From the last page of Bill Gates’s annual letter:
One area that I have been spending a lot of personal time on is energy and its effect on climate. The most important innovation required to avoid climate change will be a way of producing electricity that is cheaper than coal and that emits no greenhouse gases. There will be a huge market for this, and governments should supply large amounts of funding for basic R&D. Because the foundation invests in areas where there is not a big market, I have not yet seen a way that we can play a unique role here, but I am investing in several ideas outside the foundation. I am surprised that the climate debate hasn’t focused more on encouraging R&D since it is critical to getting to zero emissions.
Dear Mr Gates: With all due respect, you need to spend a little more personal time on this. First of all, it is simply wrong to suggest that a “huge market” for “producing electricity that is cheaper than coal and that emits no greenhouse gases” will magically come into being. Without a price on carbon, the market will assign clean energy exactly the same value that it assigns dirty energy; in other words, without a dollop of government intervention (e.g., through a carbon tax or cap-and-trade system) there will be no “huge market” for technology specifically because it is green.
Second, it is wrong in terms of both theory and practice to say that “the climate debate hasn’t focused more on encouraging R&D”. As a theoretical matter, a good place to start would be the literature review from my PhD dissertation (“The Effects of Environmental Policy on Technological Change in Pollution Control“, 2003), e.g.:
Kneese and Schultze: Over the long haul, perhaps the most important single criterion on which to judge environmental policies is the extent to which they spur new technology toward the efficient conservation of environmental quality.
Orr: It seems to me that the greatest advantage of effluent charges relative to alternative control mechanisms is in their provision of decentralized incentives for technological change.
As a practical matter, the reason carbon-pricing fanatics like me are fanatical about it is that we want to create incentives so that profit-maximizing entities in the private sector will pursue clean energy R&D. You write about seeking “large amounts of [government] funding for basic R&D”, but somehow you fail to connect the dots between private-sector investment and carbon pricing.
PS. Maybe you’d like to expand your private investments “outside the foundation” to include support for an effort here in Washington State to replace the state property tax with a carbon tax…
It is true that the market will assign the same benefit to dirty energy as to clean energy because what the end user is buying is the energy. The demand for cheap clean energy will come because the clean energy is also the cheapest. Let us set carbon aside for a minute and look at the example of sulfur. The federal government did not create a cap and trade system for sulfur-dioxide. A BTU generated by high sulfur coal has the same utility as a BTU generated from low sulfur coal, so use the cheapest coal. But they converted the public cost of sulfur (noxious air) to a private cost (stack emissions scrubbers). The installation, operation and maintenance cost of the emissions control equipment made the clean coal the cheap coal and replaced the dirty Illinois coal in the market with cleaner Powder River coal. Hurray for free markets.
Footnote: the Illinois legislature, worried about jobs in the coal mines of southern Illinois, passed a law making it illegal for government owned buildings in Illinois to burn out-of-state coal. Rather than pay for scrubbers, every public school building in Chicago promptly converted to even cleaner natural gas. Hurray for free markets.
Da fragt man sich beim Durchlesen ja schon, ob man selbst nicht irgendwie bescheuert ist. Dankeschön für Ihre Einsichten