The Free Market Case for Green

Great Debates
1

Peter Robinson of the Brookings Institution hosts a series of video interviews with various public figures. It’s actually very good (it’s hosted on National Review’s web site, but don’t let that turn you off).

One series I just finished watching is a 5-part interview with TJ Rogers, the CEO of Cypruss Semiconductor, and someone who I think is one of the most principled and intelligent people around. Rogers is a self-made billionaire with a Ph.D in engineering. He’s a hard-headed capitalist and Libertarian who tries to approach everything with a clear mind and a scientific viewpoint.

This interview is about green technology, global warming, alternative energy, and the like. Rogers has a view of it all which closely matches my own opinions on the subject. He’s not an alarmist, but he recognizes there are problems. He’s not a global warming denier, but he’s also not an Al Gore-ish scaremonger. His company is heavily invested in solar, so he has a stake on both sides of the issue.

The result is what I consider to be one of the most reasonable and rational discussions of these issues I’ve seen in a long time.

So if you want to watch the series of videos, which total maybe 30 minutes, and debate it, you can follow the links below:

Part 1 - Why the market can - and will - address the issue (it’s all about the economics)

Part 2 - Separating global warming fact from alarmism (It’s happening, it’s probably manmade, it’s not clear how bad it will be)

Part 3 - Solar power and its future (it’s near to having a good ROI, which will cause mass migration to solar)

Part 4 - Evaluating the candidate’s proposals on global warming (Barak Obama comes out the best)

Part 5 - Other alternative energy sources (wind is good, solar’s good, nuclear’s good, ethanol as we currently do it is stupid).

I’d be interested in hearing comments on the series.

2

I dunno, Sam. We got to sit through a five part series, and risk National Review cooties before we can even discuss the subject? Hey, we all love ya, big guy, but isn’t that a bar set at “daunting”? I mean, your call, fer sure. Just sayin’, is all.

3

Try the first one. They’re only 7-8 minutes long. If you think it’s total bunk, say so and stop there, and tell me why.

And how are you supposed to discuss the subject without viewing it? Isn’t that like discussing the IPCC report without reading it?

4

I watched part 1.

A few observations:

His description of his employee’s “blathering about ice caps…” and his general statements about environmentalism lead me to conclude that he doesn’t take climate change seriously. Maybe he demonstrates this later. [Also using the phrase, “I would have rather been water-boarded” doesn’t exactly endear me to the guy or convince me of his rationality.]

You title part 1 “Why the market can - and will - address the issue,” but this is not addressed at all in part one. The only reference to solving environmental problems in part 1 is to how much money his solar power company has made. That fails to demonstrate either 1) that the free market had anything to do with its success, given how heavily subsidized solar research is; 2) that it is effectively solving a problem; or 3) that the market will address any of the other environmental issues, including the various causes of climate change.

If you’re going to convince me that–despite nearly universal agreement that many environmental problems are the result of market failures–environmental problems can be solved by the market alone, I’m going to need some actual arguments and evidence. I am all for market-based solutions, but of course these are neither free market nor libertarian.

5

Well, you might consider watching the other parts.

I think you might be missing his point - the point is that as long as you expect people to ‘think green’ in order too get anything done, and to put green philosophy ahead of things like money and profit, you’re not going to achieve much. But as soon as companies see a profitable reason to be ‘green’, even if they don’t believe in global warming or green philosophy, THAT is when you’ll see widespread change. In his own company, he doesn’t let people talk ‘green talk’. It’s all about profit - even in his solar cell company. Because if you lose sight of the fact that you need to make a profit, you won’t succeed and no one will gain the benefit of your products.

As for the ‘i would rather have been water-boarded’ comment, it was clearly made in jest, as hyperbole. And if you bothered to notice, one of the people he mentioned who was ‘blathering political slogans’ at him was the guy who runs the Competitive Enterprise Institute. So he’s not just trashing environmentalists. He’s trashing peopel who replace hard-headed realism with political slogans.

6

I missed where he defends that point in the video. Can you give me a loose transcript or time-stamp? I heard a lot of generalities about Milton Friedman, but I didn’t hear a single argument for why environmental ideology is irrelevant.

And, again, the fact that a solar-power company cannot succeed if it doesn’t make a profit does not in any way mean that the free market alone can solve environmental problems.

Yes, I know it was made in jest. It’s the sort of thing that people who don’t really care about that fact that our government tortures people joke about. [ETA: Actually, that’s a little oversensitive. It just rubbed me the wrong way in the context that he was talking about. Ultraconservatives don’t get to make jokes about water-boarding, even if they like to think of themselves as libertarians.]

7

Look, I’m all about markets myself. Yay capitalism, whoohoo economic freedom, etc.

But profit is not the highest fucking good. And “capitalism” will never ever account for market externalities without some sort of government regulation in order to force the issue. And his response? “It is Big Brother telling you what you gotta do.” That’s a fucking stupid thing to say. I realize the quote is out of context, and he did not in fact have a hard-line on the issue, but I would not trust his idea about the appropriate level for a cap ‘n’ trade system. His idea of “trashing the economy” might be severely overstated.

It also doesn’t reflect well on him that he’s seemingly unaware that carbon taxes (Al Gore’s proposal) are practically identical (economically speaking) to cap ‘n’ trade systems. Maybe Al Gore’s proposal is a little severe (eliminate all payroll taxes and substitute that lost governmental revenue with pollution taxes), but for all I know, this dude’s proposal might not be severe enough.

But it wouldn’t help the discussion for me to call this guy deluded, and it similarly doesn’t help to call Al Gore a fearmonger. I had the privilege of seeing Al Gore’s slideshow live just a year ago, and he wasn’t trying to panic the audience - he updated his information from the time of the movie, changed some things, improved some things, and it was clear that he was speaking about possibilities and not inevitabilities.

So? We need this guy in the discussion, certainly, but we also need good ol’ Al in the discussion, too. They’re going to have different biases, which we should take into account, but they’re also going to have different insights. This industrialist is a refreshing change from what we normally hear from business leaders (if they were all like him, things would be a hell of a lot better), but I wouldn’t say that this is the most reasonable discussion I’ve heard on the topic.

8

It’s his main point through the whole middle section of the video. He’s really talking about the invisible hand. And later in the video where chastises his employees for engaging in ‘green’ thinking rather than ‘bottom line’ thinking. He also says that if Wal-Mart can get more customers and make more money by going solar (i.e. for the PR value), they’ll do it. Not because they want to save the earth, but because they want to make money. They make money by doing this because their customers want to save the earth. So it’s not saying that it’s wrong to want to save the earth or to be green, but that companies have to ultimately serve the bottom line.

Not all environmental problems. And later in the video series Peter Robinson even points out that regulation that corrects for externalities should be palatable to a market advocate - and Rogers agrees. He even says nice things about Barack Obama’s environmental policy.

However… The fact remains that you are not going to see widespread adoption of green technology (other than around the margins) until there’s money to be made in it. This is true of business, and it’s also true of government. Quick question: How many countries that have signed on to Kyoto have actually hit their Kyoto targets? How many countries have reduced their CO2 emissions at all?

The country that has the most ‘green’ energy infrastructure in the world is France, which gets 80% of its electricity from nuclear power. And it chose to do it for financial and security reasons long before ‘global warming’ was on anyone’s radar.

Rogers points out later on that if you can make solar cells which have a return on investment on the order of a couple of years or less, you won’t need government regulation, subsidies, carbon taxes, or anything else to get people to buy them. Every new house built will have them on the roof.

That’s how capitalism fixes things. Government has some ability to force people to do what they don’t want to do. Capitalism provides things people want. Until very recently, people didn’t really want an alternative to oil. It was too cheap and easy. No other energy sources could compete. So all the begging and pleading and regulations invoked to make cars more efficient and a 55 mph speed limit and Kyoto and all that stuff never had ANY effect. But if you can provide ‘green’ power at half the cost of fossil fuel power, you’ll have a sea-change in attitude and implementation. Break the ROI barrier, and people will beat a path to your door.

And of course you have some evidence that TJ Rogers is an ‘ultraconservative’? Before you answer, you might want to read this op-ed he wrote.

You also might be surprised to find out that he’ll probably support Obama in the next election. He believes that both McCain and Hillary are more authoritarian than Obama. And he’s strongly against the Iraq war. So you might not want to jerk your knee quite so hard.

9

Carbon taxes are in no way ‘practically identical to cap and trade’. Personally I think carbon taxes are superior. But Gore takes it to an extreme level.

I can give you all kinds of reasons why taxing energy that high would be a severe detriment to the economy.

How about calling him a fearmonger after he came out this week and blamed the Myanmar disaster on Global Warming? Something that no reputable scientist would dare to do?

Maybe he has different approaches for different audiences, but Gore’s public presentation of the dangers of global warming are far in excess of anything the IPCC has claimed.

I realize that people with different ideology will find differing levels of reasonableness in this discussion. But I thought it was pretty fair all around. I think his interpretation of where global warming science is is pretty much right on. His analysis of the various alternative energy programs is right on. His belief that it will take capitalism and technology to solve the problem is right on. In general, I found it a thoughtful, rational discussion of the problem.

10

Wait, he’s a hard-core free market advocate who concedes the need for government to correct market failure? I’ve got news for you. Almost every mainstream environmentalist thinks that correcting market failure is the main role of government environmental policy. Advocating a pure free market means rejecting government’s role in correcting market failure.

So how does his approach differ from Al Gore’s? As best I can tell, it differs only in one significant respect: he doesn’t believe in behavioral economics (which, by the way, is the main reason I call him ultraconservative). Well, I disagree with him. I do think people’s psychology and emotional biases affect their marketplace decisions. And as a consequence, I think Al Gore’s work is important.

11

By the way, carbon taxes and cap-and-trade are identical in the sense that they both–when working efficiently–perfectly internalize the cost of pollution so that a firm’s decision to pollute an extra unit of pollution is exactly tied to the cost and benefit of that additional unit of production. They arrive at that in different ways, one through the collective market action of permits which set a market price on units of pollution, and the other through Congressional calibration of taxes to set a unit price on pollution; but both methods adopt pretty much the same principle about the most effective way to deal with pollution. I’m surprised that you support the tax, which involves more state planning (because they have to guess at the proper level for the tax) than the cap-and-trade.

12

Selling supplies to a church doesn’t make you a Christian. Selling solar energy and other green technology doesn’t make you an environmentalist. TJ Rogers is a businessman who’s found a market - good for him. But what does any of that have to do with the merits of environmentalism? Enviromentalism isn’t a good idea because it enables somebody like TJ Rogers to sell solar energy panels just like Christianity isn’t a good idea because it enables somebody to sell church pews. Some ideas have merit that’s not based on market value.

13

CAFE standards doubled the average mpg in the US in about ten years between 1975 and 1985.

14

And yet, the National Academy of Sciences determined that CAFE at best has resulted in a 14% reduction in fuel consumption. Why? Because CAFE standards have tended to lag the actual improvements in fuel economy, because people tend to drive more when it costs less, and because if CAFE standards resulted in higher costs or less desirable cars, it may have led to more older, less efficient cars to remain on the road.

And of course, CAFE standards helped create the modern SUV, because light trucks have a different, more lax standard. An unintended consequence.

15

Market forces ultimately will drive innovation in Green tech, a lot of money is being pumped into these solutions. Monetizing pollution is the holy grail of this.

16

As Richard Parker has already pointed out, both methods are capable of efficiently internalizing the costs of pollution. Economically speaking, both methods are identical in outcome. It would help the discussion if you would learn some public finance before you shoot off with ignorant opinions.

Read your own cite.

Despite the misleading title, once we actually read what Al Gore has to say, we get this: “[W]e’re seeing consequences that scientists have long predicted might be associated with continued global warming.” I added emphasis since you appeared to miss it the first time: Might be associated with global warming.

Or how about this: “It’s also important to note that the emerging consensus among the climate scientists is although any individual storm can’t be linked singularly to global warming – we’ve always had hurricanes,” Gore said. “Nevertheless, the trend toward more Category 5 storms – the larger ones and trend toward stronger and more destructive storms appears to be linked to global warming and specifically to the impact of global warming on higher ocean temperatures in the top couple of hundred feet of the ocean, which drives convection energy and moisture into these storms and makes them more powerful.” Appears to be. Nothing definitive, but there does appear to be a link.

Everything he said is totally true.

Of course some people disagree, and your obviously biased cite managed to find one of them. All hail the great CNN meteorologist! Al Gore might indeed be wrong. But he’s not out there by himself. I’ve come across pop science articles myself (no mention of Al Gore) that come to the same conclusion: GW might be resulting in greater storm intensity. He’s not making things up, and he’s not overstating his case.

I agree entirely that he was pretty fair all around. He didn’t acknowledge the scientific consensus that anthropogenic factors are most likely the leading cause of today’s warming (he stated the opposite), but even so, even though he was mistaken about the consensus, he still came to the same conclusion.

Sam Stone, my problem isn’t with this guy. My problem is people like you.

If I judged this industrialist as harshly as you judge Gore, and with as little evidence, then I could’ve ripped a few out-of-context quotes from the interview to make it look like he was saying things he actually wasn’t. And you would rightly jump on my ass for misrepresenting this guy’s positions, which are (on the whole) quite reasonable. In fact, just based on the first impression, I might even agree that this guy is more reasonable than Gore. He’s obviously given a lot of thought to the situation and is knowledgeable about the available choices (even if he is prone to ridiculous hyperbole about “Big Brother”).

So yeah. This guy is pretty okay. But now what? It mostly isn’t the left standing in the way of solutions, it’s this guy’s colleagues, the other big businesses that take handouts and subsidies and stand in the way of sensible policies.

We don’t need to convince the left to do something. They already want to do things, even if they’re confused about what’s the best solution. We need to convince the right. So what now?

17

I don’t know. But Sweden has, and then some, without having to sacrifice its economy to do so.

Not to mention, there’s a big middle ground between “didn’t hit Kyoto targets” and “didn’t accomplish anything.”

18

NO.

15-20 years ago, this could be considered an unintended consequence. Since then, the proponents of CAFE standards have been trying to close the ‘light truck’ loophole.

They have been blocked, at every turn, by the opponents of CAFE standards. The growth of the SUV market (and of SUVs themselves) must be regarded as a deliberate consequence of the actions of the obstructionists.

As Kendall Jackson points out, the left agrees that these problems need to be dealt with. It’s the right that’s blocking things. So how do you change that - besides calling Gore a ‘scaremonger,’ that is?

19

Are you sure the thread title shouldn’t be, “The Green Case for Free Markets”?

20

The fundamental problem with free markets and global warming is that there’s no cost whatsoever associated with dumping carbon dioxide and other greenhouse gases into the atmosphere. Free resources will be exploited as long as they have value, and having a free place to dump one’s CO2 has considerable value.

The only reliable way to prevent global warming is to associate a cost to that dumping that will be high enough to reduce CO2 dumping to the required level.

It’s always possible that the free market will come to the rescue, and come up with means of energy production that create more energy, with less CO2 output, than present means. But expecting it to is a fool’s game, as long as there’s no cost to dumping CO2. Any such result would be accidental, not market-driven.