Two essential parts of a rational energy policy

Two back-to-back speakers at the last spring CSSP meeting showed the way forward.

Perspective is everything in life, and framing can vastly alter perspective.  So can an understanding of cognitive processes. Joe Brewer, Fellow of the Rockridge Institute, revealed how we are being framed by failing to understand human tendencies. Most of the rest of this paragraph and of the next two paragraphs are only slight paraphrasing of his words. Humans are basically risk averse. They will do far more to avoid losing five dollars than to gain five dollars. Each of us can feel the loss from paying more for gasoline better than we can imagine the gain from moving to unknown, new technologies. Humans currently have flawed cultural understandings, considering the economy and environment as distinct and at odds. Markets are seen as "natural" and independent of societal purposes. Rockridge promotes cognitive policy, asking in turn:
·   What ideas must the public understand in order to solve the climate crisis?
·   What needs to happen for these ideas to become "common sense"?

Cap and trade in various forms (e.g., the Lieberman-Warner Bill) is familiar to most.  A cognitive policy replacement for cap and trade according to Joe might be called cap and dividend. That sounds better already! The underlying idea that the public must understand is that air is inherently valuable and owned by everyone -- air is property, part of the common wealth in archaically understood terms. The right to clean air thus becomes a new kind of property for people that we all own -- equally. In this new framing, markets are seen as tools for achieving various societal goals, including protecting the things upon which we depend for survival. Without human survival, profits vanish. Global warming is a market failure because the vital cost has been left out.

A further cognitive criterion for public support is that an effective policy must be popular if it is to stand the test of time. In addition, it must be popular for the right reasons, namely because it promotes the right long-term values in the minds of citizens. Social security is a good example. Its basic ideas are that every person deserves care, that a responsible community takes care of the elderly and that people who work hard should be taken care of. Social security gets public support because it creates experiences that make sense in the context of these ideas. Cap and trade leads to the notion that the public is being forced by the government to pay a hidden tax, i.e., extra money to buy the same things that could be bought for less before the cap and trade system. The policy and the government both become unpopular. In cap and dividend, the meaning of wealth is expanded to include common wealth, and markets are required to reflect this key truth about reality. Markets exist inside the natural environment, not in some nebulous ether. Companies have not been paying full costs of doing business.  Now they must pay a dumping cost to damage our air. We, the citizens, are compensated by having our taxes reduced through payments to the government for damage to our air. 

Another cause for optimism and pointer forward is the unsung history of the refrigerator. That device is constantly using energy, day and night, whether you are at home or away, to fight entropy and pump heat out of its cold storage space. William R. Prindle, Vice President of ICF International, a global professional services firm, pointed out that improvements in home refrigerators through a combination of science and regulation have led to power savings equal to the entire energy supply by hydropower in the U.S. Economic models that show serious damage to the U.S. economy from regulation of carbon emissions do not take into account savings from enhanced efficiencies that subtract a favorable wedge from simple extrapolations of current per capita use and future population. This kind of energy saving, that should be anticipated and incorporated into policy and regulation, is in Prindle's terms "the first fuel" that should be considered -- better in every way than acquiring more fossil fuel that could produce the same amount of energy. It is the first fuel because it costs less per unit of energy service delivered, because it can be delivered in the near term and because it yields affordable carbon policy by offsetting costs of more expensive technologies.

Savings from efficiency not only flatten the usage curve but also buy time for better energy technologies to catch up.  In terms of cognitive policy, four myths about efficiency need to be replaced by simple truths:

Supplying U.S. and global energy needs through efficiency is admittedly more complex than building a better refrigerator, but ranking items by increasing net cost of abatement in energy input is a great way to start and produces the so-called McKinsey-Vattenfall curve. The low-hanging fruit that produces net energy gains includes insulation improvements, fuel-efficient commercial vehicles and efficient lighting and air conditioning systems.  Indeed 7 Gton of annual emission abatement can be achieved globally at negative to zero cost and 27 Gton at costs below 40 Euros per ton. The truth is that U.S. annual investment in energy-efficient technologies and services already exceeds $300B annually, whereas U.S. energy services infrastructure investments are roughly one-third of that amount. As it was for the humble refrigerator, the investment opportunity is higher on the demand side than on the supply side. Indeed, Googling on the "McKinsey-Vattenfall curve" will give you investment advice from Deutsche-Bank. Efficiency is the first and best bet and looks better and better as the price of fossil fuels climbs.