Power Failures

But they would be the first to point out that, even though American research labs are rising to the challenge, government action remains vital. The idea that government should "stay out" is meaningless. It is in knee-deep already; energy is a highly regulated industry. In fact, it's notable that we have low productivity and runaway inflation in two crucial areas these days—food and fuel. Both have been nationalized, protected or subsidized by governments around the world for decades. A host of regulatory and legal barriers make renewable and small-scale energy production less attractive, profitable and manageable than it could be. But Krupp and Horn focus on the central policy change that the United States needs to make—enacting a cap on carbon. America is the only developed country that does not put a price on carbon.

Imagine if President Bush were to announce at the G-8 summit that the United States would institute a cap on emissions. We would instantly have the world's largest carbon market and it would, instantly, change the price of clean energy. It would unleash a tsunami of economic activity in renewables that could, over time, give American productivity the next big boost it needs. It would, of course, also quickly send a signal to the market about future demand for oil, which would in turn affect the price.

But somehow I don't think that's what Bush is going to say in Hokkaido this week.

© 2008