The Breakthrough Institute has published an exhaustive piece centered on a very simple premise:
Meanwhile, a new climate policy consensus is emerging, one which prioritizes direct investment in technology innovation. This consensus begins with the recognition that the root cause of the failure of the pollution paradigm was the technology and price gap between fossil fuels and their alternatives. No nation — not even the wealthiest in Europe — is willing to price carbon enough to cover the difference. Until the technology gap is closed, little will be done to accelerate the transition to a low-carbon economy.
I can’t blame the institute for hammering the point home from several different angles. It is glaringly obvious that we will not have an energy shift until the price of low-carbon energy comes down significantly, and yet no one seems to be listening. Perhaps the best articulation of this principle – surely one of the best – has come from Robert Bryce. And yet, policies have been utterly ineffectual – demand-side interventions focusing on raising conventional energy prices rather than supply-side ones that seek the sustainable solution of lowering alternative energy prices.
The institute makes a bold assertion: the current policies proposed to mitigate CO2 are inconsistent with history. It is the entire history of innovation that falling prices for emerging technologies, not government regulatory regimes, ultimately drove shifts toward those technologies.
The lessons from these experiences are not that regulatory measures will not ultimately be necessary to deal with climate change. It is rather that the success of such measures depends upon the availability of cheap and widely available technologies to either mitigate emissions associated with carbon based fuels or replace those energy sources entirely. Efforts to establish regulatory policies as the first, primary, and central step in the effort to address global warming put the pollution regulatory “cart” before the energy technology “horse.” The result has been serial political and policy failure for 20 years.
The institute assumes, perhaps too optimistically, that the miserable failure of CO2 abatement regimes is finally waking up policymakers to the truth. I am not so optimistic, although I think they have discovered the third way on government intervention on behalf of clean energy. Spurning government regulation that drives up costs for consumers sits better with Conservatives and Libertarians. They can maybe stomach government playing the role of venture capitalist, especially if it costs 1/4 as much as cap-and-trade.