to Turkey which as what point we wash our hands of it.
Again I live your can do attitude but am greatly disappointed at your lack of coverage for nuclear.
Found it,
MYTH: We don't have a solution to nuclear's "waste problem"
REALITY: Nuclear waste isn't a problem. In fact, it’s the best solution we have to meeting our energy needs while protecting the natural environment!
Here's what you need to know:
https://twitter.com/MadiHilly/status/1550148385931513856?s=20&t=AvRAU0L2uHY0-RiZifhHog
I thought that solar panels can still produce about 80% of their rated power after 25 years. Even if they degrade more than that, you would imagine that there is a market for 60% rating panels. They might need new electronics and new mounting frames, but they could be salvaged. I suppose the price of new panels sets a maximum price for used panels, but there is a secondary market for all sorts of stuff past its depreciation date. Look at the market for old cars, industrial machinery and the like.
(Maybe I've got the economics wrong, but the story telling value is great. How about a science fiction story set on a solar power ranch full of aged out solar panels maintained by half price, factory second robots and a bunch of neo-hippies out of a Stewart Brand catalog?)
A timely paper came a few weeks ago, that traces the history and fast growth of the scientific field that models 100% renewable energy. "Hundreds of peer reviewed studies now claim 100%RE is possible worldwide against low cost." See https://www.helsinkitimes.fi/themes/themes/science-and-technology/22012-researchers-agree-the-world-can-reach-a-100-renewable-energy-system-by-or-before-2050.html#.YvPUxCrrWdI.twitter and https://ieeexplore.ieee.org/document/9837910
I'll confess that I'm one of the economists who drank the carbon tax Kool-aid. The real point of the carbon tax was to incorporate the opportunity cost of greenhouse gas emissions in decision-making. The Nineties revisions of the Clean Air Act introduced the opportunity costs of sulfur dioxide emissions in polluters decision making by giving them a measurable cost for their output of SO2. The result was a spectacular reduction in these emissions and the acid rain they produced. Effectively, the role of pollution as an input in the production process became a cost firms had to reduce.
As you point out, subsidies for renewables function as demand reducers for carbon based sources of energy. Well done.
Increasingly I'm wondering to myself whether I ever truly believed in a carbon tax, or whether I simply liked defending unpopular opinions as a way of proving how clever I was.
Fascinating stuff, Noah. Thanks.
One small style point for some of us across the Atlantic - the initials 'IRA' are already taken and don't have a particularly positive connotation.
Independent Retirement Account?
While I 1000% agree that economists have focused wayy too much on carbon taxes and GHGs as the only externality, there are some important exceptions you don't reference. Philippe Aghion and Daron Acemoglu published a highly cited 2012 AER paper, The environment and directed technical change, which deals with learning curves to some extent (but also seem to radically underestimate their magnitude) through their concept of "directed technical change" - a very econ way of legitimizing industrial policy imo:
https://www.aeaweb.org/articles?id=10.1257/aer.102.1.131
Aghion, in particular, has revisited these ideas in several important follow-up papers, such as this 2016 paper on Carbon Taxes, Path Dependency and Directed Technical Change:
https://www.journals.uchicago.edu/doi/abs/10.1086/684581
Aghion also has a great discussion of these ideas in his 2021 book, the Power of Creative Destruction, which I thoroughly recommend:|
https://www.amazon.com/Power-Creative-Destruction-Economic-Upheaval/dp/B09M55Y76F/ref=sr_1_1?crid=1KCG57XY5PV8C&keywords=the+power+of+creative+destruction&qid=1660234461&sprefix=pc+microphone+headset%2Caps%2C86&sr=8-1
The UK has a lot of wind and plans to install more. There is a guaranteed price called a "strike price" expressed in 2012 £s which is inflation linked so a good return is possible - someone sent me an ad promising 7.1% though no doubt the minimum investment would be very large.
The problem is that wind being intermittent and extremely variable you need a backup system which is inevitably expensive. In the UK that is gas and with the Ukraine war and everyone else switching to gas as it has fewer emissions than coal the price has risen very very high (https://www.theice.com/products/910/UK-Natural-Gas-Futures/data?marketId=5253323&span=3).
You can watch UK electricity in real time at http://www.gridwatch.templar.co.uk/. I just looked and our wind fleet is producing 2.64% with gas+nuclear producing 52+15 = 67%. Sadly our nuclear fleet is old and closing down - how long it can stagger on is unclear. In 2028 we have a new reactor staring up which will alone supply 7% of demand, but it has been endlessly delayed. We lost our "learning by doing" skills regarding nuclear when development was stopped in 1989 (3 years after Chernobyl).
UK policy has for years concerned itself only with reducing emissions, everything else has been forgotten. We are in a dire situation.