Bradford Plumer makes a really excellent point here about how prices and incentives and good energy policy don’t always align, and still won’t even if we pass cap and trade:
A renter might notice
that his windows are leaky and the refrigerator is old and
decrepit–and that all this waste is hell on the monthly electric
bill–but he’s not going to caulk the windows for a place he’ll move
out of in a few years. And the landlord, meanwhile, isn’t paying the
energy bill, so why should he buy a new fridge? No one’s behaving
irrationally here–it’s just that the incentives don’t align in favor
of efficiency. And a price on emissions wouldn’t necessarily fix this.
That’s why, in some cases, there’s a rationale for well-designed
regulations in addition to a carbon cap.
This pivots off an interblog discussion about whether there are lots of firms passing up profits by not adopting “pollution-abatement” policies, like the ones in the graph below.
Last year EnerNOC, an energy efficiency consulting company, located
$100,000 in energy savings for Morgan Stanley’s Times Square offices
(they were keeping the elevator machinery rooms as cool as the
corporate suite, and things like that). Morgan Stanley’s profit in the
first three quarters of 2009 was more than $100,000. To be specific, it
was $729 million more. So you can understand why spending time on an
energy efficiency policy was not a big concern for their
board. But that’s exactly why it’s likely that there are a lot of firms
like Morgan Stanley who are likely passing up abatement policies, even
if they save hundreds of thousands of dollars.
It makes sense that adopting a national cap and trade policy would
raise national awareness of emissions, and that awareness might trickle
up to the folks who exercise control over their buildings’ energy use.
But Plumer’s exactly right that not everybody has a financial incentive
to care about how much energy they consume. For example, I live in an
apartment where heat is included in the rent, so nothing’s stopping me
from turning the thermostat to Tropical and watching TV in my
bathing suit all year.
The cost of heating being factored into my rent is a bit like an employer taking health care out of our
compensation. We don’t see the money being spent, so we don’t have the
same incentive to ration our use — of heat or health care.
