Thursday, May 08, 2014

Private Sector vs. Government Responses to Global Warming Risk

The NY Times is devoting some serious space in its attempt to nudge President Obama to use his remaining political capital to push for a carbon tax and to ban coal as an energy source.   I applaud this effort but view it as unlikely and unfortunately as futile in terms of capping global GHG emissions.  Suppose the U.S does pass a carbon tax, how does this affect the BRIC nation's emissions?  What is the "domino effect" such that this well meaning domestic policy triggers an international deal?   Who will enforce the global boycott of coal such that those nations endowed with coal choose to leave it in the ground?    Global electricity demand will only continue to grow.   What share of global electricity will be produced by nuclear, wind, solar and hydro in the year 2050?  If 50% of the world's power is generated with these sources, then the power sector will continue to be a major contributor to GHG emissions.

In its discussion of U.S impacts of climate change, the NY Times lists three big challenges; THE SOUTHWEST WILL FRY, THE EAST WILL SOAK ,ALASKA WILL KEEP MELTING

Each of these are anticipated, serious challenges.   How can business make money designing new products and strategies for coping with these anticipated issues?  How successful will the very best products be in helping us to cope?  Through free market competition, how cheap will these products be?  Note my optimism.   Free market adaptation does not require that a majority of the U.S Congress vote in favor of low carbon policy. It does not require that the typical voter be willing to vote for higher gas prices.  Instead,  free market adaptation relies on our very best minds to seek to be the next "Green Zuck" and come up with new ideas (the equivalent of Diet Dr. Pepper) that help us to adapt.  These individuals are pursuing their own narrow self interest of trying to become rich but we all benefit from their discoveries.  This isn't a free lunch. If our innovative nerds focus on these issues, does this retard progress in new medical technologies?  

President Obama can accelerate this process by giving the NSF new resources so that University Nerds can do the basic research that would provide the backbone for the future new adaptation products.  For example, better batteries that allow solar homes to store power would allow more households to go off the grid and be less susceptible to grid blackouts.