Global Warming: A Real Solution

Given the clout of the oil industry, however, it will take time and enormous political will to implement a tax on carbon production. Fortunately, there are ways we can foster the immediate adoption of cleaner and more efficient energy technologies ? without pissing off the oil industry and its powerful political allies, all eager to stall reform. Here are six modest, tried-and-true mechanisms we can implement to quickly foster free-market solutions to global warming:

Feebates California is considering imposing a $2,500 fee on Hummers and other low-efficiency automobiles ? and then rebating that money to drivers who choose to purchase more efficient cars like hybrids. This cross between a fee and a rebate motivates manufacturers to develop less-polluting vehicles and is a perfect example of how to give consumers an incentive to conform their self-interest to the public interest, turning every driver into a guerrilla warrior in the battle against global warming.

Cap and Trade One of the most effective tools for harnessing markets to save civilization is a mandatory cap on planet-warming pollution ? one that begins by cutting emissions now and then reduces them eighty percent by 2050. Establishing mandatory limits in all industrial sectors would create a huge market for products and technologies that use less energy and emit far less carbon. In addition, companies that figure out how to cut their emissions to below their limit will earn credits that can be sold to those companies that can't meet their quota, creating a powerful incentive to actually beat the pollution limits. California, New York and a dozen other states are already experimenting with various cap-and-trade systems, recognizing that if they level the playing field with marketwide limits and smart incentives, the market will respond. Clean Incentives Revenues from the sale of carbon credits under the cap-and-trade system should be used to create market-based financial incentives to speed the development and adoption of promising new technologies. Europe has created a gold rush in solar energy by promising to buy energy at premium pricing from homeowners who generate power from rooftop panels. All across Europe, citizens are scrambling to cover their roofs and homes with solar collectors and transform their residences into mini power plants. "Everyone is becoming an entrepreneur," says Bill McDonough, an architect who has received three presidential awards for his sustainable designs. Connecticut already offers a rebate of up to $46,500 for homeowners who go solar, and Congress could boost the rapid expansion of existing technologies by providing similar incentives for solar water heaters, residential wind turbines, geothermal systems, modern electronic lighting and improved insulation. Incentives could also help Detroit convert to electric cars and encourage consumers to replace aging automobiles, washing machines, air conditioners and refrigerators.

Decoupling Utilities currently make money only by producing and selling us more electricity ? giving power companies little incentive to promote energy efficiency. California, however, has decoupled profits from energy sales, creating a new kind of market that rewards efficiency. Utilities make money not by selling power but by helping consumers use it more productively in their homes. The result: Californians use almost half as many kilowatts as other Americans. "We've been able to keep energy demand flat for thirty years with a rapidly growing population, while the average per-capita energy consumption for the rest of the nation has soared by fifty percent," says Tom King, CEO of Pacific Gas and Electric. "And we haven't even made a dent in the potential that's out there ? we can go beyond anything anybody's ever projected."

Net Metering California also took an early lead in this area, allowing homeowners who install solar panels or wind turbines to sell their excess electricity back to the utility. The electric meter actually spins backward when the home is generating more electricity than it consumes, and customers are billed only for the net amount of energy they consume from the utility's grid. "Our objective is to give every homeowner the incentive to turn their house into a clean-energy power station," says King. "We can not only replace gasoline and dramatically reduce carbon emissions, but we'll also have a grid that is more decentralized and hence more resilient."

Performance Standards The quickest way to improve the energy efficiency of appliances, cars, trucks and buildings is to establish minimum standards based on the current state of technology. Rather than prescribing specific solutions, performance standards harness the market by establishing targets and rewarding companies that create the best emissions-cutting technology. The government has successfully done this for energy-intensive appliances like refrigerators, which now consume seventy-five percent less energy than they did twenty-five years ago.

We also need strong standards to keep some very bad technologies from rushing into the market under the banner of energy efficiency. A particularly ugly aspect of the current coal rush, for example, is the desire of the industry and its servants in Congress, Democrats and Republicans, to build a new breed of refinery that would liquefy coal to replace gasoline. Advocates claim that liquid coal is clean, but the process results in nearly twice as much carbon pollution per gallon as gasoline. And whatever the process, why would we want to create an entire new industry dependent on an energy source that is procured by blowing up mountains in Appalachia and strip-mining the West?