Which Comes First, Innovation or Regulation?


Two seemingly unrelated stories in Wednesday’s trade press got me thinking – always dangerous – about the relationship between regulation and innovation.  The first story, from Daily Environment Report, noted that House Republicans have introduced a bill which would preclude EPA from promulgating CO2 performance standards for either new or existing fossil fuel power plants until carbon capture and storage systems have been determined to be technologically and economically viable.  I do realize that Republicans can introduce anything that they want and that this bill is unlikely to become law (though it does have two Democrat co-sponsors).

Nonetheless, the proposal demonstrates an ignorance of what technology-forcing is about that is quite troubling.  It used to be that Republicans actually believed in markets.  If there is an environmental problem, i.e., a market failure, then impose appropriate standards and let the market find the solution.  The solution may not even exist today.  That is why, in the history of environmental regulation, the cost to comply with major regulations routinely has been less than what was estimated when the regulations were promulgated.  Once the regulation was actually in place, American ingenuity actually came up with innovative solutions that achieved compliance in ways that were more efficient than had been imagined before there was any actual need to comply.

Now, we’ve got it all backwards.  If we wait to impose the regulations until the compliance technology exists, we may have a long wait (which, of course, may be what the sponsors are hoping for).

This lesson was driven home by the second story that caught my eye.  ClimateWire reported that researchers at Lawrence Livermore National Laboratory have done a proof of concept of a new technology that may be able to capture CO2 from the atmosphere less expensively than had previously though possible.  The process may also have other side benefits.  What’s the kicker?  While cheaper than existing concepts,

this expense may not be feasible without a carbon price.

No shock there.  Until we have a price on carbon, we’re not going to have cost-effective solutions to the climate change problem caused by carbon emissions.  We’re just going to have a bunch of potentially useful concepts.  Once we have a price on carbon, I remain confident that solutions will follow promptly thereafter.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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