Greetings from the Australian National University in Canberra, where Dr Adele Morris, Policy Director, Climate and Energy Economics Project, Brookings Institution, USA is speaking on "Clean energy technology policy: The economics of why and how". Dr. Morris commented this was her first talk in Australia. She asked "What is Clean Energy?" and pointed out there could be trade-offs between different pollutants and benefits at different points in the life-cycle of products. She pointed out that the only way to have completely clean energy would be not to produce energy at all (I teach my "ICT Sustainability" students at ANU how to reduce energy use). It seems to me that for this reason the term "clean energy" should not be used at all, as it will be at best confusing, if not be used deliberately deceptively.
Dr. Morris went on to discuss policy tools to promote clean energy. The most direct of these are direct subsidies, but she pointed out there are also less direct tax subsidies and assistance such as government accepting risk. There are also programs for government to purchase clean energy products. There are also labeling laws, such as for appliances.
For the USA in 2010 government clean energy subsidies were about $37B, but this was artificially boosted due to financial crisis measures. The subsidies for renewable energy are about 49 time higher than for fossil fuel. While it may seem obvious that "clean" energy requires windmills and the like, but reducing the pollution from fossil fuels could have a larger effect, at least in the short term, as they are a major part of energy use.
Dr. Morris pointed out that the large spike in funding in 2010 due to the GFC was not a good way to infest in long term development. She then when on to ask why the government should intervene in the market for energy. This seems to assume that energy industry investment is based on market forces. However, the nuclear, coal, natural gas and other energy industries have direct engorgement subsidies and policies. Dr. Morris did not discuss how clean energy policy intervention compared in size or scope to previous government policies to promote energy industries.
Dr. Morris presented the standard economics price demand curve and explained how a carbon tax can cause less carbon emissions. She pointed out that the size of a carbon tax has no relationship to the size of the R&D which might be needed to reduce emissions. She pointed out that an energy efficiency tax credit has much less effect than a carbon tax. I was not entirely clear on the argument, but it appeared to be that the tax credit would be targeted at very specific activities (such as buying a new hot water system) and would not effect other behavior. A general carbon tax will effect any behavior which involves carbon emissions.
Dr. Morris pointed out that energy security for electricity generation in the USA has little to do with renewable energy use. US electricity is generated using domestic fossil fuel sources (mostly coal), not from imported oil. The replacement of fossil fuel with renewable sources is very high cost and much imported oil is from secure sources (not unstable middle eastern countries).
The last issue Dr. Morris raised was if clean energy is an economic growth sector. She questioned if this industry needed special government subsidies over other industries. If China wants to mass produce cheap solar panels, then why not let them? Does clean energy produce more and better jobs than other industries? This has been an issue in Australia with insulation retrofitting being seen as a way to employ people (but the Australian government has had some problems with this).
I asked Dr. Morris was how much of a role conventional economics play in decision making on energy and if it does not, do we need a new form of economics which explains the apparently irrational way people behaved. She answered by first distinguishing between the behavior of executives in companies and governments. She asserted that executives should make investments to benefit the company. She pointed out that while economists are not always listened to by government, she claimed they has some success at stopping patently bad policies.
In answer to another question Dr. Morris said that it was easier for China to put a price on carbon than the USA, due to political differences.
Dr. Morris will be taking part in "International Climate Policy for the Long Term: Workshop" at the ANU, tomorrow, Wednesday 14 March 2012.