a “carbon cap” necessarily means that a government is committing to either a cessation of economic growth or to the systematic advancement of technological innovation in energy systems on a predictable schedule, such that economic growth is not constrained. Because halting economic growth is not an option, in China or anywhere else, and because technological innovation does not occur via fiat, there is in practice no such thing as a carbon cap.
Pointer from Mark Thoma.
If you assume a Leontief production function, then this is correct. You either come up with a way to reduce the fixed coefficient of carbon/output or you reduce output.
Instead of a fixed-factor production function, assume some substitutability, in which you can produce the same output with less carbon emissions and more of some of other factor of production–labor, capital, or other forms of energy. That would mean that you can vary the carbon/output ratio with existing knowledge, so that Pielke is not correct. He might argue that the elasticity of substitution is quite small, which may plausibly be the case.
I am skeptical that a carbon cap would be implemented effectively. The more narrowly it is implemented, the more the substitution will be between two different sources of carbon emissions rather than away from overall carbon emissions. Thus, the recent announcement by the EPA that it will target the electric power industry for a 30 percent reduction in emissions over a period of decades strikes me as unwise from even the most staunch environmentalist perspective. Assuming that the policy were to stick and the reduction were to be achieved within that industry, it would most likely be the result of a shift of carbon-intensive energy sources to uses in other sectors. It is not hard to picture a scenario in which total carbon emissions actually increase as a result, because you are directing carbon-based energy sources into less efficient uses.
Regardless, the EPA announcement works well as a gesture. And politics seems to be mostly about gestures. In Hansonian terms, politics is not about policy.
There is plenty of reason to be skeptical of effective implementation, but making coal less attractive is not one of them. Coal as the cheapest fossil fuel is already used as much and as everywhere as can be and is tolerated and also has the worst carbon profile. Because of this, any tax on coal can’t be shifted until its cost exceeds that of natural gas. We could base the entire carbon reduction on coal and still not have to worry about that.
This is pretending that coal’s only cost is carbon production. Natural gas dosn’t not produce carbon. It just produces less in power plants. But natural gas can be used in different applications than burning it for electricity. And it is likely in a price bottom.
And this also is why I think the current Supreme Court is awful: The EPAs mandate barely if at all allows for regulating carbon, and only if it protects health and welfare. As Arnold shows, there are scenarios where neither are true and the welfare part is almost certainly not true. Thus, the EPA has been forced by the Supreme Court and those who take their decisions as carte blanche (through a mis-application of a mis-interpreation) to violate their charter. The Supreme Court has taking words like “may, if” and interpreted them to mean “has to, regardless.” It has done this with several other decisions.
This proposal is banning coal and mandating natural gas. Even in the improperly cited decision used to justify this supposed authority, the Supreme Court stated this kind of thing would not be allowed. But…just call it a tax!
I’d feel a little better if the economists pushing “carbon caps” weren’t the same ones who pushed Cash For Clunkers. And thought it was a success.
http://delong.typepad.com/sdj/2010/04/wow-cash-for-clunkers-worked-graph-of-the-day-for-april-7-2010.html
Inconvenient Truth: Coal use must be curtailed. Just ask China. The only question is how.
Inconvenient truth: This is just the beginning. The same people who want coal use curtailed also want natural gas, oil, hydropower and nuclear curtailed. And their side is winning.
The future is either renewable or unsustainable, regardless of climate change: Oil is a huge pipeline of dollars to brutal people who don’t like us very much. Nuke waste continues to be unmanageable even if you think Fukushima can’t happen here. Hydro can’t expand.
Natgas is the bridge fuel, assuming we can keep frackers from poisoning our aquifers.