Political Issues on the Horizon, Part 3

In my last two posts, we explored four political issues that are likely to be important in the next decade. To wrap up this political trilogy, I’m going to talk about two issues that are often discussed as vitally important for our future…which I nevertheless think will soon fade from the political landscape.

Cap and Trade. For the past decade, the climate change debate in the United States has focused on the wrong issues. One side of this debate has tended to overhype the worst-case climate change scenario, arguing for immediate, draconian carbon cuts which would harm the economy while doing almost nothing to avert climate change. The other side has flatly denied climate change even exists, despite a huge amount of scientific evidence indicating otherwise.

Yet technological advancement, not political decrees, will determine the fate of our climate. As it becomes clear that none of the common prescriptions for climate change are politically feasible and scientifically plausible, we can and must stop focusing on policies like cap-and-trade and instead turn to the real solution: technology.

Fossil fuel combustion is responsible for 96.5% of all man-made carbon dioxide emissions. Addressing the need for fossil fuel combustion is of paramount importance to stop clogging our atmosphere with carbon dioxide. Fortunately, solar power will soon supplant fossil fuels as our primary source of energy. Any political policies to fix climate change must instead focus on making this happen as soon as possible, through subsidies and tax credits for solar energy pioneers.

Furthermore, research into geoengineering must be heavily funded to determine if there are any plausible ways to counteract the harmful effects of carbon dioxide, without unleashing even worse environmental damage in the process. Some of the more promising ideas include stationing powerful underwater turbines in the ocean to spray water high into the atmosphere, injecting chemicals underneath large glaciers to prevent them from sliding into the ocean, seeding the ocean with iron flakes to encourage carbon-eating plankton to grow, and spraying sulfur dioxide into the stratosphere to mimic the cooling effects of volcanoes. Any of these solutions would cool the earth, but they carry environmental risks of their own that may make them unpalatable. In many ways, we would be picking our poison: do the risks of geoengineering outweigh the risks of climate change, or vice versa? Governments should commit to researching these geoengineering techniques in depth to determine the answer.

Ultimately, political debates over cap-and-trade or possible successors to the Kyoto Protocol are a dead-end. They are unproductive and unlikely to succeed. I expect them to disappear from the political landscape in the very near future, as more voters realize that a more practical approach is necessary to truly combat climate change.

National Debt. In 2006, the Democratic Party gained control of Congress, in part, by campaigning on deficit reduction. In 2010, the Republican Party did the same. Yet there is no evidence that either party in the United States has any actual interest in reducing the debt. Both parties value their other priorities – cutting taxes in the case of Republicans, and increasing spending in the case of Democrats – much more highly than deficit reduction.

And that is not entirely a bad thing. For all the hype that surrounds our debt, it is still not at dangerous levels. Even after the worst recession in recent history, our debt stands at about 94%. This is high by American standards, but still much lower than many other developed nations which are at no risk of defaulting. The interest rate on treasury bonds is at an all-time low, meaning that the idea of the US government defaulting on its debt is barely even in the minds of investors.

To be sure, we cannot continue running large deficits forever. We need a medium-term plan to get our deficits under control, but even so, we don’t need to balance the budget entirely. Running a small annual deficit is fine. Between 1940 and 1980, the United States cut its debt-to-GDP ratio from 120% to 35%, despite running an annual deficit for most of the intervening years. There is no reason we cannot do this again in the next few decades. As long as our economy grows faster than our debt, our debt-to-GDP ratio will fall, eventually returning to more typical levels.

Although the national debt will probably continue to be a complaint of the out-party, I am skeptical that it will be more than a political tactic anytime soon. Neither party has shown any interest in seriously addressing the debt, and as long as we can get our deficits down to a more reasonable level once the economy picks up, neither party will need to.

The Future of Energy: Solar Power Is Coming

The amount of energy the earth receives from the sun each year is more than 10,000 times the total energy needs of all humans on earth. We cannot effectively harness even such a paltry fraction of the sun’s energy yet. In 2008, less than 0.02% of the global energy supply came from solar energy. In most parts of the world, solar energy is simply too expensive. Carbon-based energy such as oil and coal still provide a cheaper alternative, even while harming our environment. Solar energy currently costs about 38 cents per kilowatt-hour, compared with only 5 cents per kWh for oil and less than 1 cent per kWh for coal. Government taxes and subsidies typically reduce this cost disparity slightly, but not enough to make solar energy viable for most people.

Fortunately, this will soon change. Photovoltaic solar cells are typically made of silicon: the same material in computer chips. Engineers cannot shrink the solar panels in the same way that they can shrink transistors, because solar panels need to have a large surface area to absorb as much sunlight as possible. However, they can make the panels themselves more efficient and shrink the thickness of the panels. As a result, solar energy appears to be on a Moore’s Law-like trajectory of its own. Approximately every 18 months, the total solar capacity doubles and the cost falls by 20%. Up until now, this hasn’t been noticeable because it is such a small portion of our overall energy supply. Doubling a small number is still a small number.

However, if this trend continues, solar energy will be able to supply virtually 100% of the earth’s energy needs by 2035. Some observers are even more optimistic, predicting that solar energy will cost about the same as carbon-based energy by 2015. They theorize that after 2015, the capacity of solar energy could increase much more quickly, as consumer demand for solar energy makes it very lucrative and the industry explodes. Other observers are more skeptical; some question whether solar energy is really on Moore’s Law-like pattern of exponential growth at all, suggesting that this recent trend could be caused by other factors.

I think it’s quite clear that solar power will continue to grow at an exponential rate, since manufacturing solar panels requires many of the same techniques that drive the reduction in cost of computer chips. But I wouldn’t count on the industry suddenly exploding in popularity as soon as solar energy becomes slightly cheaper than oil and coal. It’s important to remember that solar energy is not a commodity like oil that can be traded globally. The costs will be much lower in deserts and other sunny areas. By the end of this decade, we may see the American Southwest and Southern Europe starting to switch to solar power, while other regions lag behind, using oil and coal for much longer.

Moving away from fossil fuels will be the single most important step we can take to stop making climate change worse (although much of the damage will already be done, and will continue to accumulate for decades after the switch). An international economy that was not reliant on oil would be much more stable for global security. Many of the biggest potential threats to international stability come from oil-rich regimes, where money from oil exports often funds extremist groups or large militaries that destabilize the region. Furthermore, solar energy prices would be much more predictable than oil. Unlike oil, there would be no maximum amount of energy available; new solar panels could always be added and older panels could be improved, ensuring that the price continued to drop. They would drop at a roughly consistent rate, rather than fluctuating wildly from one year to the next as oil does. Eventually, the energy cost in nearly all products will be virtually eliminated, as solar energy becomes cheaper and cheaper.

Most people look back over recent history and find it difficult to imagine that energy prices will ever go down - just look at gas prices today compared to a decade ago! But in reality, the past decade is an exception, caused by the rapid development of China and India just as we reached peak oil production. In the long term, the broad trend has been for energy costs to decline. Solar energy will ensure that that trend continues for decades to come.

PREDICTIONS:
By 2025 – In the United States, solar energy is cheaper than oil on average, on a per kilowatt-hour basis.
By 2035 – The global oil trade is less than 25% the size that it is in 2010 (approximately $2.1 trillion), adjusted for inflation.