At the end of this week’s White House-sponsored Major Economies Meeting on Energy Security and Climate Change, President Bush said “We will set a long-term goal for reducing global greenhouse gas emissions. By setting this goal, we acknowledge there is a problem. And by setting this goal, we commit ourselves to doing something about it.” Let’s talk a little about how goals work in the real world, starting with an example.

Telecommunications equipment is a tightly regulated in order to ensure that all that equipment works together more or less seamlessly, a fact that’s true nationally as well as internationally. In the United States, Telcordia Technologies controls the hundreds of standards that apply to the voice and data telecommunications networks, from the phone sitting on your desk to the central office switches routing your phone call and those of your closest half-million neighbors. The equipment has to meet these standards for safety reasons and in order to ensure that attaching new equipment doesn’t damage the existing phone network. Every one of the standards has both “requirements” that must be met and “objectives” that exist to improve the quality of the phone network. Those objectives are there for any company that chose to design to them, but no company I worked for ever did. Sure, the improvements were touted in the marketing literature, but that was it. And you can probably guess why.

Simply put, meeting the objectives cost more money. Telecomm equipment is very nearly a commodity product, so for equivalent features, higher cost means fewer sales.

And so we get back to Bush and carbon dioxide reduction “goals.” Goals are all well and good, but carbon dioxide reductions will fail for the same reason that telecomm equipment designers don’t design to the Telcordia “goals” – reducing carbon dioxide costs money. For a quick example, let’s look at carbon sequestration from coal plants.

Recently designed coal plants generate inexpensive electricity, with coal gasification plants and natural gas plants running somewhat more expensively. Unfortunately, capturing carbon requires energy, with sequestration taking even more. And for the power companies, energy is money. This paper shows just how much more electricity would cost due to carbon capture (see Table 3) due to the energy used to capture and sequester the carbon dioxide. For common pulverized coal (PC) power plants, the cost of electricity increases by about 61% for CO₂ capture and an additional 17% for carbon sequestration. Electricity produced by natural gas combined cycle (NGCC) plants goes up by 37% for capture and another 7% for sequestration. Electricity costs increase even for the best performing technology, coal-based integrated gasification combined cycle (IGCC) plants, with electricity going up by 30% for capture and another 14% for storage. And there is a grand total of one IGCC plant in operation in the United States today – the Polk Power Station in Tampa, Florida – every other coal plant is a boiling steam power plant that runs off of pulverized coal.

Do you really want to pay between 44% and 78% more for your electricity if you don’t have to? After all, the power companies will pass every penny that they’re legally allowed to on to their customers. And because the capitol equipment for CO₂ capture and sequestration costs so much, the power companies will fight it tooth and nail like they have the plant retrofits required by the Clean Air Act. It’s perverse, but if the changes to existing power plants are too expensive, it becomes cheaper to lobby to change the laws and to fight in the courts than it is to retrofit the plants – if a major lawsuit costs $50 million per year but complying with the laws cost $250 million per year, it’s cheaper to do nothing while the case works through the federal courts than it is to comply with the laws.

We need a Telcordia-like body to set international standards and to make sure that everyone, developed and developing nations alike, plays by the same rules. Kyoto was a start, but not only did it exclude China and India, it also has no enforcable penalties against nations that fail to meet the requirements. As such, Kyoto was doomed to failure from the outset. Maybe the U.N. is the right body to set these standards, maybe it’s not – I’m still not sure. The U.N is a great starting point, but I don’t think it’s enough. Ultimately, I believe the U.S. must develop its own CO₂ emission requirements to meet, because goals simply don’t work.

If you change the culture, business and politics will move away from the carbon economy, but changing a culture takes time. Here in the U.S., high school and college students are starting to change the culture, but the changes will take too long to reverse our present course. So emissions caps in the form of requirements are necessary. But in order to make a significant impact in carbon emissions, even required emissions caps won’t be enough – we need carbon taxes, and significant taxes at that.

I’ll detail a progressive plan for carbon taxes in the next installment.

For a strategic discussion of energy policy, see Decarbonizing the Carbon Economy.