IF NOT A PRICE ON CARBON, THEN WHAT?

Written by James Greenberger on July 23rd, 2010

On Thursday, Senator Majority Leader Harry Reid announced that he was abandoning efforts to pass a broad energy bill this summer that would have included a cap-and-trade scheme for greenhouse gas emissions.  By Senator Reid’s calculation he did not have the votes to move that legislation.

 

The demise of cap-and-trade is another watershed event that must be a call to action.  Although many of us had deep misgivings about cap-and-trade as a mechanism (in its worst incarnation, its imposition of higher fees on carbon emitted by coal burning power plants than on carbon emitted by gasoline burning cars would have been a very bad development for electric drive), the basic principle behind cap-and-trade—putting a price on carbon—has long been seen as the key strategy for weaning U.S. consumers off petroleum and other carbon-based fuels.  That strategy now appears to be dead.  If not a price on carbon, then what?

If the government cannot increase the price of petroleum to reflect its true cost, then the only strategy left to promote electric drive is to redouble efforts to decrease the cost of electric vehicle batteries to consumers.  There are only three ways to do that:  Build a better mousetrap; build the mousetrap more efficiently; and find better ways for consumers to pay for the mousetrap.

 

Last week I wrote about making the manufacture of a $10,000 electric People’s Car a national priority.  If that goal is going to be achieved anytime soon, it can only be achieved by letting consumers pay for electric cars in unconventional ways.

 

In the longer term, however, building electric cars and their related infrastructure more efficiently will be key to reducing cost.  Ordinarily, we could rely on the free market to create that efficiency.  If we put a price on carbon and simply let different electric vehicles and infrastructure providers compete on a level playing field, this is exactly what would happen.  But that does not appear to be the path we will be going down.  Fortunately or unfortunately, government will now have to become much more directly involved in the deployment of electrified vehicles in the United States.

 

One of the key challenges to greater government involvement is the lack of clear authority over vehicle electrification within the federal government.  The DOT, DOE, DOD, DOC, FERC, NIST and a host of other federal agencies all have jurisdiction over different pieces of the electrification puzzle.  Moreover, because we are talking about electricity, which has historically been a local regulatory concern, there are literally hundreds of state and local entities with jurisdiction over key aspects of electrification policy.  That’s no way to run a railroad, much less a critical component of national energy policy.

 

Earlier this week, the Alliance of Automobile Manufacturers, the Association of International Automobile Manufacturers, the Electric Drive Transportation Association and the Edison Electric Institute, called for a new National Electric Fuel Task Force to help accelerate the adoption of plug-in electric vehicles and the necessary infrastructure.  This interagency body would attempt to coordinate efforts among federal agencies working on electrification issues and be headquartered in the Department of Energy.

 

The creation of a National Electric Fuel Task Force is a good idea, but does not go far enough.  Interagency discussion and cooperation are important, but to make real progress there must also be clear responsibility and accountability.  At the beginning of the last decade, the attacks of 9/11 underscored the limitations of interagency cooperation and led to the creation of the Department of Homeland Security in 2003.  While the creation of a new cabinet-level department to oversee electrification may not be necessary, the consolidation of federal, state and local authority over all aspects of electric vehicle deployment into one administrative body is essential.

 

For the past several years we have assumed that we market forces spurred by high priced carbon would force the electrification of transportation in the United States.  Senator Reid’s announcement makes clear that assumption is dead.  The federal government must now step up and address the challenge of electrification directly in a forceful, logical and coordinated way.