Harvard economist Ed Glaeser has a nice column in today’s Boston Globe in which he proposes a “road map for environmentalism” (HT to Greg Mankiw). I think it’s a thoughtful and substantially correct analysis and pragmatic set of proposals; in particular, his emphasis on the importance of rethinking current policies and the extent to which they fail to meet our objectives:
But smart environmentalism doesn’t just mean more government programs, it also means rethinking current policies. Our emissions policy, which requires regular emissions tests for newer vehicles, is expensive to operate and poorly designed to fight climate change. After all, it does nothing to induce less driving. Even more problematically, by letting owners of older cars off the hook, the current system imposes costs on the Prius driver but exempts the drivers of the vintage gas guzzlers that create the most emissions. We should require different emissions tests and even higher emission taxes for older cars that generate higher environmental costs.
With respect to energy efficient technology, he’s on the right track with respect to vehicles, but misses the boat with respect to energy use in buildings:
New technologies are likely to be our best weapons against climate change and we should try to encourage more energy-efficient innovation. Our patent system is poorly suited to encourage these innovations, since successful innovations will create environmental social benefits that far exceed the private revenues earned by the innovator. Patents also make it less likely that technology will be transferred to the developing world. A better system might be to offer large public prizes that reward innovations, which are then made freely available throughout the globe.
Yes and no. Notice how much technological change there’s been in vehicle engines, an area that has more robust market processes than other areas of our energy consumption. Transactions occur through market processes all along the value chain both in gasoline and in vehicles; price signals are omnipresent and transparent. However, price signals are gagged with political mufflers in electricity and (in many states) natural gas markets. How can we choose to conserve in response to high price signals if political elites take it upon themselves to “protect us from high energy prices”? That kind of protection leads to more energy use to produce building heating, cooling, lighting, and communications. How is that good for the environment?
If you want to encourage more energy-efficient innovation in buildings instead of vehicles, it’s not the patent system that is the primary culprit. It’s the stultifying effects of non-market electricity and natural gas prices due to obsolete retail regulation.