Regulations, Energy and the Internet

At TPMCafe, former FCC chair Reed Hunt decides to take on a new topic: the energy sector. Lamenting the noticeable absence of "hundreds and thousands of start-ups that with huge funding and explosive entrepreneurship will wean the world off carbon-emitting energy generation and distribution," Hunt goes...hunting...for a public policy that will drive market-based solutions to our reliance on carbon. Here Hunt draws from his own experience in the communications industry; he asks, reasonably enough, what it is that drove the explosion in communications technology. Hunt's conclusion:

if law opens markets to new entry by adjacent firms and start-up firms, and makes that entry very easy, huge funds will flow from global capital pools into the new rivals in the markets dominated by big firms. In reaction the big incumbents are more likely to increase their own efforts to adopt new technologies.

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The rule of law opened the door for this massive entrepreneurial change in many ways, but the two most important steps in the United States were the establishment of an "open" regime for the Internet and the auctioning of spectrum for wireless, which opened the industry to competition.

So far, so good. If you want explosive private-sector growth, then deregulate and privatize the industries. I'm not sure that I see what the "rule of law" business is all about, since in fact, the law that "opened" the Internet was needed only because there had been previous laws that closed it. Ditto for the spectrum for wireless; the state had to auction it only because the state had already claimed ownership of it. Still, the point is a good one: fewer regulations equals more competition and more private sector innovating.

With this basic marketist point working in the background, Hunt then offers his proposal for the energy sector:

In the case of energy, a regulatory condition for new investment by rivals and incumbents both must be restrictions on carbon emission. Taxes can be used as a goad also, but the regulatory requirements must be mandatory. Regulation should guide investment to meet certain outputs -- or in the case of carbon emissions, the absence of certain outputs.

Say what now? Let me get this straight. Deregulation of the communications sector prompted explosive growth, launched hundreds and thousands of start-ups, and spurred innovation. You allude to that fact directly. No, you don't just allude to it; you take that fact as your presumed starting point and justification for your proposals for the energy sector. And you then think that what this shows is that the energy sector needs more regulation? How's that work?

Look, I'm pretty sympathetic to the claim that pollution is something that markets are going to have to work a bit to figure out. Indeed, pollution is pretty much the paradigm case of a negative externality. Obviously a marketist is going to have to come up with some sort of method for internalizing those external costs. My own preference is to create a market in pollution credits. That should probably be coupled with opening up the existing power grid and thus breaking the (artificial) monopolies that local power companies generally enjoy. Admittedly, though, this is far from my area of expertise, so I'm happy to entertain alternative suggestions from others.

Just one caveat, though: I'm really, seriously, profoundly uninterested in your skepticism about man-made global warming. Personally, I think that the debate is just about as fruitful as a discussion of the relative merits of evolution and Genesis as models of the origins of the universe. It's called scientific consensus, people. You seem to like it well enough for every other subject. And even if that overwhelming scientific consensus turns out to be wrong, it's not like a debate here is going to help with that. When scientists are wrong, it's up to, you know, like, other actual scientists to settle the question. A bunch of non-scientists googling studies that say what we like them to say isn't accomplishing much, really. At any rate, it's not particularly relevant to this post. Notice that I say "pollution" generally and not "global warming" or "greenhouse gases." Carbon-based energy is a pollutant, as anyone who has ever tried to go for a run during a dry spell in D.C. knows. So let's talk about pollutants and leave it to the environmental biologists to figure out what sorts of things properly belong in the "pollutant" category.

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