No, cap-and-trade is supposed to be the most cost-effective way to reduce emissions. Investing in clean energy has many other benefits (improving science and tech, creating new industries, job creation, lower cost of energy, etc).
I understand that not all of the money under a cap-and-trade system goes to generating new clean energy. For example, in many cases using a kilowatt of energy we already have more efficiently is less expensive than generating a new kilowatt. However, the idea that we should design our energy policy around maximizing new energy creation even when it's more cost effective to make our current products more energy efficient makes no sense, assuming we take economic benefit to mean wealth created per dollar spent. Unless Lomborg simply means that investing all of our money in clean tech would create more jobs, in which case that's just an example of the broken window fallacy.
(And I understand that many cap-and-trade schemes also have provisions for things like paying South American countries to reduce their rate of deforestation, which is neither a case of conservation of existing energy nor production of new energy, but this amounts to only a few million dollars per year.)
Dropping the cost to create solar energy has a larger long term impact than building more solar cells with existing tech. If we want to change to 100% green tech in 20 years it may be a good idea to postpone most investments in green infrastructure 5 years and focus on research. Think in terms of a render farm if you buy 100k in PC's now and calculate for 5 years you generate a result. But by waiting one year to start and then buing 100k in PC's you will finish sooner and have a more valuable render farm.
Certainly true, but the way you spur innovation in any field is to make that innovation profitable. And of course more basic research funded by government is always good as well.
> However, the idea that we should design our energy policy around maximizing new energy creation even when it's more cost effective to make our current products more energy efficient makes no sense, assuming we take economic benefit to mean wealth created per dollar spent.
Sure it does. Even if we made all of our current products us 0 energy, we might want more energy for other things than the amount saved.
BTW - is it actually more cost-efficient or is that assumed because it's convenient for some other argument?
"Even if we made all of our current products us 0 energy, we might want more energy for other things than the amount saved."
Let's say it costs 5 dollars to save one kilowatt of electricity. Let's also say it costs 20 dollars to generate one new kilowatt of electricity. Both ways, we get one new kilowatt of electricity, but one way is less expensive. Of course at any given time we would be pursuing a mix of strategies that involve both new generation and conservation. We should always pursue the mix of strategies that is the least expensive, assuming the cost of carbon is internalized.
> Let's say it costs 5 dollars to save one kilowatt of electricity. Let's also say it costs 20 dollars to generate one new kilowatt of electricity. Both ways, we get one new kilowatt of electricity, but one way is less expensive.
Except that energy saving is capped. If we're using 5kw and we want 100kw, saving that 5 is nice but only 5% of the goal.
And yes, we're going to need significantly energy than we have today. The first of those "extra uses" are also known as India and China.
Also, while the assumption that energy savings costs 25% of new production costs is convenient for an argument, it isn't all that common. People don't spend more money than they have to. As energy costs have gone up, the low-hanging fruit has been picked.
Of course, some folks cheat by including "savings" that requires changing behavior/reducing value and assuming that that's cost free. That's wrong because minimum energy use isn't the goal - the goal is to maximize value for cost. Just because you don't see the value of something that uses energy doesn't mean that everyone else agrees.
"Except that energy saving is capped. If we're using 5kw and we want 100kw, saving that 5 is nice but only 5% of the goal."
Your argument is flawed because you are assuming that you either have to create new electricity or conserve electricity and you can't do both. The least expensive way to get X units of new energy is always going to be some mix of conservation and creation, and the free market lets us find the most efficient point along the spectrum.
"People don't spend more money than they have to. As energy costs have gone up, the low-hanging fruit has been picked."
The technology used to save can: what we want is new useful energy, not new energy per se. If a new use, using current technology, would require 100 W, but using energy-saving technology [developed to save on current use] would only require 50 W, then investment in current savings will produce future savings. Compare the trends in electricity use in California and the rest of the US since the '70s: California's per capita use has been nearly flat, while the rest of the country's has grown substantially.
In the sense that pure markets are the most effective known way to efficiently allocate resources. In reality they can fall short in any number of ways.
Cap-and-trade for sulfur dioxide is the poster child. It has worked well in reducing overall levels quickly and cost effectively: http://www.grinningplanet.com/2004/02-12/cap-and-trade-pollu... . But I don't know of any other examples of cap-and-trade so it's not clear it's an all-purpose strategy.
It works as long as you have an accurate historical baseline and you are able to accurately track the amount emitted by each source. IIRC cap-and-trade has been used successfully in a few other places, but I don't know where offhand.
On the other hand, I do know that a tax has never solved a single air pollution problem anywhere in the world.
