Brad Plumer is a thoughtful young columnist for the New York Times. In this piece , he argues that a byproduct of President Trump's gutting of the Department of Energy's green subsidies is that world climate change mitigation will suffer a great blow. Is he correct? In his piece, he argues that green economy investments remains risky both due to the inherent failure rates in R&D and due to shifting market conditions. For example, if you build a perfect electric vehicle but gas prices converge to zero due to fracking then your EV won't sell. This macro risk (i.e future gas price dynamics) should affect your upfront investment.
So, Mr. Plumer argues that the government must engage in a type of parallel "Manhattan Project" to do the basic research so that the Elon Musks can then implement this. As an academic, I applaud such a call for basic science but I believe the $ should go to the National Science Foundation rather than the DOE labs.
Mr. Plumer then contradicts himself with this quote from a Mr. Navin
“Companies need a degree of certainty from the agency,” said Jeff Navin, a former acting chief of staff at the Energy Department. “The worry is that if someone has a game-changing technology and is looking to the government to help them commercialize it, maybe Europe or China starts to look more attractive.”
So, this suggests that the same technologies will be developed but that the United States may not be the financier. From a climate change perspective, we don't care who earns these income effects (i.e who owns the Tesla shares), we only care that the Tesla now exists. If the Chinese will finance it, why does Brad Plumer care that we didn't finance it?
Mr. Plumer might say; "I want a green economy and a prosperous U.S economy". Okay, that sounds good then U.S companies must learn to go to Beijing and beg for subsidies there or better they should educate Wall Street and Venture capitalists on the benefits of holding equity stakes in their companies.
Mr. Plumer does not discuss why federal $ is needed here at all. If some firms believe that the "future is low carbon" let them make a bet that future Democratic Presidents will enact carbon pricing. Why must Federal $ be used for anything but basic research? Do the basic research through the NSF and stop having the government (through the DOE) picking winners.
In a world where ideas are public goods, we are not doomed if the U.S fumbles the ball. Mr. Plumer's "nationalism" implicitly dismisses the ability of Chinese scientists to pick up and run with the ball. Read Richard Freeman's piece on the rise of Chinese science. If there is $20 bill on the ground, it will be picked up even if plump Americans do not bend over to do so.
UPDATE: I agree that the U.S has played a key role in scientific advance but we do not have a monopoly in this sector. In the near future, other nations will begin to catch up to the U.S in terms of research capacity. The U.S represents just 4% of the world's population. Are you going to argue that over the next 25 years that we will produce 95% of the world's great new ideas? There are other great nations who can fill the void if the U.S reduces its investment in this green sector. Ideas are public goods. Implicit in Mr. Plumer's pessimism is a U.S style nationalism that "only the U.S can save the world". I do not believe this.
Mr. Plumer also forgets the opportunity cost concept. If U.S companies do not invest in the "green economy", they will invest in something else such as new medicines or new airplane safety equipment. These investments have value for society. Mr. Plumer implicitly assumes that the green investment that does not occur because of Mr. Trump's change in the rules vanishes into a bottomless ocean. That's not right.